Andersen's Sordid Story
From William Lucy, Secretary-Treasurer
In the last five years, Andersen has been the defendant in 146 federal cases ... brought by clients and their shareholders.
Thousands of innocent, loyal employees lost their jobs and their pensions while corporate VIPs made millions when Enron went under. And as the Enron mess developed, another powerful, high-profile com-pany was implicated: the accounting firm of Arthur Andersen, LLP.
It comes as no surprise that Arthur Andersen, Enron's accounting firm, also engaged in Enron-related criminal activities. Andersen does not exactly have a squeaky clean record. In the last five years, it has been the defendant in 146 federal cases — 50 of them involving Enron — brought by clients and their shareholders. Over the same period, holding the record for four of the five largest settlements for audit failures, the company has paid out $400 million. Andersen even defrauded the elderly churchgoers who invested in the now-bankrupt Baptist Foundation of Arizona.
Again and again, the company has merely gotten its hand slapped for illegal activities and has continued committing crimes — all the while functioning as a top U.S. accounting firm. It is accustomed to pleading guilty without suffering more than limited financial consequences.
Andersen acknowledges that its employees last fall shredded thousands of Enron-related audit documents after hearing about the Securities and Exchange Commission's decision to inspect them. The company stands accused of sanctioning Enron's use of off-balance sheets to deceive investors, hiding losses and making its senior people very wealthy.
Secrets from the people
Although criminal charges have been filed against Andersen for its Enron activities, there has been a constant stream of very secretive, behind-the-scene negotiations between the accounting firm and the Department of Justice (DOJ).
Everything connected with Enron seems to be related to keeping secrets from the American people. These deceptions extended to its accounting firm, which was given the task of secretly destroying evidence.
After all this extraordinary wheeling and dealing, the talks between DOJ and Arthur Andersen collapsed. In the last analysis, even after receiving special treatment and special deals, the failing firm refused to admit guilt when it came to obstruction of justice.
If Andersen warrants benign treatment — despite playing a major role in the pillaging of investors, employees and retirees who lost their life savings in the Enron catastrophe — something is very wrong with our method of meting out justice under our appointed President and his Big Business friends.
History does repeat
Before the Enron-Andersen scandal, there was Watergate. A break-in to Democratic headquarters by Republican-hired agents led to the discovery that 21 corporations illegally donated to both parties to buy influence. Short-lived reforms included creating the Federal Election Commission.
Then we had the savings and loan fiasco: Powerful people in Congress were too close to S&L executives — and as with Enron, deregulation directly contributed. The government bailout of the S&Ls totaled around $1.4 trillion. With this money, the government could have provided prenatal care for every American child for the next 2,300 years, or purchased 5 million average homes!
Charles Keating, the most notorious shyster in that scandal, distributed over $1 million to senators looking too closely at his Lincoln Savings & Loan. Some observers believe, however, that Keating's illegal pursuits pale alongside those of Enron and Andersen. Ironically, Andersen also audited the books at Lincoln Savings & Loan.
AFSCME's position
As we face the November elections, we should look carefully at who is supporting the current accounting legislation in the House of Representatives. Everyone agrees, in light of Enron-Andersen, that new and closer oversight is needed. If nothing else, this debacle has shed light on long-term, major problems in auditing.
But does the current bill to regulate accounting firms contain the necessary teeth? There would still be conflicts of interest. The accounting industry would still be self-regulating. The Securities and Exchange Commission, which looks out for the interests of investors, would still be under-funded and under-authorized.
Though Andersen has continued to operate, despite admitting to repeated dirty dealing, we must make sure they are no longer able to continue to defraud the American people.
