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Special Report
Administration Ties to Arthur Andersen
Nearly as Tight as Those to Enron
By John Dunbar and Nathaniel Heller
(WASHINGTON, Jan. 16) -- Arthur Andersen LLP, the accounting firm
that has been implicated in the collapse of Enron Corp., was a top
contributor to President George W. Bush's political campaigns. (See
the tables below)
Since 1998, Andersen and its employees have contributed $212,825 to
Bush, including $25,000 in donations to Bush's inaugural celebration
when he was governor of the state of Texas. The total makes Andersen
one of Bush's biggest financial backers.
RELATED REPORTS REPORTS
Fourteen Top Bush Officials Invested in Enron Stock (Jan.11, 2002)
Enron Top Brass Accused of Dumping Stock Were Big Political Donors (Jan. 9, 2002)
Overall, since 1998, Andersen has spent $8.1 million to influence the federal
government, including $6 million on lobbying expenditures.
Like its client Enron, Andersen had strong ties to the Bush campaign and
administration. Two former lobbyists for the firm now occupy high-level positions in
the administration.
Stephen Goddard Jr., a managing partner in charge of Andersen's Houston office who was
relieved of management responsibilities on January 15, 2001, was a Bush "pioneer,"
meaning he raised at least $100,000 for Bush's pres
idential campaign.
Andersen's political action committees also gave generously to members of Congress.
They contributed $27,000 to Rep. Billy Tauzin (R-La.) over the last three years.
Tauzin, the chairman of the House Energy and Commerce Co
mmittee, is currently leading one of the congressional investigations of Enron and
Andersen. Over the last three years, he's been the top congressional recipient of
Andersen political action committee contributions, accor
ding to the Center for Responsive Politics.
Andersen is in the midst of growing investigations into the collapse of energy giant
Enron Corp., which filed for bankruptcy in December following a company disclosure
that it had hidden massive amounts of debt off its ba
lance sheet. Andersen was the company's independent auditor, and assured investors
that, in their opinion, the company's financial statements presented "fairly, in all
material respects, the financial position of Enron Co
rp."
Andersen has admitted to destroying a "significant but undetermined number" of
documents relating to the Enron audit. The firm announced it fired the partner in
charge of Enron's audits, David B. Duncan, who rushed subord
inates to shred records of Enron's audits that had been requested, but not yet
subpoenaed, by government investigators.
Like Enron, Andersen is a defendant in shareholder lawsuits that allege the firm did
not properly disclose Enron's financial position to investors.
Andersen, a huge accounting and consulting business with 85,000 employees in 84
countries, has been a prodigious spender on other political activities.
In researching "The Buying of the President 2000," the Center determined Andersen was
Bush's 13th largest career patron through June 30, 1999. By comparison, former Vice
President Al Gore received $8,200 from Andersen emp
loyees when he ran for president, according to documents from the Federal Election
Commission.
Capitol Hill connections
The company's political action committee has spent $1.3 million on House and Senate
members since 1998, with Democrats receiving slightly less than half as much as
Republicans. Among the recipients was current Attorney Ge
neral John Ashcroft, who accepted $10,000 for his unsuccessful Senate reelection
campaign, according to CRP.
Ashcroft recused himself from the criminal investigation of Enron after the Center
reported one of his campaign committees received a $25,000 contribution from the
company.
Tauzin has been critical of Andersen. "Anyone who destroyed records simply out of
stupidity should be fired; anyone who destroyed records intentionally to subvert our
investigation should be prosecuted," he is quoted in a
committee press statement. "One way or another, our committee will get to the bottom
of this debacle."
Andersen also spent a little over $500,000 in unregulated, soft money contributions to
political parties, the vast majority going to the GOP.
Outstripping those numbers by far, however, is the amount Andersen spends on lobbying.
Since 1998, the company has spent $6 million in-house on lobbying Congress, according
to lobby disclosure records. They also retained
outside firms to lobby for them.
Among the issues the company pushed was legislation to consider the retail
deregulation of the electric utility industry, a key issue for Enron and its chairman,
Kenneth Lay.
Andersen's stable of lobbyists includes names from Washington's power elite.
Former Andersen lobbyists Nicholas Calio and Kirsten Ardleigh Chadwick, who worked for
the firm O'Brien Calio, now head up President Bush's legislative affairs office at the
White House. The two are the White House's top
lobbyists to Congress and are charged with pushing the administration's legislative
agenda on Capitol Hill.
According to federal lobbying records, Andersen paid O'Brien Calio $60,000 to lobby on
Internal Revenue Service reform legislation in the first half of 1998. Calio and
Arleigh Chadwick worked on that effort, according to
the lobbying disclosure form. They moved to the White House shortly after President
Bush's inauguration.
Interests beyond accounting
Andersen began lobbying on the issue of electricity deregulation as early as 1996, and
continued into 1998. Enron had been trying to get Congress to create a wholly
competitive environment in the electric utility industry
for years. One state that deregulated, California, still has utilities that owe
millions of dollars to Enron. Similar efforts to pass legislation to deregulate
electric utilities at the federal level have failed.
Andersen has also spent large amounts of money to influence the Securities and
Exchange Commission to allow large accounting and consulting firms to perform both
services for their corporate clients.
