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Andersen Gets $500,000 Fine, 5 Years Probation

Oct 17, 2002 | USA Today

Arthur Andersen, the accounting firm that once represented the gold standard in auditing, was fined $500,000 and sentenced to five years probation Wednesday for obstructing a federal investigation of Enron last year.

Andersen's indictment and conviction in the Enron scandal has already cost the former Big Five accounting firm its auditing practice, thousands of clients and almost all of its employees. Its sentencing Wednesday came a year to the day after Enron announced more than $1 billion of accounting errors, unleashing a wave of investigations and disclosures that pushed Enron into bankruptcy court and brought down its former auditor.

U.S. District Court Judge Melinda Harmon's sentence the maximum penalty under the law was a foregone conclusion for Andersen and its lawyers. The firm plans to appeal the guilty verdict that a Houston jury handed up in June.

''Our company should not have been destroyed because of the conduct of some individuals the government disagrees with,'' said Andersen attorney Rusty Hardin.

Deputy Attorney General Larry Thompson blamed Andersen's demise on the firm's management.

''When a business organization breeds a culture of deceit and contempt for the law, the organization itself must be held accountable,'' he said. ''Companies that break the law, as well as individuals who break the law, will be soundly punished.''

Andersen was punished. Its indictment last March, coupled with Andersen's refusal to enter a guilty plea, effectively put the firm out of the auditing business.

The government's prosecution of Andersen ''ought to be a wake-up call'' for other businesses and executives to follow the law, said Philip Hilder, a Houston lawyer for several Enron employees unlikely to face criminal charges, including internal whistle-blower Sherron Watkins.

Its sentencing doesn't end Andersen's woes. The firm still faces civil lawsuits arising from its audits for Enron and other former clients.

It could also face further prosecution by the federal Enron Task Force, which is trying to determine whether people responsible for managing and reporting Enron's earnings can be charged with stock manipulation. Andersen's U.S. operations employ about 1,000 people, down from more than 26,000 early this year.

''We're an ongoing business,'' says spokesman Patrick Dorton, without elaborating on what the firm is doing to generate revenue.

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