It would be foolhardy to suggest that an accounting giant the stature of Chicago-based Andersen should welcome a Justice Department accusation that it obstructed justice by destroying Enron documents.
But the indictment does give Andersen a chance to fight for its future. Justice’s action Thursday carries Andersen closer to making its case on the central question that layers of investigations have raised. For several months now, Andersen has been tarred with an extraordinarily broad brush. Yes, by now we all know it’s not nice to frantically shred documents by the truckload. But what hasn’t been answered is whether that shredding was the work of a cluster of rogue Andersen employees–or the progeny of a corporate culture that tolerated, even encouraged criminal activity.
The government essentially argues the latter–a charge Andersen fiercely denies. The company said Thursday that document destruction “was confined to a relatively few partners and employees of the firm and was almost entirely limited to the Houston office. None of the destruction occurred with the knowledge, much less the consent, of senior firm management.”
We’ll see. But getting resolved the gaping question of who knew what will go a long way toward determining whether Andersen can survive for the long haul. The more pressing question is whether it can survive for the short haul.
Before the indictment, Andersen’s reputation and business prospects were already imperiled by the Enron scandal. Andersen had signed off on Enron’s books certifying the soundness of the energy trading giant’s financial prospects even as Enron kept billions of dollars of ultimately fatal debt off those books.
Since Enron filed for bankruptcy late last year and Andersen’s document shredding became public knowledge, the firm has been bleeding clients–Merck, Federal Express and Household International are just some of the companies that have decided to take their business elsewhere. In the wake of Thursday’s indictment, more may follow–although it’s significant that some major clients, unwilling to write off all of Andersen’s tens of thousands of employees, are taking a wait-and-see approach.
What those clients should keep in mind is the fact that Andersen is innocent until proven otherwise–and that, in the opinion of some accounting experts, the government will have a tougher time making its case stick than blaring headlines might suggest.
Thursday’s action by Justice gives Andersen a chance to fight for its life–though only as long as its clients will tolerate. The coming days are a test for them as well. Those who equate an indictment with a conviction won’t have qualms about abandoning Andersen. Those who know the difference might bear in mind the verity that no indictment ever looks more convincing than on the day it is issued.