Among the sharpest criticisms of Andersen's role in Enron's collapse is the fact that
Andersen provides both auditing and consulting services, considered by many experts to
be a conflict of interest.
Last year, SEC Chairman Arthur Levitt, Jr. proposed a rule that would have restricted
the amount of non-audit-related consulting work that companies like Arthur Andersen
and other Big Five accounting firms could do for th
eir audit clients. Andersen opposed the rule, and hired the powerful lobby shop of
Clark & Weinstock to argue its case.
Among the Clark & Weinstock lobbyists working Capitol Hill on behalf of Andersen were
former congressman Vic Fazio (D-Calif.); Jim Matthews, former chief of staff to Rep.
Thomas Manton (D-N.Y.); and Anne Urban, formerly S
en. Robert Kerrey's (D- Neb.) legislative director.
Under pressure from the Big Five, the Commission ultimately adopted a weak version of
the rule that favored the accounting industry and left their consulting services
virtually untouched. The rule required only the disclo
sure of how much money the accounting firm earned for consulting services from each
company it audited. No limits were placed on the amount of money an audit firm could
earn.
'The most incredible fight'
Levitt called the brawl with the accounting industry "the most incredible fight I have
ever been involved in." At the time, Jeffrey Peck, a managing director for Andersen,
said the rule would cut his firm's market potenti
al by 40 percent.
Given the stakes, allies of the accounting firms mounted a vigorous campaign against
any limitation on their market potential. Among those arguing against the proposed
rule was Harvey L. Pitt, then an attorney with the fi
rm of Fried, Frank, Harris, Shriver & Jacobson. Bush appointed Pitt chairman of the
SEC; the Senate confirmed him in August 2001.
Pitt represented Andersen, as well as the four other Big Five firms, as a private
lawyer before returning to government service in 2001. As chairman of Fried, Frank's
Washington, D.C., office, Pitt worked on behalf of the
Big Five "on a wide range of regulatory issues relating to their scope of services
and firm structures," according to a company biography.
Despite his ties to Andersen, Pitt has said he will not recuse himself from the SEC's
Enron investigation. "It is not the function of the chairman of the SEC, or any
commissioner, to manage an investigation," Pitt explain
ed in a written statement.
Pitt opposed limits on the amount of consulting work the Big Five could do for their
audit clients before Levitt proposed the SEC rule. In a 1998 article, Pitt and
colleague David Birenbaum wrote that "there is no empiric
al basis for the proposition that the provision of non-audit services for audit
clients leads to audit failure," according to a Washington Post story published last
summer.
According to reports, Enron paid Arthur Andersen $52 million in 2000. Twenty-seven
million came from consulting services, $25 million from auditing services. In a
congressional hearing in December, Bernardino said the con
sulting fees not related to audit functions were only $13 million of the $52 million
total.
Andersen's audits have been questioned before. The firm was the accountant for
Sunbeam, which grossly overstated its profits, and Andersen agreed to pay $110 million
to settle shareholder suits without admitting or denyin
g blame. Waste Management, another client of Andersen, overstated income by $1
billion. Andersen agreed to pay part of a $220 million class-action settlement and a
$7 million civil penalty, without admitting liability, ac
cording to a New York Times story.
Contributions made by Andersen to George W. Bush*
Employees
Inaugural
Total
$187,825
$25,000
$212,825
* Includes $25,000 to Bush's inaugural celebration in 1998
Source: Center for Public Integrity
Andersen in-house lobbying expenses
1998
1999
2000
2001*
Total
$1,600,000
$1,040,000
$2,480,000
$920,000
$6,040,000
*First 6 months
Source: Legislative Resource Center
Andersen PAC money
Election Cycle
House Democrats
House GOP
Senate Democrats
Senate GOP
Total
1998
$109,619
$192,877
$48,000
$77,090
$427,586
2000
$168,675
$315,451
$42,584
$113,789
$640,499
2002
$78,855
$130,032
$39,000
$31,793
$279,680
Total
$357,149
$638,360
$129,584
$222,672
$1,347,765
Source: Center for Responsive Politics
Andersen soft money
Party
1998
2000
2002
Total
Democrats
$1,250
$25,750
$0
$27,000
GOP
$105,000
$236,500
$132,262
$473,762
Total
$106,250
$262,250
$132,262
$500,762
Source: Center for Responsive Politics
All spending
Type
Amount
Contributions
$212,825
Lobbying
$6,040,000
PAC Money
$1,347,765
Soft Money
$500,762
Total
$8,101,352
In August 2000, Andersen Consulting, a division of Andersen Worldwide, formally split
from Arthur Andersen, the more traditional auditing and accounting component of the
firm. After arbitration, Andersen Consulting change
d its name to Accenture, a change it made in January 2001. Accenture became a publicly
traded company four months later.
For this story, contributions made by Andersen Consulting or its employees or PAC
before August 2000 were counted toward the totals above.
* * *
Center for Public Integrity Database Editor MaryJo Sylwester
contributed to this report. To write a letter to the editor for
publication, send to [EMAIL PROTECTED] Please include a
daytime telephone number.
� Copyright 2002, The Center for Public Integrity. All rights
reserved.
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