Andersen Deal In The Works

The Justice Department will defer prosecuting Arthur Andersen LLP on obstruction charges in a settlement that requires the public admission that officials at Andersen headquarters knew employees were wrongfully destroying documents related to the collapse of Enron Corp., people familiar with the matter confirmed Monday.

In the settlement, still being finalized, the Andersen accounting firm also must cooperate fully with government prosecutors investigating Enron's bankruptcy, these people told The Associated Press, speaking on condition of anonymity.

The most significant provisions of what was described as a "global settlement" on the criminal charge already have been resolved, though some details were still being worked out. The sides expected to announce the deal Wednesday here in Washington, these people said.

The agreement could result in a deferral from prosecuting Andersen for as long as three years. Andersen's lawyers were uncomfortable with a deferral lasting that long, but the Justice Department was concerned that its investigation into possible wrongdoing at Enron isn't close yet to filing any criminal charges, people close to the negotiations said.

The agreement comes after weeks of intense, secret negotiations between the Justice Department and Andersen in the wake of the firm's criminal indictment unsealed March 14. Talks intensified after last week's plea agreement with David B. Duncan, the former senior Andersen auditor on the Enron account.

The grand jury accused the firm of destroying "tons of paper" at its offices worldwide and deleting enormous numbers of computer files on its Enron audits.

Duncan pleaded guilty April 9 to destroying documents relating to Enron's collapse and agreed to cooperate with government prosecutors. He remains free until his sentencing in August. Duncan is prohibited under his plea from discussing what he tells prosecutors, but he is considered knowledgeable about Enron's most controversial deals preceding its failure in December.

By agreeing to defer any criminal prosecution of Andersen for up to three years, the Justice Department can require Andersen as a corporation to cooperate in its investigation of Enron and promise not to violate any laws during that period, although it was unclear whether the government could compel cooperation from Andersen employees, who still could be indicted individually.

Andersen also likely would be required to show steps it will take internally to prevent any recurrence, such as updating its policies on destroying documents.

Duncan's defection last week was important "because it left Andersen with very limited options in terms of a viable defense," said Robert A. Mintz, a former U.S. prosecutor and expert on white-collar crime. "They had an opportunity to defend this case if they could have effectively circled the wagons and kept everybody on board, but once Duncan broke ranks that defense was essentially gutted."