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Sunterra Seeking $150 million in Damages from Andersen; Blames Failure on Accounting Firm
By Todd Pack, The Orlando Sentinel, Fla.
Knight Ridder/Tribune Business News 

Jun. 15--Sunterra Corp., the Orlando-based time-share operator whose meteoric rise in the 1990s ended in financial collapse two years ago, blames its failure on the beleagured Arthur Andersen accounting and consulting firm. 

Sunterra is suing the firm in federal court in Orlando, saying Andersen "purported to audit" its financial statements for 1998 and 1999 and "should have discerned that Sunterra's financial condition . . . [was] materially overstated and conveyed a false impression of financial well-being." 

Sunterra alleges that it was forced to filed for Chapter 11 bankruptcy reorganization in 2000 and reduce its retained earnings by $363 million over two years because of the accounting firm's errors. 

"The magnitude of Andersen's professional negligence is exemplified by the fact that Sunterra was out of money and in bankruptcy" within weeks of the firm signing off on its 1999 financial report, which raised no questions about Sunterra's ability to stay in business, the company said in its lawsuit, filed May 30. 

Sunterra seeks $150 million in damages. 

Sunterra's attorney and spokesmen for Andersen didn't return calls Friday. 

Sunterra's suit only adds to the accounting firm's legal and credibility woes. Chicago-based Andersen is accused of obstructing justice by hiding accounting abuses at Enron Corp., a Houston energy company. 

Because of the scandal, it has lost hundreds of accounting customers nationwide. It recently split and sold its Orlando auditing and consulting operations to separate companies. 

Sunterra, one of the nation's top time-share companies, has announced plans to move its corporate offices from Orlando to Las Vegas as part of a plan to emerge from bankruptcy court protection from its creditors. 

-----To see more of The Orlando Sentinel, or to subscribe to the newspaper, go to http://www.OrlandoSentinel.com 

(c) 2002. Distributed by Knight Ridder/Tribune Business News. OWN, ENRNQ, 


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