The collapse of the U.S. company, Enron, marked the largest corporate bankruptcy in United States history. And now questions have surfaced in Britain about Enron's accounting firm, Arthur Andersen, and contracts that Andersen has secured with the Labor government of Prime Minister Tony Blair.
It was in 1981 that the DeLorean sports car firm, established by American businessman John DeLorean, collapsed. That business failure in Northern Ireland cost British taxpayers millions of dollars, money that was used to prop up the venture. The Prime Minister then was Margaret Thatcher of the Conservative party. She was furious with the accounting firm Arthur Andersen, which oversaw the DeLorean venture.
She unofficially barred Andersen from obtaining any British government contracts and she tried to sue the firm for nearly $300 million.
That case was eventually settled when Tony Blair's Labor government came to power in 1997. Arthur Andersen paid out just a fraction, about ten percent, of what Prime Minister Thatcher had sought years before.
Now with the collapse of Enron, its accountancy firm, Arthur Andersen, has again come under scrutiny in both Britain and in the U.S.. where it has acknowledged the massive destruction by its employees of Enron-related documents.
Here in Britain, there have been charges concerning alleged political favoritism about the financial settlement it struck with Mr. Blair's government and the fact that after a 16 year absence it was back winning government contracts. That charge of favoritism was strongly denied by John Ormerod, the managing partner of Arthur Andersen, UK. "The fees that we generate from government work are a small proportion of our practice and a small proportion of the total market and specifically are very small compared with our main competitors. Importantly, each of those assignments is won on merit and not of the result of any thought or advantage from any previous contact with any other party or any other relationship," he said.
Arthur Andersen helped the Labor party formulate various economic policies during the 1997 political campaign, such as in the area of corporate and capital gains tax reform. And some of this work was done for free. But as former Labor party political advisor Charlie Whelan said, the accounting firm did nothing wrong. "The reality is, here is a company over here. It is a big company and it works in America as well," he said. "But just because they have been involved in some company in America and then they did work for Labor, linking the two does not necessarily mean there is any corruption involved. It is like guilt by association really. It is all a bit bonkers (crazy)."
While the political storm surrounding Arthur Andersen in Britain now appears to be settling down, there are wider questions about the influence corporations wield in the British Parliament.