Arthur Andersen's 'Victory'
A retrial won't help the firm's 28,000 former employees.
Wednesday, June 1, 2005 12:01 a.m. EDT
As a unanimous Supreme Court yesterday announced its reversal of the 2002 criminal conviction of Arthur Andersen for shredding Enron-related documents, our first thought was: Now they tell us. Or, as former Reagan Labor Secretary Ray Donovan famously asked after his acquittal in 1987: "Which office do I go to to get my reputation back?"
Except that in this case, even if the proverbial office existed, there is no one left at Andersen to knock on the front door and demand restitution. The accounting giant, which once employed 28,000 people in the U.S. and 85,000 world-wide, is essentially no more. There's still an office in Chicago, but the fewer than 200 people who work there handle leftover legal and administrative chores and manage a bit of real estate.
The verdict, if not the indictment itself, was a death sentence for the partnership, 98% of whose employees had never cast an eye on an Enron audit. It was handed down by a Houston jury after 10 days of deliberation, and nearly a hung jury, following instructions from the judge that the Supreme Court now says were faulty. Anyone interested in a succinct history of Andersen's role in the Enron collapse, by the way, should make a point of reading Chief Justice William Rehnquist's 12-page ruling for the Court.
As we argued at the time, it would have been wiser for the Justice Department to go after individual Andersen partners for obstructing justice while handing over the firm to Paul Volcker, who had a clean-up plan ready to go. Instead, with one exception--David Duncan, the Andersen partner who audited Enron and turned state's evidence--no one was held responsible.
Numerous senior Andersen alumni are arguably better off now than they were pre-Enron. Many partners took their clients and vamoosed to one of the remaining Big Four accounting firms, which averted their eyes from any Enron taint. Today their services are in even greater demand thanks to Sarbanes-Oxley and the rash of post-Enron government regulations. It's one of life's political ironies that the fallout from the corporate scandals has enriched the very accounting profession that Congress claimed it was attempting to punish.
The Andersen prosecution is an exception to what has otherwise been a good Bush Administration record in prosecuting corporate wrong-doing. The Justice Department needed a political scalp at the time, and it is certainly true that Andersen's senior partners had a lot to answer for. But putting the company out of business harmed the innocent as well and arguably let the most culpable escape.
At Enron, Adelphia, WorldCom and HealthSouth, on the other hand, Justice has pursued individuals, and for the most part successfully. In the case of Adelphia, Attorney General Alberto Gonzales recently disclosed that Justice decided not to indict the company "in return for a $715 million contribution by the corporation to a Victim Compensation Fund." If that decision was based on wisdom gained from the Andersen mistake, then we suppose it wasn't a total loss.
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