VideoWell, at least the top honchos at Andersen are telling the same story.
One week after his boss was grilled by Congressional probers, C.E. Andrews, head of global auditing at Arthur Andersen, said that any errors the accounting firm made when auditing Enron Corp. were "honest errors," according to FT.com.
He also said that Enron may have broken laws when it withheld from Andersen critical information regarding its controversial partnerships.
Andrews' testimony came one week after his boss, Andersen chief executive Joseph Beradino, basically said the same things when he was bombarded with questions regarding the auditor's role in Enron's incredible collapse.
Andrews said his firm is reviewing the handling of two of the questionable off-balance-sheet partnerships. One of them accounted for 80 percent of the company's earnings restatement, the other 20 percent, says the newspaper's Web site.
"On one, the smaller of them, we made a professional judgement about the appropriate accounting treatment that turned out to be wrong," Andrews told the Senate Commerce Committee, according to FT.com. "On the one with the larger impact, it would appear that our audit team was not provided critical information.... We have notified Enron's audit committee of possible illegal acts."
Meanwhile, Kenneth Lay, Enron's chief executive, and former CFO Andrew Fastow were still no-shows.
Rather, angry, tearful former and current Enron employees who lost millions of dollars from Enron's disintegration because they held Enron stock in their 401 (k) explained how they were unable to sell the shares and switch to a different investment as the stock's plunged to near worthless levels.
Moody's Downgrades Two Airlines
The fallout from the September attacks is now hurting the airlines' ability to raise money.
Moody's Investors Service on Tuesday downgraded the debt rating of Delta Air Lines, Inc. and American Airlines Inc.
It cut Delta's senior implied debt to Ba3 from Ba2, adding that the rating outlook is negative. It downgraded the debt rating of American Airlines' senior implied to B1 from Ba2, again adding that the rating outlook is negative.
"The ratings reflect the more difficult business environment" facing Delta and American due to the weak economy and the specific effects on the airline industry of the September 11 terrorist attacks," Moody's said in statements accompanying both downgrades.
"The intermediate term outlook for Delta's cash flow and debt protection measurements is for continued weakness, and the cash losses from operations experienced over the last several months have eroded Delta's financial profile," it added in its press release announcing Delta's downgrade.
In the statement attached to the American action, it said, "The intermediate term outlook for American's cash flow has deteriorated, and large cash losses from operations experienced over the last several months have eroded American's financial profile. Recovery of adequate levels of cash flow recovery will be constrained by higher than average costs and the continued effort to merger TWA into American's operations."
The rating agency did note that American's and Delta's "current liquidity position, sizable unencumbered asset base and probable continued access to the capital markets should provide the airline(s) with available avenues of financial flexibility to weather the current difficult conditions."
In other financing news:
- Solectron Corp., the world's largest contract electronics manufacturer, which on Tuesday reported a fiscal first-quarter loss, said it would borrow up to $2 billion partly in order to meet its short-term obligation to repurchase some notes due in January. Its debt was recently cut to junk status by the major rating agencies.
- Merck & Co. issued $500 million in three-year medium-term notes, led by Morgan Stanley. It was priced to yield 105 basis points over comparable Treasurys.
- Data storage networker Brocade Communications Systems Inc. said it will issue $500 million in convertible subordinated notes due 2007 in a private offering to institutional buyers. The company will use the proceeds for general corporate purposes, including working capital and capital expenditures.
- Calpine Corp. said on Wednesday it plans to issue $400 million of convertible debentures in the private placement market. The proceeds will be used to repurchase a portion of the company's zero-coupon convertible debentures due 2021.
In Brief
- Judith Boynton, who resigned as Polaroid's chief financial officer in January, received severance payments of nearly $295,000, according to published reports, citing court records. The company filed for bankruptcy a number of months after she left. Polaroid Chairman Gary DiCamillo received nearly $2.5 million in salary and incentive pay this year -- more than double his salary and bonus last year.
- They're a little early this time. Milberg Weiss Bershad Hynes & Lerach LLP filed a shareholder lawsuit against all but one of Hewlett-Packard Co.'s directors, alleging breach of fiduciary duty in the agreement to acquire Compaq Computer Corp. The only director not named in the suit is Walter Hewlett, who is leading a proxy fight to prevent H-P from purchasing Compaq. The suit alleges that the company's directors, as well as some senior executives that aren't named, failed to disclose material facts about the acquisition, which was announced Sept. 3.
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