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To: Jim Willie CB who wrote (46728)	1/21/2002 2:46:34 PM
From: stockman_scott	Read Replies (1) \| Respond to of 65232

Down for the count: Why Andersen can't win the fight Crain's Chicago Business • January 21, 2002 The Andersen we've known is gone and will never return. The final fate of the Chicago-based accounting firm is yet to be determined, but it's very possible that the company will go out of business, brought down by the weight of its own mismanagement and its critical role in the collapse of Houston-based Enron Corp. Even if, by some miracle, Andersen survives the Enron scandal, its reputation will be shredded, as will the firm's ability to retain, or attract, corporate clients. Having squandered its credibility and legacy, Andersen will find that the stench of Enron can't be washed away by firing a few executives, agreeing to a multimillion-dollar settlement, installing new governance procedures or making a public mea culpa. Whatever Andersen's fate, it's certain that the Chicago economy will be harmed. During a time of recession and extensive financial ills at several major companies, including UAL Corp. and Motorola Inc., the last thing this region needed was for Andersen — a longtime stalwart corporate citizen and large employer — to unravel so ignominiously. The fact that this is happening to such a respected company makes the pain even worse. Nevertheless, all indications are that Andersen brought these troubles on itself. All the facts are not yet known, but the litany of wretched management decisions revealed so far is mind-boggling: Andersen compromised its sacrosanct role as auditor; exposed itself to conflict-of-interest charges by accepting millions of dollars in Enron consulting fees, and downplayed its role in events leading to its client seeking bankruptcy protection — a demise that will go down as one of the biggest corporate scams in U.S. history. Taking this scandal to new heights of public outrage is the disclosure that employees in Andersen's Houston office shredded sensitive documents and deleted e-mails related to work on Enron. Worse yet, the purge reportedly took place after the Securities and Exchange Commission signaled that it was looking into Andersen's auditing oversight of Enron. In a desperate attempt at damage control, Andersen CEO Joseph Berardino last week fired the lead partner on the Enron account and put three other workers in the Houston office on leave. Mr. Berardino also outlined other corrective measures, including what he calls an "independent" review of the firm's record-retention policies and a promise that, in the near term, Andersen will reveal changes in its practices and policies. It may sound presumptuous to say that such reforms won't save Andersen, but they won't. It's too little and way too late. Billions of dollars in Enron equity is gone forever, and thousands of angry shareholders and employees are holding virtually worthless Enron stock. Also lost is Andersen's credibility — the heart and soul of any company, but the very essence of an accounting firm. Serious suspicions will not go away, nor will the questions surrounding this travesty. Among the most damaging queries: Why should shareholders trust an Andersen audit again? Why should a corporate client entrust its financial affairs to such a firm? Why should regulators put credence in Andersen's work? And even if the top people at Andersen had no involvement in the Enron affair, they must be held to account for their failure to keep a closer watch over and a tighter leash on their subordinates. At the very least, what does the Enron debacle say about the way the Andersen store is being run? As unfair as it is to the thousands of honest Andersen employees who had nothing to do with Enron, their firm is now tainted as a book-cooker and a document-destroyer. Their management let them down, but every worker will suffer the consequences. Andersen is exposed to potentially millions of dollars in liabilities, a criminal investigation, unprecedented public outrage, client backlash and a virtual inability to attract new clients. Andersen could try to settle and then doggedly go it alone. It may seek sanctuary in Bankruptcy Court. Or it may attempt to merge all or some of its practices with other accounting firms. But, no matter what it tries, the Andersen we knew will be gone. ©2001 by Crain Communications Inc.

To: Jim Willie CB who wrote (46728)	1/21/2002 3:09:18 PM
From: stockman_scott	Respond to of 65232

Some comments from an Enron discussion board... <<...After all, the Enron saga offers all the sprawling comic richness and icy moral clarity of a Tom Wolfe novel. Back in the mid-’80s, it was just a dingy little gas-pipeline company. But capitalizing on the Reagan era’s vogue of deregulation, Enron reinvented itself, turning into a behemoth that traded in energy rather than merely providing it. By 2000, it had become the poster boy for the benefits of deregulation and limited government oversight. Here was a $60 billion concern that smugly called itself the “World’s Leading Company.” And why not? Although Enron had a low public profile — have you ever even seen its tilted “E” logo? — it was idolized by financial publications. And like a tumor, it was growing inexorably bigger, even building pipelines and plants in Argentina, Bolivia, Brazil, India, Mozambique, the Philippines and China. Meanwhile, back in Houston, the corporate hotshots behaved as if the word hubris hadn’t yet been translated into Texan. In a superb article in the December 9 Houston Chronicle, reporter Greg Hassell offered a portrait of Enron’s glory days, laying bare a gaudy corporate culture that was busy readying its vanities for the bonfire: Beyond the in-building health club and free Starbucks coffee, silver Porsches became an obligatory parking-lot status symbol, and traders were known to freak out when their annual bonus was only half a million bucks. This conspicuous consumption was encouraged by an evangelical leadership that one former executive compared to the Taliban — either you were for the company or you were an infidel. To call down an Enron fatwa, you needed merely ask for proof of its extravagant claims of profitability (proof its accountants obviously didn’t seek very diligently). As Hassell explains, Enron focused on deals that looked lucrative in the short term — “My bonus is based on what I do this quarter,” shrieked one of its agonized traders — even if they were long-term disasters. Such shortsightedness didn’t just sap the company, it led to an abject lack of social responsibility. When Enron wasn’t driving up energy prices in California last year, it was buying up, then destroying Oregon’s homegrown energy system; in India, human-rights groups have compelling evidence of physical violence against villagers who opposed new plants by Enron subsidiary Dabhol Power Co. This same casual amorality turned office politics into one endless episode of Corporate Survivor, in which a policy nicknamed “rank and yank” had employees give one another annual ratings, with the bottom 15 percent being fired. In such a cutthroat culture, it’s hardly surprising that Enron execs would sell off their own shares for a fortune and prohibit underlings from doing the same, even when it became obvious that Enron stock was sinking faster than a Soviet sub. Such is the fine art of bankruptcy...>>