As it struggles to survive the collapse of Enron Corp., Andersen has dramatically revised its strategy in recent days, switching from a cautious approach focused on making legal arguments to a broader public relations counterattack aimed at winning public support.
The Chicago-based accounting giant, whose future has been threatened since it was named March 14 in a federal indictment stemming from Enron’s collapse, has gone on the offensive and demanded that the Justice Department drop the felony obstruction-of-justice charge.
The firm has run full-page advertisements in major U.S. newspapers and helped coordinate public rallies and media appearances of Andersen employees eager to tell their stories. Andersen workers also have blanketed public officials and media outlets with letters and e-mails protesting the indictment, as well as complaining about what they consider one-sided media coverage of the story.
With a banner headline in one newspaper ad exclaiming “Why we’re fighting back,” Andersen hopes to convince the public that the whole firm is not criminal even if a few of its employees have done wrong.
It’s a dramatic shift from where the firm was less than two weeks ago. Officials were hesitant to talk, in part because they were deferring to lawyers preoccupied with defending the firm in the criminal investigation. But by taking the legally safe route, top Andersen officials now acknowledge, the firm lost precious time that could have been used to mount the defense now being raised: Why should the actions of a few Andersen officials involved in work for Enron bring down the entire firm?
“We have moved from a strictly legal strategy to a more comprehensive strategy in the last 10 days,” one top Andersen executive said. “Only time will tell if that is successful.”
Management strategists say Andersen’s defense has been fraught with public relations errors and agree that the firm should have moved quicker to counter the rising tide of bad publicity. The firm simply moved too late to make top officials available as spokesmen and to harness the heartfelt emotions of thousands of Andersen workers who put a human face on the firm.
“Companies have to respond quickly,” said Annette Veech, senior lecturer in business communications at the Olin School of Business at Washington University in St. Louis. “Companies have to admit when mistakes have occurred and apologize. They need to change the operational procedures and ensure these kinds of mistakes won’t happen in the future.”
“It doesn’t seem that they could have gotten themselves in a much worse public relations situation,” said James Schrager, a professor of strategic management at the University of Chicago Graduate School of Business.
Damage control comes late
In November, it was clear that Andersen faced significant fallout from the collapse of Houston-based Enron, the now-bankrupt energy giant whose books Andersen audited. Yet it wasn’t until February that the firm made its most meaningful effort at damage control, recruiting former Federal Reserve Chairman Paul Volcker to recommend reshaping Andersen’s policies and management. And Volcker’s full proposal for reform wasn’t released until Friday. By then, the firm had been under indictment for a week.
Since Andersen’s strategy switch, the firm’s partners and employees have marched and demonstrated in Chicago, Houston and other cities, trying to draw attention to their firm’s side of the story. The professionally printed signs some carried gave the demonstrations a staged air, but there was nothing insincere about the Andersen workers’ emotions.
The indictment shows how the “government can and will use its power to make a decision that is not in the interest of the public, the people, [or] the economy,” said Andersen executive assistant Michelle Ivy, who spoke at Friday’s rally in the Loop.
Like many at Andersen, Ivy wants the Justice Department to rethink its action.
“It is my hope that they have, or very shortly will, review the charges … and realize how ridiculous and unjust the indictment was in the first place,” she said.
Ken Serauskis, an information technology consultant for Andersen’s Global Technology arm, said he is “astonished that not one charge has been filed against Enron or its leadership,” a sentiment echoed by many at Andersen.
Earlier scandals affect position
Andersen’s position would be stronger if it weren’t for earlier business scandals involving its clients. Andersen was the auditor for Waste Management and Sunbeam, where executives used accounting tricks to overstate earnings.
“The persistent warning signs were ignored,” said Daniel Diermeier, co-director of the Ford Center for Global Citizenship at Northwestern University’s Kellogg School of Management. After Sunbeam and Waste Management, top Andersen officials should have realized the danger the firm faced if it did not change the way it operated, Diermeier said.
“They did not anticipate that this might explode,” he said.
In their words
Andersen employees have been e-mailing the media, lawmakers and the Justice Department to protest the company’s indictment:
– “This kind of prosecution may be common in some third-world kangaroo courts, but I was raised in a small town in West Texas and I was taught that it was wrong to punish an entire group of people for the actions of a few.”
– “Mr. President, there is always a time for repentance: don’t wash your hands. Remember Benjamin Franklin and please do something. God Bless the United States of America. God bless my honorable Firm, Arthur Andersen.”
– “I am a proud Republican who voted for you and your father. I supported your campaign financially, and I have proudly watched your handling of the tragedy of September 11. I am now having my own ‘September 11’ experience and you have ABANDONED me.”
– “With deep anger I have noticed that it is possible to indict a 99%+ majority of innocent, hard working employees all over the United States and in fact all over the world for the wrongdoing of a few: The future of 85,000+ people is put at risk by this unbalanced indictment!”
