Kentucky U.S. Sen. Jim Bunning is backing off his opposition to a proposed federal regulation designed to discourage the cozy accounting practices that resulted in scandal for failed Enron Corp. and its accountant, Arthur Andersen.

        Federal government watchdog Common Cause and others have charged that the relationship between Enron and Arthur Andersen was a potential conflict of interest because at the same time Andersen was auditing the troubled energy company's books it also held a lucrative consulting contract with Enron.

        But in July of 2000, Mr. Bunning — a Southgate Republican who has taken thousands of dollars in campaign contributions from the accounting industry — joined nine of his Senate colleagues to slow implementation of a rule that would have barred accounting firms from auditing and consulting for the same company.

        Common Cause has said Arthur Andersen's dual roles may have led the firm to overlook or minimize Enron's accounting irregularities. Congressional and criminal investigators are looking into allegations of document shredding and false information included in Andersen's audits of Enron's books.

        In an interview last week, Mr. Bunning, a member of the Senate Banking, Housing and Urban Affairs Committee, said his opposition in July to the proposed Securities and Exchange Commission rule on accounting firms “seemed to make sense.”

        “It does not make sense now after Enron,” he said. “There will be a reexamination of that position due to Enron ... because it looks like a pretty good idea now.”

        But Mr. Bunning reacted with a strongly worded denial to a Jan. 23 report in The Hill, a Capitol Hill newspaper, that he was among a group of Senators who threatened the SEC's funding if the rule were implemented.

        “What a bunch of (expletive),” he said. “You can quote me.”

        Mr. Bunning said he made no such threats and the SEC funding was not cut. He did release a July 28, 2000, letter he and nine other members of the Senate Banking committee signed that asked former SEC Chairman Arthur Levitt to slow implementation of accounting firm regulation the chairman had proposed.

        But Mr. Bunning said the letter was sent because Republicans and Democrats — including Sen. Evan Bayh of Indiana — on the committee were concerned that Mr. Levitt was attempting to circumvent the legislative process by drafting the proposed rule change.

        “Banking committee members objected to the fact that the head of the SEC was trying to make a rule rather than letting the law come through the committee,” Mr. Bunning said. “We didn't think that was the right way to do it.”

        Mr. Bunning's staff pointed out that in the July 2000 letter to Mr. Levitt, the Senators do not make overt comments opposing the rule. They ask only that its implementation be delayed “in order to fully evaluate the impact of your proposal ... (and) allow for careful analysis of the proposed changes.”

        The letter, however, was released by Mr. Bunning and Mr. Bayh only in mid-January, after Common Cause called on thee senators to divulge all correspondence on the proposed rule change.

        Other banking committee members to sign the letter were Republicans Rod Grams of Minnesota, Phil Gramm of Texas, Mike Crapo of Idaho, Robert Bennett of Utah, Wayne Allard of Colorado, Chuck Hagel of Nebraska, Rick Santorum of Pennsylvania and Democrat Charles Schumer of New York.

        The accounting industry worked hard to prevent implementation of the rule, according to Washington-based Common Cause, which tracks political contributions through the Federal Election Commission.

        Andersen, other large accounting firms and the American Institute of Certified Public Accountants — the accounting industry's trade and lobbying group — contributed more than $27 million to federal candidates and political parties between 1991 and 2001, Common Cause found in an analysis of campaign finance reports.

        Between Jan. 1, 1999, and Dec. 31, 2000, Mr. Bunning took $8,500 and Mr. Bayh received $9,074 from the accounting industry, Common Cause found.

        And according to the Center for Responsive Politics in Washington, which also tracks campaign finances, Mr. Bunning's campaign contributions from the accounting industry totaled $71,000 since 1995 with Mr. Bayh receiving more than $90,000.

        Common Cause President Scott Harshbarger said one of the main reasons the accounting industry was making contributions was to kill or slow the proposed rule change.

        “One of their top goals was to maintain their lucrative consulting revenues from their audit clients,” Mr. Harshbarger said in a Jan. 16 statement.

        In November of 2000, the SEC enacted a compromise rule that permitted consulting and auditing services to be provided by the same firm under certain additional guidelines.

        During 2000, Andersen was paid $25 million to audit Enron's books while at the same time receiving a $27 million consulting contracting, according to documents filed with the SEC.

        Given the situation with Andersen and Enron — now in the largest bankruptcy in U.S. history — the Senate Banking Committee is likely to revisit the proposed SEC rule, Mr. Bunning said.

        “We always suspect people are honest, particularly Big Five accounting firms,” he said. “But certain members of accounting firms look the other way if audits don't turn out clean.

        “We may reexamine those situations and not allow (accounting) firms that are auditors also be financial advisers, or consultants, at the same time,” he said.

        Along with Andersen, the Big Five accounting firms are PricewaterhouseCoopers, KPMG, Deloitte & Touche and Ernst & Young.

        The Louisville Courier-Journal and Enquirer wire services contributed to this report.
       

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