Government to review Enron, Arthur Andersen contracts

By the OGJ Online Staff

HOUSTON, Jan. 28, 2002 — White House budget director Mitchell Daniels ordered a review of $70 million in federal contracts with embattled Enron Corp. and Arthur Anderson LLP to determine if the companies meet government standards.

In a letter to the General Services Administration, the Office of Management and Budget asked GSA to consider whether it is appropriate to initiate suspension or debarment proceedings. GSA said it will do a review as quickly as possible.

Firms seeking to do business with the government must have satisfactory records of business ethics and integrity. OMB asked all federal agencies with Andersen and Enron contracts to ensure that existing contracts are being performed in accordance with contract terms and proper business practices.

Mitchell said charges of document shredding, manipulative accounting practices, and other practices “could reflect poorly” on the companies and their ability to meet government standards. Companies can be suspended for a period or excluded from government contracting and government approved subcontracting for a “reasonable period” under debarment proceedings.

Both companies have contracts with the Justice Department, which is investigating them for possible criminal violations, and the Department of Defense. Arthur Andersen has $26.6 million with the Justice Department and Enron has a $470,000 contract for gas and electrical services. Enron also has a $5.7 million contract with the Defense Department and Arthur Andersen has an $11.4 million contract.

Enron filed for bankruptcy protection in December after a swift financial downfall, resulting in big losses for the company stockholders, employees, and creditors. Andersen, which audited Enron’s books, is also being investigated. Congress is holding multiple hearings on the Enron debacle and its effect on the energy and financial markets, accounting practices, and pension laws.

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