Andersen Asks Judge to Block Questioning

Lawyers for accounting firm Andersen Monday asked a federal judge to bar prosecutors from questioning witnesses in front of a grand jury about the evidence underlying the government’s indictment against the company.

A motion filed in federal court in Houston contends prosecutors are attempting to call at least four Andersen partners and employees to testify before the panel under oath.

Andersen said prosecutors are abusing the grand jury process by using it to question witnesses about the evidence relating to a charge that had already been filed. On March 7 the grand jury handed up an indictment against Andersen for obstruction of justice.

A spokesperson for the Justice Department could not be reached for comment.

Andersen was fired as auditor by more companies Monday as the company tries to settle lawsuits related to the collapse of former client Enron Corp.

Calpine Corp., a U.S. power-plant builder, and Centex Corp., the fourth-largest U.S. homebuilder, dropped Andersen. San Jose-based Calpine hired Deloitte & Touche and Dallas-based Centex named Ernst & Young.

Separately, Northeast Utilities said it would fire Andersen and hire Deloitte, as did oil products maker Pennzoil-Quaker State Co. and drug maker ILEX Oncology Inc., the companies said in filings with the Securities and Exchange Commission.

Andersen has lost more than 60 U.S. clients, including 23 companies in the Standard & Poor’s 500 index, as well as affiliates in Russia, Spain, China, Hong Kong and New Zealand to rivals this year. Andersen is trying to survive lawsuits filed by Enron shareholders and a U.S. criminal charge of obstructing an investigation into the collapse of the energy trader.

“If this client exodus continues, and if the foreign affiliates continue to leave and partners continue to leave, it’ll be very difficult for them to survive,” said Charles Drott, a former partner at Touche Ross, Deloitte & Touche’s predecessor, and an expert on accounting fraud.

Callaway Golf Co., First Financial Bankshares Inc. and Action Performance Cos. also fired Andersen on Monday. Many of Chicago-based Andersen’s remaining clients may wait for the result of the criminal trial, which will start May 6, said Joseph Carcello, an accounting professor at the University of Tennessee.

Andersen has called the criminal charge a “death penalty” and is rallying its 28,000 U.S. employees to protest the Justice Department’s indictment of the firm. The company says the charge is unfair because only a few employees destroyed Enron documents.

Asked if President Bush believes the indictment is unjust, White House spokesman Ari Fleischer said, “The president has faith in the people he has appointed at the Department of Justice. Those are not issues that the White House micromanages.”

In a rescue bid, former Federal Reserve Chairman Paul Volcker proposed Friday to take over and reshape Andersen if the Justice Department agrees to drop the criminal charge and Enron shareholders and creditors settle lawsuits.

Affiliates outside the U.S., which contributed more than half of Andersen’s $9.3 billion in revenue in the fiscal year ended Aug. 31, are leaving on concern Andersen may not survive.

The New Zealand affiliate joined Ernst & Young International, which picked up Andersen’s Russian unit. Andersen’s Chinese and Hong Kong affiliates plan to join PricewaterhouseCoopers.

Andersen has been in talks to sell the overseas operations to rival KPMG International, a plan threatened by the splintering partnerships.

Andersen will try to keep affiliates from leaving by enforcing contracts that require them to pay Andersen for dropping out of the company’s network.

Andersen wants a single deal to get the best price, collect the most in penalty fees from defectors and ensure as many employees as possible find jobs, analysts say.

Enron shareholders and employees have named Andersen as a co-defendant in suits that claim Enron stock dropped $68 billion in value on news that Enron hid debt and inflated income on books Andersen audited.

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Bloomberg News was used in compiling this report.