Enron and the Fall of Arthur Andersen

Enron's fall 2001 collapse wound up taking down the accounting firm Arthur Andersen, too. The firm was indicted for having approved Enron's books, and went out of business. Critics say the government should have indicted responsible individuals, rather than the entire firm.

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SCOTT HORSELY reporting:

I'm Scott Horsley.

Long before federal prosecutors brought charges against Ken Lay and Jeffrey Skilling, they went after Enron's auditor, the Arthur Andersen Company. Andersen's partner in charge of the Enron account had ordered the wholesale shredding of Enron-related documents in the fall of 2001. Andersen fired the partner, but that didn't stop then Deputy Attorney General Larry Thompson from seeking an indictment against the firm itself.

Mr. LARRY THOMPSON (Former Deputy Attorney General): The indictment alleges that Andersen partners and others personally directed these efforts to destroy evidence.

HORSLEY: The indictment alone was devastating for Andersen. Most companies don't want an accused felon certifying their books. Enron was just one of a number of strikes against the auditor. Andersen had also overlooked big problems at Sunbeam, Waste Management and the WorldCom fraud that would soon dwarf even Enron. Still, many of Andersen's employees felt like Tiffany Witter, that they were being tarred with too broad a brush.

Ms. TIFFANY WITTER (Employee, Arthur Andersen): I feel like Arthur Andersen is my firm, and I want to fight because it's not something that - I feel like someone's taking something away from me which shouldn't be taken away.

HORSLEY: In Enron's hometown of Houston, Andersen attorney Rusty Hardin pressed for a speedy trial. Andersen was in court within two months.

Mr. RUSTY HARDIN (Attorney, Arthur Andersen): If Arthur Andersen's found guilty, then so be it. But if Arthur Andersen's found not guilty a lot of people, including the Congress, should look very deeply among themselves as to whether they got on a bandwagon for a lot of quotes and a lot of free publicity and hammered into the ground a really, really good 89-year-old company.

HORSLEY: But after ten days of jury deliberation, Andersen was found guilty. And the bandwagon for accounting reform rolled on. New limits were imposed on the kind of lucrative consulting contracts that had been blamed for blinding accountants to problems at the companies they audited.

Then, a year ago, the U.S. Supreme Court unanimously reversed Andersen's conviction, saying the judge's instructions to the jury had been too broad. The high court ruling came too late to save Andersen, which had shrunk from 28,000 employees to just 200. While Enron's top executives now face prison time, Arthur Andersen got the death sentence.

Scott Horsley, NPR News.

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