It remains one of the greatest ravesties in the history of Ameri- can business: In 2001, the 85,000 employees of one of the world’s
largest accounting firms began losing
their jobs in droves. Their employer had
become tainted by its loose association
with Enron Corp., a financial house of
cards that was imploding and taking with
it billions of dollars in employee pensions
and shareholder investments.
In 2002, accounting firm Arthur
Andersen was convicted of charges
related to Enron’s fraudulent practices.
The charges had nothing to do with the
quality of their auditing — or any of
Enron’s illicit practices. The conviction
was appealed, and in 2005, the U.S.
Supreme Court struck it down in a
unanimous vote. But the damage had
already been done.
To date, despite millions of records
being subpoenaed, there is no evidence
Arthur Andersen ever did anything
wrong. Still, perceptions are everything:
Most people are not aware that the
accounting firm, which led the industry
in establishing strict, high standards,
became a government scapegoat.
When I speak to groups across the
country, I ask the following questions.
Below are the typical responses I receive
— and the actual facts.
What do you remember about
Typical Response: They were the ones
that helped facilitate the Enron fraud.
They deserved what they got.
Fact: Arthur Andersen was the largest
and most prestigious firm in the country.
It was considered the gold standard of
the accounting profession by the business
For what was Arthur Andersen
Typical Response: They messed up the
audit of Enron and signed off on false
Fact: They were indicted for shredding
documents. These documents were drafts
and other items that do not support the
final product. All accounting firms establish policies for routinely shredding such
A Business World Massacre —
What Can Happen When
Government Needs a Scapegoat
By Larry Katzen