In an act that combines a large dose of ingratitude with a heaping helping of chutzpah, the Enron board of directors fired Arthur Andersen as the company's auditor. 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. Using the American Institute of Certified Public Accountants’ (AICPA) AICPA Code of Conduct, we’ll highlight just a few of the areas where Arthur Anderson failed: Integrity among CPAs is not as clearly defined as other points; instead, it is best defined as doing what is ‘right’ – both ethically and technically. The Court has recognized that there is nothing “obviously evil” or “inevitably nefarious” about acting “for the specific purpose of depriving the Government of … information”. At the meeting, Andersen discussed "conflicts of interest" relating to AndrewFastowAndrew Fastow, Enron's chief financial officer at the time. Lay's protestations at this point are just sad.
Where Arthur Anderson went wrong: The firm did not consider the advice of its quality control partner, Carl Bass. In support of its action, an Enron lawyer cited a February 2001 memo in which top Andersen officials, including Duncan, voiced concerns about possible conflicts of interest and inadequate public disclosure of "off-balance-sheet" Enron partnerships. 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. 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. Sorry, your blog cannot share posts by email. To operate in a completely ethical manner, you can only engage in business with others who also operate under the highest ethical standards.
Andersen knew or should have known what Enron was doing.
Meanwhile, Lay and other top Enron executives have been out of sight, hiding behind lawyers and spokesmen (see Lay-ing Low). [I found this in my drafts folder, written October 20, 2011 but never published.]. 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.". "There's no resemblance between the concerns that Arthur Andersen expressed internally in this meeting and the assurances they gave the audit committee that everything was well," Enron lawyer Robert Bennett told reporters. ( Log Out /
The destruction of documents was never intended to be a conspiracy to keep information from the SEC.
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. Wall Street firms that issued Enron securities and then paid analysts to tell the public to buy them--which they did until weeks before the final collapse--are also probably at least as culpable as Andersen. Andersen auditors weren't … In 2001, the Enron scandal erupted; by 2002, Arthur Anderson collapsed, and the Big Five Accounting firms became the Big Four. While there is plenty of blame to go around, the prime mover in the scandal is Enron and its executives. All Rights Reserved, This is a BETA experience.
It should go without saying that you only want to work with companies operating within the parameters of their own internal controls. It invoked 18 U.S.C.
Create a free website or blog at WordPress.com. The theory of this prosecution criminalized conduct commonly understood to be lawful, including the document retention policies in place at almost every American corporation or professional firm of any size. 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.
§ 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.
What it means: As a CPA, you are expected to provide services to the best of your ability and to always seek to improve your services and your profession.
The government argued that Nancy Temple’s proposed edits to David Duncan’s draft memorandum constituted criminal “witness tampering,” because in its hindsight view the SEC would have wanted to see Duncan’s first draft. ( Log Out /
Now he has hired his own lawyers from the Wall Street firm Sullivan & Cromwell and is cooperating with congressional investigators. Change ).
Any defendant engages in a wide range of conduct to limit information; that is one of the reasons that our legal system is frequently described as “adversary” and not “Hello Kitty and Barbie Play A Happy Game Of Prosecution and Rainbows.”. Change ), You are commenting using your Google account. The partner, DavidDuncanDavid Duncan, said he acted pursuant to firm policy and the advice of its lawyers. § 1512(b)(2)(A), which criminalizes killing, intimidating, threatening, and “knowingly … corruptly persuad[ing]” any person with the intent to make evidence unavailable to an official proceeding. You may opt-out by, EY & Citi On The Importance Of Resilience And Innovation, Impact 50: Investors Seeking Profit — And Pushing For Change.
Even nearly twenty years on, this scandal and the ensuring collapse of one of the world’s most respected accounting firms stands as the single best example of just how badly things can go wrong.
While Arthur Anderson’s overall role and responsibility in the Enron scandal is still argued today, the general consensus is that the ethical culture of the company was diminished and that far too many risks were taken in the interest of the bottom line. Enron West Coast Trading Primer: Get Shorty, John Kroger Quits Public Life; Public Rejoices, Everything Wrong With The Smartest Guys In The Room, The Enron Revisionists by Mark Gimien (Slate's "The Big Money" article), Ungagged – The Other Side of the Enron Story, Conversation With An Enron Executive About. This was a routine, required meeting consistent with our policies and practices," the firm said in a statement. Whether the existence of these partnerships, or their use to hide debts actually owed by Enron, was properly disclosed was also a topic of discussion at the meeting. Andersen has been doing some scapegoating of its own, firing the partner in charge of the Enron engagement because he ordered the "expedited" destruction of documents relating to the Enron audit. While Arthur Andersen was not implicated in directly assisting Enron in cooking its books, the company was found to have been woefully negligent in its role of overseeing and auditing Enron’s financials. Born 30 May 1885 in Plano, Illinois, and orphaned at the age of 16, Arthur E. Andersen began working as a mail boy by day and attended school at night, eventually being hired as the assistant to the comptroller of Allis-Chalmers in Chicago.
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