Andersen's Fault in the Collapse of Enron

As the American business realm and judicial system continue to reel from the Enron scandal and mega-accounting firm Arthur Andersen's fault in the collapse of Enron, many wonder about the fallout from this wake-up call to corporate America. What are the lasting effects of Enron and preventative measures that have tried to legislate corporate ethics? As a former pit trader and a founding partner of Chicago Research and Trading, one of the leading commodity options trading firms, Mark Ritchie addresses these issues in his Epilogue to God in the Pits: the Enron-Jihad Edition:

How would you like to have your accounting firm charge you millions and when you ask to see the papers you paid them to compute, they say, "Sorry, the shredder ate my homework." With accountants like that, it's easy to raise your right hand to congress and say, "No one told me the company was in trouble. I must have sold my stock by mistake." Too cynical? Is it cynical to wonder why the Enron execs have not been asked this simple question: "How many millions did you and your family make on that mistake?" To my critics I ask another simple question: How much of a company's stock would you buy after you learn that their very attractive profit numbers were computed by Arthur Andersen? If you don't want to buy, please don't call me cynical.

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To those who say that the employees shouldn't have had all their eggs in one basket, I say this is precisely what every liar wants, a diversion to a different subject. A naive investor who has all his eggs in one basket needs the truth even more than the professional. Some say that President Bush has already solved this problem by making it illegal to prevent employees from selling their stock. This assumes that the talented people who were creative enough to get around the laws that existed in the nineties will suddenly lack the creativity to get around this one. The implication of new laws is that the Enron scandal was caused by faulty laws or a lack of good ones. This is a preposterous and fatal mistake. Enron was actually caused by a very simple and willful ignoring of the golden rule.

If Andersen survives its current scandal, it will be the ultimate proof that crime pays and white-collar crime pays best. Soon enough, Osama bin Laden will likely have gone to meet his ultimate accountant, but the people who orchestrated this attack on the Enron employees' retirement accounts will still be comfortably holding their millions.

The professionals in the business will say that I have chosen an isolated case, focused on the scum of the industry, and blown it out of proportion to sensationalize my point. But the truth is that Enron does not represent the scum of the industry. Neither does Arthur Andersen. They are the best the industry has to offer. In some cases these very people were singled out and given awards by the president of the United States for exemplary ethics, specifically with respect to treatment of their employees.

What is the bottom line? We in the West must pay some attention to the golden rule ourselves, and put forth the effort to let others know about it.


Excerpt from God in the Pits, The Enron-Jihad Edition, by Mark Andrew Ritchie
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