IT IS HOUSTON'S economic catastrophe and the White House's growing scandal. But the collapse of energy giant Enron has a nationwide ripple effect that means losses for Seattle businesses and taxpayers and gainful employment for Seattle law firms. City Hall officials last week were reviewing work performed by Enron's troubled auditing firm, Arthur Andersen, for any taxpayer liabilities.
Now in bankruptcy court, Enron has fired Andersen as both firms face charges of destroying documents and misleading investors, causing some Enron stockholders to lose their life savings. City finance director Dwight Dively says Andersen does not currently audit any city departments but does audit Pacific Medical Center and its clinics, which are regulated by City Hall as a Public Development Authority (PDA). "The PDAs operate very independently," says Dively, "so the city does not select their auditors." Another official says the city plans to contact Andersen to seek reassurance of its PacMed work.
Records show Andersen audited the city Department of Solid Waste in recent years. That department contracts with Waste Management Inc. for half of the city's garbage disposal, and Andersen is Waste Management Inc.'s private auditor. That connection has proved troublesome: Last year, Andersen paid $7 million to settle U.S. charges of filing false and misleading audits for Waste Management Inc.
Another department, Seattle City Light, bought power from, and sold it to, energy wholesaler Enron. At the moment, Enron owes Seattle $1 million for electricity it bought from the city—which may have to go to bankruptcy court to collect.
Two Seattle law firms are already in court to recover some of the millions that investors lost. Hagens Berman and Keller Rohrback L.L.P. have filed prospective class-action suits on behalf of Enron employees and stockholders. Echoing charges now being probed by Congress and U.S. regulators, the suits accuse Enron officials of insider trading and concealing information.
Seattle insurer Safeco recently announced that the Enron failure was costing the company $40 million, and the state investment board says it has lost $103 million. Attorney General Christine Gregoire joined attorneys general from Ohio and Georgia last week seeking to become lead plaintiffs in a federal lawsuit to recoup taxpayer losses.