Enron went into bankruptcy at the end of 2001 after it was discovered a large-scale accounting fraud had severely distorted the energy company’s financial condition. Enron auditor Andersen US was indicted in Texas for obstructing justice, specifically for destroying documents. In June 2002, the US firm was convicted by a jury, fined $500,000 and put on probation for five years, by which time it had dissolved.
In the US indictment, it was alleged documents were also destroyed by Andersen’s UK firm in London, the catalyst of a six-year investigation to ascertain the role UK chartered accountants may have played in the scandal. However, the Joint Disciplinary Scheme’s executive counsel has found no evidence that Andersen’s UK firm or its staff destroyed any of the documents in question.
Lord Wakeham, a former Conservative cabinet minister in the UK, was a member of Enron’s audit committee and a key part of its corporate governance arrangements. He was the only professional accountant on the committee but has now been cleared of any UK disciplinary action by the Dickson report.
The executive counsel recommended against pursuing Wakeham, a fellow of the Institute of Chartered Accountants of England and Wales, because the case had been investigated in the US and neither the Securities and Exchange Commission nor the Department of Justice saw fit to bring any proceedings against any non-executive director. For the counsel to further investigate would require finding fresh evidence and investigators have no power to compel US witnesses to co-operate. Therefore, Dickson concluded it was not in the public interest to pursue the investigation.
However, lessons can still be learned. The executive committee believes there is a need to clarify the duties and responsibilities of accountants who act as non-executive directors. It has written to UK professional bodies urging them to issue guidance.