Firm's past dotted with audit woes

CHICAGO -- Accounting firm Arthur Andersen has settled at least a dozen cases over the last 20 years to end investigations into allegations its auditors missed, ignored or hid clients' financial problems from unwitting investors.

In two of the most recent and serious cases, the Securities and Exchange Commission alleged Andersen inflated earnings on behalf of trash hauler Waste Management Inc. and appliance maker Sunbeam Corp. And in many of the earlier cases, state officials and shareholders' lawyers made accusations that parallel the alleged irregularities at the heart of Enron Corp.'s collapse.

On Thursday, Enron fired Arthur Andersen as congressional investigators pressed the accounting firm for more documents concerning the energy company's business activities.

"In all but the magnitude of dollars, there are striking similarities between Enron and what happened here -- the compromising relationships with auditors, destruction of documents and so on," said Connecticut Attorney General Richard Blumenthal, who investigated Andersen's role in the collapse of Colonial Realty Co. in the early 1990s.

Securities lawyers, seasoned accountants and other experts caution Arthur Andersen's past blemishes may be no worse than other large accounting houses, which face attacks from bitter investors when a big company crumbles.

But they say Andersen's role in Enron's stunning fall and its past problems highlight long-simmering concerns about potential conflicts of interest when companies have too close a relationship with the auditing firms that the investing public relies on for objective reviews.