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what did arthur andersen do wrong

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She said ominously after the guilty verdict, “We are not finished with Arthur Andersen.”. Lay's protestations at this point are just sad. Some of the best witnesses against Enron may come from Andersen. This conviction was secured by creative lawyering on the part of government prosecutors, at the expense of sound statutory interpretation and the basic goals and values of the criminal law. It went away much like Enron, and the case was closed, and people moved on. [I found this in my drafts folder, written October 20, 2011 but never published.] When the scandal broke, the worl…

Since the Enron bankruptcy on Dec. 2, Andersen CEO JosephBerardinoJoseph Berardino has been out front trying to save the reputation of his firm, whose reputation and very corporate existence are threatened by its Enron engagement. It also means that if a gray area exists, you must use your best judgment to act with integrity. AA’s Supreme Court brief says: It is plain as day that the Government did not charge Andersen with obstruction of justice for discarding documents during the relevant time period because no official proceeding of the SEC was pending. You must ensure that your work honors the public trust. Neither is an abstract desire not to retain documents because they might be relevant to some possible future proceeding. Due care means always striving for improvement and excellence. Where Anderson went wrong: The firm failed to make Enron’s Audit Committee aware that Enron’s CFO and his colleagues were involved in a number of conflict of interest situations. In 1908, after attending courses at night while working full-time, he graduated from the Kellogg School at Northwestern University with a bachelor's degree in business. This Court has held for more than a century that “a person lacking knowledge of a pending proceeding necessarily lack[s] the EnronSpecial Report: Enron's Endgame"While we had been willing to give Andersen the benefit of the doubt until the completion of [an internal] investigation, we can't afford to wait any longer in light of recent events, including the reported destruction of documents by Andersen personnel and the disciplinary actions taken against several of Andersen's partners working in its Houston office," said KennethLayKenneth Lay, Enron's chairman and chief executive, in a statement. Everyone from your clients to the government to employers and investors rely on you to practice with the highest level of integrity and objectivity as to serve the public interest and maintain trust in commerce. Chief Justice William Rehnquist wrote that “jury instructions at issue simply failed to convey the requisite consciousness of wrongdoing…Indeed, it is striking how little culpability the instructions required.”, Chief Justice William Rehnquist was also highly skeptical of the government’s concept of “corrupt persuasion”—persuading someone to engage in an act with an improper purpose even without knowing an act is unlawful.”. Due to the sometimes complex nature of financial matters, many may not be familiar with the details of Enron case or Arthur Andersen’s role.

If you suspect a client or company of engaging in unethical behavior, you should refrain from providing services to that client. Andersen spokesman Patrick Dorton told reporters the firing was "no surprise to anyone.... As a matter of fact, our relationship with Enron ended when the company failed and it went into bankruptcy.". But it wasn't Andersen that said "Go" in the first place. Neither attempted to hide what they – or anyone else – was doing. In July 2002, a jury found Arthur Andersen guilty of obstruction of justice after it had destroyed documents related to Enron Corp. Andersen claimed that the documents were destroyed as part of its housekeeping duties and not as a ruse to keep Enron documents away from the regulators. It also means not allowing any other biased opinion to affect your work or the decisions you make. § 1512(b)(2)(A) applies only when the defendant intended to make documents or testimony unavailable to a particular official proceeding, defined as a judicial proceeding, “a proceeding before the Congress,” or “a proceeding before a Federal Government agency which is authorized by law.” Interference with the fact-finding ability of law enforcement or preliminary agency investigations is not sufficient. It should go without saying that you only want to work with companies operating within the parameters of their own internal controls.

When Arthur Andersen took the case to the Supreme Court, the Supremes unanimously reversed the conviction due to flaws with jury instructions. More to the point, saying Andersen failed to warn the Enron board implies that the board needed warning. The SEC said it would offer a specific proposal in 60 days.

Where Arthur Anderson went wrong: The firm approved many of Enron’s Special Purpose Entities that were then used to hide losses and generate false profits. Indeed, the reason Andersen's actions are scandalous is because Andersen may have abandoned its legal duty to public shareholders in favor of protecting the interests of its client Enron, from whom it received $1 million a week in auditing and consulting fees.

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