GSA Suspends Enron and Arthur Andersen and Former Officials
March 15, 2002
GSA # 9930
March 15, 2002
Contact: Bill Bearden 202-501-1231
Washington, DC — The General Services Administration today suspended Enron Corp., related Enron corporate entities, several former Enron officials, Arthur Andersen, LLP, and a former Andersen official, from conducting new business with the Federal government. The suspension is for a period of 12 months for all parties except for Andersen, whose suspension is for the duration of the indictment. GSA's review of other Enron subsidiaries, and other Enron and Andersen officials continues.
Regarding Enron's suspension, GSA took this action based on a finding of adequate evidence that the Enron parties had engaged in misconduct and committed internal control irregularities that seriously affect their suitability to receive Government contracts. Under law and regulation the Government may award contracts only to responsible contractors. To qualify as a responsible contractor, a company or individual must have a satisfactory record of integrity and business ethics and must possess the necessary organization, accounting and operational controls.
Regarding Andersen's suspension, GSA took this action based upon an indictment released yesterday. The indictment alleges that Andersen, at numerous locations throughout the world, knowingly, intentionally, and corruptly destroyed documents and other information relating to Andersen's work for Enron, and that these actions were taken to impair official proceedings. Under federal law, an indictment for such a criminal offense is adequate evidence of misconduct to support suspension of a government contractor.
The names of the entities and individuals suspended are published in the List of Parties Excluded From Federal Procurement and Non Procurement Programs. This publication contains the names of contractors debarred, suspended, proposed for debarment, or declared ineligible by any agency of the Federal Government. The suspension is effective throughout the executive branch of the Federal Government and applies to all new business with the Federal government. The suspended entities and individuals are:
Arthur Andersen, LLP
Enron North America Corp.
Portland General Electric Company
Enron Energy Services Operations, Inc.
Clinton Energy Management Services, Inc.
Enron Energy Services, Inc.
The Bentley Company
Richard B. Buy, former Enron Senior Vice President and Chief Risk Officer
Richard A. Causey, former Enron Senior Vice President and Chief Accounting Officer
David B. Duncan, Arthur Andersen's Chief Auditor for the Enron engagement
Andrew S. Fastow, former Enron Chief Financial Officer
Ben F. Glisan, Jr., former Enron Treasurer
Michael J. Kopper, former Managing Director of Enron's Global Equity Markets Group
Kenneth L. Lay, former Enron President, Chief Executive Officer, and Chairman of the Board
Jeffrey K. Skilling, former Enron President, Chief Executive Officer, and Chief Operating Officer
In late January, the Office of Management and Budget asked GSA to determine whether the business performance of Andersen and Enron Corp. met the standards required to do business with the government in the future and to consider whether it would be appropriate to initiate suspension or debarment proceedings. All federal agencies with Andersen and Enron contracts were asked to ensure existing contracts are being performed in accordance with contract terms and proper business practices.
"GSA is continuing the review of Andersen and Enron officials to determine whether their business practices meet the standards required to do business with the government in the future," said Raymond J. McKenna, GSA's General Counsel. "At this time, it is inappropriate to comment further about this continuing review."
Reasons for GSA's Suspension Action
GSA has suspended Enron Corp., all of its related corporate entities doing business with the Federal government, several former Enron corporate officials, Arthur Andersen, LLP (Enron's former accounting firm) and a former official of Andersen, GSA's inquiry regarding other Enron and Andersen officials is continuing.
Under law and regulation the Government may award contracts only to responsible contractors. To qualify as a responsible contractor, a company or individual must have "a satisfactory record of integrity and business ethics" and must possess the necessary organization, accounting and operational controls.
A contractor or prospective contractor who is not responsible may be barred or temporarily suspended from receipt of future Government business. The purpose of suspension is not to punish a contractor or an individual, but to protect the government from contractors that do not have a satisfactory record of business ethics and integrity. Suspension from Government procurements is appropriate where adequate evidence shows that a company or person has committed misconduct related to business ethics and integrity, or other irregularities relevant to their present responsibility, and where a pending investigation or legal proceeding is examining those questionable activities.
