Chicago-based Arthur Andersen LLP confirmed Friday that the Securities and Exchange Commission (SEC), as part of its continuing formal investigation into Enron Corp., has subpoenaed the financial records and documents of the failed energy marketer.

“We have been subpoenaed,” said Andersen spokesman David Tabolt, but he declined to say what types of records were covered under the subpoena and when it was issued. The SEC subpoena was required, he noted, to override Andersen’s client-confidentiality obligation with Enron.

A spokesman with the SEC also refused to comment on the subpoenas, or its investigation into the financial activities of the once high-flying Enron.

As Enron’s auditor, Anderson has come under attack on Capitol Hill and in other circles for its failure to detect and/or report the mistatements in the company’s earnings dating as far back as 1997. The House Energy and Commerce Committee has said it intends to focus on the accounting practices of the company at a hearing it has planned. Rep. John Dingell, the ranking Democrat on the committee, has called for an “oversight review or special investigation” of the Big Five accountant.

In a related development, attorneys specializing in securities fraud cases declined to speculate as to whether criminal fraud charges were likely to be brought against any Enron executives, saying it was “too premature” to comment on that. While the SEC has placed a “great deal of urgency” on its investigation of Enron, “it isn’t clear yet all of the businesses that they were involved in and the extent of Enron’s liabilities,” said a securities fraud attorney in Pennsylvania.

For the Enron corporate leadership to be exposed to criminal charges, it would have had to have “engaged in fraudulent practices, such as not disclosing risks, and making misrepresentations about what [the company] was doing and its earnings,” he told NGI. Most importantly, he noted, authorities would have to believe that corporate officials had “criminal intent.”

Since the SEC’s authority is primarily limited to civil lawsuits, administrative reviews and disciplinary actions, the agency would have to refer any evidence that it uncovers of criminal fraud to the appropriate U.S. Attorney’s Office, the lawyer said. A securities fraud specialist in Washington, DC, noted that state securities regulators and the New York Stock Exchange’s regulatory branch also could conduct investigations.

He said securities fraud would be criminal if the wrongdoing was “egregious in nature” involving large financial losses, had occurred over an extended time, and had affected a broad number of parties.

Securities fraud is defined as a “false representation of matter of fact that should have been disclosed, which deceives another so that he/she acts upon it to his/her injury,” the specialist noted. The fraud oftentimes occurs when a broker (or corporation) fails to properly communicate information or facts to an investor, purposely provides false representations of facts, or omits material information, he said.

The fraud would apply primarily to stocks, which give investors a financial stake in a company, or to bonds, a long-term promissory note in which the issuer agrees to pay the owner the amount of the face value of the bond on a future date, plus interest.

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