January 24, 2002

Mr. Joseph F. Berardino
Managing Partner and Chief Executive Officer
Andersen LLP
33 W. Monroe Street
Chicago, Illinois 60603

Dear Mr. Berardino:

I am writing with respect to issues raised by an October 16, 2001, e-mail from Nancy A. Temple, a lawyer in Andersen’s legal group, to David B. Duncan, the Andersen partner in charge of the Enron engagement, with cc’s to Michael Odom, Richard Corgel, and Gary B. Goolsby, all Andersen officials, which says in relevant part:

"In light of the ‘non-recurring’characterization, the lack of any suggestion that this characterization is not in accordance with GAAP, and the lack of income statements in accordance with GAAP, I will consult further within the legal group as to whether we should do anything more to protect ourselves from potential 10A issues."

The Private Securities Litigation Reform Act of 1995 (Public Law 104-67) added Section 10A to the Securities Exchange Act of 1934, at the behest of then Representative Ron Wyden and with my strong support.

Section 10A requires each audit, required pursuant to the Exchange Act of financial statements of an issuer by an independent public accountant to include, in accordance with generally accepted auditing standards,

(1) procedures designed to provide reasonable assurance of detecting illegal acts that would have a direct and material effect on the determination of financial statement amounts;

(2) procedures designed to identify related party transactions that are material to the financial statements or otherwise require disclosure therein; and

(3) an evaluation of whether there is substantial doubt about the ability of the issuer to continue as a going concern during the ensuring fiscal year.

Section 10A further requires a company’s board of directors or its auditor to notify the Securities and Exchange Commission (SEC) about possible illegal acts under certain conditions. Specifically, if, in the course of conducting a covered audit, the independent public accountant detects or otherwise becomes aware of information indicating that an illegal act has or may have occurred, the auditor must inform the appropriate level of management as soon as possible and ensure that the board of directors or the audit committee is adequately informed. Section 10A also requires that the auditor report his conclusions directly to the board of directors or audit committee if he concludes the following:

(1) the likely illegal act has a material effect on the financial statements;

(2) senior management has not taken proper and timely remedial action; and

(3) failure to take remedial action is reasonably expected to result in a departure from a standard audit report or the auditor’s resignation.

A board of directors or audit committee that receives such a report shall inform the SEC within one business day of receiving the report and send the auditor a copy of the notice provided to the SEC. If the auditor does not receive a copy of the notice within the required one business day, the auditor is to furnish a copy of the report to the SEC not later than one business day following the failure to receive a copy of the notice.

Serious concerns are being raised about whether Andersen’s audits of Enron, particularly during the restatement periods 1997 through the first two quarters of 2001, were conducted in compliance with section 10A and with generally accepted auditing standards concerning the detection of material misstatements due to fraudulent financial reporting. To assist us in resolving these issues, please provide responses to the following questions by the close of business on Monday, February 11, 2002:

(1) In 1997, the AICPA issued a new auditing standard, Statement on Auditing Standards (SAS) No. 82, Consideration of Fraud in a Financial Statement Audit, in order to improve auditing guidance related to the detection of material misstatements due to fraudulent financial reporting. The new standard clarified the auditor’s responsibility to detect material misstatements resulting from fraudulent financial reporting, changed the auditor’s risk assessment process to require documentation of the auditor’s assessment of the likelihood of financial statement fraud, and provided expanded operational guidance to assist auditors in meeting their already existing responsibility for the detection of material misstatements due to fraud.

For any audits of Enron financial statements conducted in each of the years 1997, 1998, 1999, 2000, and 2001, please describe and document all the steps taken by Andersen in each instance to comply with SAS No. 82 and any other applicable standards regarding fraudulent financial reporting.

(2) I have in my possession a copy of an October 19, 2001, e-mail from Mark B. Zajac to David B. Duncan, with cc’s to William E. Swanson and Michael Odom, all Andersen officials, Subject: FIDO Fraud Test Results -- Enron Corporation. As I understand it, Fido is a financial statement analysis tool that identifies financial statements that have a heightened likelihood of material earnings manipulation (financial statements fraud). Fido identifies particular aspects of the financial statements for investigation by audit teams. In reporting Enron’s results, the Zajac e-mail indicates a "red alert: a heightened risk of financial statement fraud." In the context of the Enron debacle, this is tantamount to yelling that the barn door is open long after the horses have fled the scene and shown up in the next county.

Please advise whether Fido tests were performed in any prior years. If not, explain why not. If so, please explain the results and provide copies of any documentation, and advise, also with supporting documentation, whether and how these results were communicated to the engagement team and to the company and its audit committee.

(3) Please describe and document Andersen’s compliance with each of the steps required by section 10A(b) during the period 1997 through 2001.

Thank you for your cooperation and attention to my request. I look forward to reviewing your response.

Sincerely,

JOHN D. DINGELL
RANKING MEMBER

Enclosures (.pdf file)

cc: The Honorable W. J. "Billy" Tauzin, Chairman
Committee on Energy and Commerce