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Enron Corp.’s unsecured creditors won the right Thursday to sue to recover $10 million paid to former auditor Arthur Andersen in the three months before the Houston energy giant’s collapse. Judge Arthur Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan approved the creditors’ motion to seek to recover the alleged payouts, known as preferential transfer payments, made to the auditor within 90 days of Enron’s Dec. 2, 2001, filing. Gonzalez permitted the creditors to challenge at least $9,969,511 in payments to Andersen. The matter will proceed as an adversary proceeding within Enron’s Chapter 11 case, which was the largest ever until WorldCom Inc. filed for bankruptcy this year. “All the available evidence indicates that the transfers consisted of property of the debtors, were made while the debtors were insolvent and were made within 90 days of the petition date,” argued the lead counsel for the unsecured creditors committee, Luc Despins of New York-based Milbank, Tweed, Hadley & McCloy, in his motion to sue on behalf of the Enron estate. The Chapter 11 reorganization filing also made it possible for Andersen “to receive more than it would likely receive in a Chapter 7 liquidation of the debtors,” Despins wrote in the motion. After a five-minute hearing, Gonzalez signed the order allowing the creditors to sue. Any recovery resulting from the lawsuit would be added to the Enron estate, and unsecured creditors would have to wait for secured claims to be paid first before getting any type of recovery. Milbank Tweed declined comment. After a five-week trial, a jury on June 15 found Andersen guilty of obstructing justice while serving as Enron’s auditor. The case was heard in U.S. District Court for the Southern District of Texas in Houston. Andersen is awaiting sentencing Oct. 11, Despins’ motion noted. Andersen, the fifth-largest accounting firm last year with $9.2 billion in revenue, was also the auditor for Waste Management Systems and Sunbeam Corp. before those companies were required to restate their earnings. Andersen paid a $7 million fine imposed by the U.S. Securities and Exchange Commission in the Waste Management saga, the largest fine ever levied on an accounting firm, before paying out more than $100 million to settle lawsuits filed by Sunbeam shareholders. Copyright (c)2002 TDD, LLC. All rights reserved.

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