In 1913, a twenty-eight-year-old accounting professor in Chicago bought a small audit practice and built it on four words: think straight, talk straight. Eighty-nine years later, Arthur Andersen was one of the Big Five, and the auditor of the seventh-largest company in America. That company was Enron.
Within a year of the shredders starting in Houston, Andersen was indicted, convicted, and gone - because an audit firm is the one kind of company that cannot operate while accused. Its entire inventory was credibility, and hundreds of public clients left in the weeks after the indictment, before the trial ever started.
Three years after the funeral, the Supreme Court threw out the conviction, nine to nothing, over flawed jury instructions. The government never retried the case. There was nothing left to retry. The death came first; the verdict that caused it did not hold.
Certificate of corporate death
NAME: ARTHUR ANDERSEN BORN: 1913, Chicago (as Andersen, DeLany & Co.) DIED: August 31, 2002 (CPA licenses surrendered) CAUSE OF DEATH:REGULATORY KILL UNDERLYING: the product was trust - credibility does not wait for verdicts
Timeline
1913 Founded in Chicago by Arthur E. Andersen; 'think straight, talk straight'
AUG 2000 Arbitrator frees Andersen Consulting for ~$1B and the name; it becomes Accenture
JUN 2001 $7M SEC fine over Waste Management audits - largest ever on a Big Five firm at the time
2001 The summit: 85,000 people, 84 countries, $9.34B revenue
OCT 2001 Enron unravels; Andersen personnel in Houston shred documents in volume
NOV 8 2001 SEC subpoenas Andersen; the shredding stops the following day
MAR 14 2002 The firm itself is indicted for obstruction of justice; clients leave in waves
JUN 15 2002 Convicted by a Houston jury
AUG 31 2002 CPA licenses surrendered; the Big Five become the Big Four
MAY 31 2005 Supreme Court overturns the conviction 9-0; the case is never retried
BUDINSKI SAYS
The greatest battles are fought over the nerdiest things.