WASHINGTON – The chief executive of accounting firm Andersen in congressional testimony on Wednesday said Enron Corp. hid crucial information from its auditors that went to the heart of the energy trader's collapse.
Enron did not reveal to Andersen, its longtime auditor, a pivotal agreement with a large financial institution for its financing vehicle Chewco, according to written testimony by Andersen chief executive Joe Berardino.
If Enron had disclosed the agreement, Andersen would have required the company to include the Chewco partnership and similar ones on its balance sheet, Berardino said in his written testimony given to the Congressional Committee on Financial Services on Wednesday.
The Chewco partnership accounted for 80 percent of the energy trader's recent earnings restatement, he said. Andersen notified Enron's audit committee of possible illegal acts within the company on Nov. 2, Berardino said.
Enron collapsed and filed for bankruptcy on Dec. 2 after it revealed losses from certain partnerships led by its former chief financial officer that were kept off its balance sheet. The firm later restated its books to include those partnerships, reducing its earnings in the fours years after 1997 by almost $600 million.
Andersen acknowledged it had made an accounting error by not consolidating a second special purpose entity that was responsible for about 20 percent, or $100 million, of Enron's earnings restatement.
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