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Decision too late to do justice to former employees

Updated: May 3, 2013 12:14PM

Originally published: June 1, 2005

The conviction was overturned -- but can the lives affected be set upright again?

More than 30,000 employees and partners of the giant Arthur Andersen accounting firm were affected by the government’s decision to indict the firm in the wake of the Enron scandal. The indictment -- an accusation -- was enough to destroy the firm. No public company could retain Andersen as an auditor once the government leveled its charges.

Perhaps it was a conscious decision to make an example of the largest and easiest target. Documents were destroyed, that was clear. But was it criminal? The jury said yes -- months later. And by then, there was very little left of the once largest and most prestigious accounting firm.

Like fragments from an exploding meteor, lives were scattered across the landscape. Some survived, and even prospered. Andersen partner Stan Logan went on to become managing partner of KPMG, one of the remaining firms that quietly picked up business from the wreckage. Andersen partner Deborah DeHaas, acknowledged by all as one of the most powerful women in the city, moved on to become vice chair and regional managing partner of Deloitte & Touche.

One survivor actually emerged from the wreckage to build a large and well-respected financial advisory business. Steven Weinstein, a CFA and CFP who was in charge of Andersen’s investment advisory services practice, formed Altair Advisers along with nine other Andersen professionals and three administrative staffers. Today the firm is celebrating its third anniversary, a business that has grown from 75 clients with $500 million under management, to nearly double the number of clients and $1.8 billion under management.

But you don’t have to look far to find bitterness, sorrow and anger. Mostly it comes from many of the retired partners who saw their investment in the firm go down the drain. There were no big pensions for the partners -- only promises that cash left deferred in the firm would grow and ultimately provide either a lump-sum or monthly benefit. That amount has been cut by two-thirds, forcing major changes in retirement lifestyles. Even a small supplemental pension has been cut drastically.

Then there were the long-term employees of the firm. Not partners, but employees, planning to stay in their jobs until retirement. Many never found positions that provided a similar lifestyle.

And there was the impact on the city itself. Andersen’s roles as a major donor, civic contributor and power center were simply erased from the scene.

And now the conviction has been overturned by the Supreme Court. That doesn’t mean Andersen was found innocent. Andersen was not perfectly pure. After all, there were the Sunbeam and Waste Management messes preceding Enron that besmirched the Andersen name. And the firm’s initial response to the Enron scandal was thought by some to be haughty and filled with the wrong kind of attitude.

But the Andersen prosecution is instructive to those looking for meaning in this story. Michael Chertoff, current secretary of the Department of Homeland Security and former judge in the Third Circuit Court of Appeals, was the Justice Department prosecutor who decided to indict the Andersen firm. The reversal of the verdict will have little impact on his career.

The Justice Department made its point. To date, the corporate scandals have resulted in jury trials and convictions for Arthur Andersen and Martha Stewart. Many Enron executives have made deals to plead guilty, notably Andrew Fastow and his wife. Others, including Jeffrey Skilling and Kenneth Lay, have been indicted and still await trial.

For some, obviously, the courts move quickly. For others, it appears the courts move very slowly. And for some, the courts ultimately do provide justice. That’s The Savage Truth.

Terry Savage is a registered investment adviser.

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