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Enron Scandal: Casinos Stand by Anderson

LAS VEGAS AND WASHINGTON -- Since the Enron Corp. scandal broke, only one major Las Vegas client, the Hard Rock Hotel, has fired Arthur Andersen as its independent auditor.

The rest of Andersen's major Las Vegas customers, primarily gaming companies, have stuck with the beleaguered accounting firm. Thursday's news that Andersen had been indicted on federal criminal charges didn't seem to change that outlook.

"You don't change auditors like you change your socks," said Jim Murren, president and chief financial officer of MGM Mirage, which uses Andersen as its auditing firm.

Station Casinos Inc.'s board met Thursday to discuss the Andersen question. The board plans to recommend that shareholders keep the firm in place as Station's auditor for another year, Glenn Christenson, Station's chief financial officer, said.

"Our experience has been that the local Arthur Andersen representatives are very high-caliber professionals, with an excellent know-ledge of the gaming industry," Christenson said. "We felt that, because of the quality of service and these other characteristics, at the present time there's no reason to change firms."

Station would switch if shareholders vote against Andersen, Christenson said. "But I really don't think we'll have much trouble with that (the shareholder vote)," Christenson said.

Still, some in Las Vegas are concerned, including Murren.

"We're watching this very, very carefully, and we're clearly very concerned, since they are our auditor and tax partners," Murren said. "The future of Andersen is clearly in doubt, and it's a very difficult and sad situation."

Murren added that MGM Mirage also has no current plans to drop the firm, which he said "has done a very good job here in town."

"We don't make any decision rashly, and we're certainly not going to make a decision rashly here," Murren said. "What happened (the indictment) is just another datapoint we need to assess."

Station and MGM Mirage are hardly the only Las Vegas firms represented by Andersen. Seven major gaming companies -- Station, MGM Mirage, Harrah's Entertainment Inc., Mandalay Resort Group, Alliance Gaming Corp., Mikohn Gaming Corp. and the Aladdin -- have their books audited by Andersen.

"Arthur Andersen is the predominant player in this sector," said Robert Saxton, chief financial officer of Alliance. "They (the Las Vegas office) are a specialized group in gaming. We selected them because of their expertise in this field."

Murren agreed, calling them "the clear leader at this point in terms of gaming practices."

Alliance shareholders were asked in December whether the company should continue to use the firm. They voted in favor of Andersen, and Saxton said that won't change because of the indictment.

"As it stands today, as long as they're qualified to perform their services under the auspices of the Nevada Gaming Commission and the Securities and Exchange Commission, we'll retain them this year as the shareholders have directed," Saxton said. "Obviously, if something changed to where they couldn't perform those services, we'd look elsewhere."

Mikohn also plans to retain Andersen at the current time, said Mikohn Chief Financial Officer Don Stevens.

Like Station, Harrah's board has also recommended shareholders approve the selection of Andersen as its independent auditor. In its proxy statement, however, Harrah's said it would reconsider that selection if shareholders voted against Andersen.

"Even if the selection is ratified, the board of directors, at its discretion, may direct the appointment of a different independent public accounting firm at any time during the year if the board of directors determines that such a change is in the best interests of the company and its stockholders," the proxy read.

Harrah's spokesman Gary Thompson declined comment on whether Harrah's position had changed in light of the indictment.

There are gaming companies in Las Vegas looking for auditors. Mary Lynn Palenik, director of gaming research and analyst for the Las Vegas office of PricewaterhouseCoopers, said the firm had had "serious discussions with a number of companies about audit services." She wouldn't say whether these firms are now represented by Andersen.

"We are not in a position to comment about any changes these companies have made or will make until such information becomes public," Palenik said.

It appears a greater-than-normal number of Andersen employees are hunting for new jobs as well, said Ronnie Sloan, vice president of operations at Las Vegas accounting firm Fair Anderson & Langerman.

"It certainly appears that way," said Sloan, who said she's seen applications from five current and former Andersen employees. "They're seeing if they can find a spot just in case."

Outside of the gaming industry, Andersen's largest Las Vegas client is Southwest Gas Corp. But like most casino operators in town, Southwest will stay put for the moment.

"We feel Arthur Andersen has been a good auditor, and our plans are to continue with them," said Southwest spokesman Roger Buehrer.

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