The suspensions implemented today are supported by adequate evidence of present non-responsibility of the parties. Enron, its subsidiaries, certain former corporate officials, and one former Andersen official, have engaged in misconduct and caused internal control irregularities that seriously impact their suitability to receive Government contracts. Andersen has been indicted under one criminal count of destruction of documents. The Government relies upon its contractors to have adequate and appropriate internal controls to oversee corporate affairs, to ensure that the work being performed for the government is in accordance with contractual requirements, and to ensure that the government is only billed for work that is actually performed for the government under the contract. A contractor that does not have adequate internal controls cannot provide such assurances to the government, and should not receive government contracts.
Enron itself admits to organizational failures, a lack of accounting and operational controls, and a collapse of their internal control structure. These organizational, accounting, and operational deficiencies have had very real - and deleterious - consequences that directly affect their present responsibility as Government contractors. These deficiencies have caused a host of irregularities, which in turn have given rise to several pending criminal and civil investigations and legal proceedings. Matters under current investigation include securities fraud, falsification and destruction of records, making false statements, and other serious offenses. The available evidence indicates a lack of business integrity and business honesty that directly and seriously affects the present responsibility of Enron and its subsidiaries as Government contractors or subcontractors.
The indictment of the Andersen firm for obstructing ongoing official proceedings relating to their audit work clearly supports a suspension from federal contracting. The government employs private accounting firms to perform important financial control work in accordance with the highest professional standards. Unlawful destruction of documents to obstruct federal investigations is contrary to these standards, and establishes Andersen's nonresponsibility for future federal contracts. GSA has also suspended David Duncan, former engagement partner for Arthur Andersen at Enron, based on his involvement, knowledge of, or complicity in the admitted destruction or deletion of Enron-related documents and records at Andersen, in the face of imminent Government investigations and potential litigation.
GSA also has suspended several former Enron officials on the basis of their direct personal involvement in, or knowledge of, the corporate misconduct under investigation. Those individuals are Kenneth Lay, Jeffrey Skilling, Andrew Fastow, Michael Kopper, Richard Causey, Richard Buy, and Ben Glisan.
Additional Suspension Process Information
GSA has the responsibility to ensure that the government is doing business with responsible contractors only and GSA has the authority to debar contractors from government contracting. The Federal Acquisition Regulation (FAR) sets the procedures for suspension. Suspension is the exclusion from federal contracting, subcontracting, and participation in federal benefit programs, for a temporary period.
Firms seeking to do business with the government must establish that they have satisfactory records of business ethics and integrity. The purpose of suspension proceedings is to provide the contractor with due process when the government has evidence that demonstrates that the contractor does not have a satisfactory record of business ethics and integrity.
Suspension may occur when the government has adequate evidence to believe that the contractor has committed fraud, anti trust violations, embezzlement, theft, forgery, bribery; making false statements, tax evasion or similar offenses; commission of any other offense indicating a lack of business integrity or honesty that seriously and directly affects the present responsibility of a government contractor; a violation of the Drug-Free Workplace Act of 1988; or any other cause so serious or compelling that it affects the present responsibility of a government contractor or subcontractor. The contractor remains suspended for a period of time of up to 18 months, or if criminal or civil litigation has been commenced by the government, until the conclusion of the legal proceedings. A contractor suspended based upon an indictment will remain suspended until the conclusion of the criminal proceedings related to the indictment. The suspension does not have any impact on current federal contracts with the contractor.
If it is determined that one or more of the above causes exist and the government's interests require protection, the agency implements the following procedures:
A Notice of Suspension to the contractor is issued. It informs the contractor of the reasons for the proposed action. Contractors who are suspended will be listed in the GSA publication, List of Parties Excluded from Federal Procurement and Nonprocurement Programs. The consequences of being listed are that the contractor is excluded from receiving contracts, and agencies cannot solicit offers from, award contracts to or consent to subcontracts with them. Existing contracts are not automatically terminated. All federal agencies are required to review this list, prior to the award of a federal contract.
The contractor is afforded an opportunity to submit, in writing or in person, information and argument in opposition to the suspension. This occurs within 30 days of receipt of the notice from GSA.