Comments

Looks like they're skating free on a technicality. I wonder if this isn't the first glimmer of a return to a more pro-business environment. Maybe we're on the path to reviewing and modifying the scope of Sarbanes-Oxley.

Posted by Noel Guinane at June 1, 2005 2:37 AM

Noel, I'd agree except they were themselves nailed on a technicality.

Posted by tom peters at June 1, 2005 5:59 AM

True, though it hardly matters much now. There's nothing left of the firm to pursue.

Posted by Noel Guinane at June 1, 2005 6:26 AM

This is the pithy comment from the UK Guardian newspaper's daily Business Notebook column:

"Lawyers for Arthur Andersen were crowing yesterday over the US supreme court's decision to overturn its criminal conviction in 2002. The accounting firm had been accused of obstructing justice by destroying documents related to its audits of Enron.

But, aside from the fact that Andersen is now just a shell company, there's no reason to get carried away. Whatever happens in the courtroom, the accounting firm rightly lost its reputation in the wave of corporate fraud that emerged in the years after the dotcom boom.

Not only was it the auditor for Enron, it also worked with WorldCom, Global Crossing and Qwest, three of the biggest other scandals of the time."

Posted by Michael from UK at June 1, 2005 8:23 AM

It's hard not to agree with you Michael. I read 'The Smartest Guys in the Room' on Enron and the damage done to Andersen's reputation does seem to have resulted from their own actions. However, the legal case originally launched against them, and that validated the loss of their reputation, hinged on the point the Supreme Court just overturned so it's not unreasonable to ask what would have happened to the firm had they been at the outset 'legally' cleared of any wrongdoing, as has just occurred. Maybe management could have saved the firm from total implosion. Maybe as the article suggests, they didn't deserve to be saved considering the other scandals (though I don't recall any legal ruling against them in those scandals).

It's a shame to see a firm that started out with such high standards of integrity, and managed to maintain them for so long, utterly demolished in a frenzy, apparently without legal justification.

Posted by Noel Guinane at June 1, 2005 9:23 AM

There is really no defending Anderson.

Posted by Cassandra Helm at June 1, 2005 12:34 PM

You know what? You're right. It's just that Arthur Andersen himself was so honest. "Think Straight Talk Straight" was his motto. He must be turning in his grave.

Posted by Noel Guinane at June 1, 2005 12:45 PM

Arthur Andersen and the French "Non": After the Andersen judgement, former Citicorp Chairman Walter Wriston wrote a great op-ed in the Wall Street Joournal. As I recall he said that booking an ordinary business transaction was covered by 800 pages of SEC regulations. "Reasonable men can disagree" was his message. The U.S. Constitution is a Marvel of Brevity. I've read that the Euro Constitution is hundreds of pages long. GOOD GOD. I can't conceive living with a multi-hundred page constitution (TRAVESTY) or 800pps governing the booking of a simple-single biz transaction. A curse on all their houses.

Posted by tom peters at June 1, 2005 1:11 PM

Just as every one of those pages in an instruction manual ("Don't use a lit match to see if there is gasoline in your tank", etc.) has someone's name on it, I'm sure those 800 pages probably do too. SIGH.

Posted by Doug at June 1, 2005 6:21 PM

You should read the article in Fools.com about this topic. The Supremes did not find them innocent only that improper instruction was given to the jury; we can only speculate what a verdict after proper instructions would be. But anyone with any sense knows that Anderson's lawyers would stop crowing very quickly!

Posted by Dave Dorff at June 1, 2005 9:59 PM

Hey Tom, what do you think of the new SEC Chairman? Back to business?

Posted by Noel Guinane at June 2, 2005 11:01 AM

A few thoughts...Not only was Arthur Andersen (the man) honest, many/most of the former employees of AA were honest too. I think the swift, unanimous decision is a signal to the AG to be more diligent the next time around. Reducing a multi-billion dollar business to dust in a matter of months was a punishment that did not fit the crime. More business leaning and a move to lighten SOX?If anyone thinks the Enron-esque irresponsibility is limited to Arthur Andersen, no chance. There's a lot of clean up yet to come.If the global marketplace had confidence in our numbers, we'd see a lot greater market cap today.

Posted by Mike Wokosin at June 2, 2005 11:12 PM

T'is a wonder why folks keep on bashing Arthur Andersen. I do agree that they managed the audit of a few large companies that went bankrupt, and I also agree that there may be times when they overlooked some questionable issues at these companies.

But these are true of all accounting firms. So are they all suspect? I guess not! External audits are just that - audits. Samples are taken of the transactions entered into by the company and scrutinised. Not everything can be checked during an audit. Besides, the folks at the company can always hide information if they do so from their auditors.

I personally have been a client of Arthur Andersen. I have received stellar service from them. I'm sure many others reading this post have as well.

Quite a few personnel at Arthur Andersen were absorbed by the other bulge bracket accounting firms. I'm sure you don't think these firms are tainted with the same brush as Arthur Andersen!?!

My 2c, Arun

Posted by Arun Sadhashivan at June 3, 2005 6:44 AM

Here's a couple of comments on the SEC Fred Schwed Jnr., who had lived through the Panic of ‘29 and the Great Depression after, wrote in his classic book on Wall Street, Where Are The Customer's Yachts?

"I have at times fancied that I detected in the S.E.C. a spirit of gleeful vengeance, which should not be the attitude of a regulatory body. A police force is supposed to keep a city orderly. Destroying the city is not among its duties ... I am willing to submit an idea to the Securities and Exchange Commission that perhaps they have thought of themselves: they are in the position of a doctor who has only one patient, with no prospect of ever getting another. It would be a tactical error to kill this patient, even though a commendable scientific zeal prompts the doctor to try out his whole shelf of pharmacopoeia on him. After all, there is no real danger in this case of the patient ever becoming completely cured."

This is not to suggest that companies should not have to obey the law or be held accountable.

Posted by Noel Guinane at June 3, 2005 8:21 AM

Maybe this discussion has run its course, but I'll say one more thing. Anderson sank because its clients deserted the firm. The litigation came later. It's a salutory reminder that a reputation (personal or corporate) can be tarnished or destroyed almost in the blink of an eye. Clients don't need to satisfy anyone but themselves that they have a good enough reason to take their business elsewhere. And the tipping point can turn on just a few key clients.

Posted by Michael from UK at June 7, 2005 7:11 AM