Final Accounting: Ambition, Greed and the Fall of Arthur Andersen - Softcover

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Formerly the Partner-in-Charge of Ethics and Responsible Business Practices consulting services for Arthur Andersen, BARBARA LEY TOFFLER was on the faculty of the Harvard Business School and now teaches at Columbia University's Business School. She is considered one of the nation's leading experts on management ethics, and has written extensively on the subject and has consulted to over sixty Fortune 500 companies. She lives in the New York area. Winner of a Deadline Club award for Best Business Reporting, JENNIFER REINGOLD has served as management editor at Business Week and senior writer at Fast Company. She writes for national publications such as The New York Times, Inc and Worth and co-authored the Business Week Guide to the Best Business Schools (McGraw-Hill, 1999).

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A withering expose of the unethical practices that triggered the indictment and collapse of the legendary accounting firm.
Arthur Andersen's conviction on obstruction of justice charges related to the Enron debacle spelled the abrupt end of the 88-year-old accounting firm. Until recently, the venerable firm had been regarded as the accounting profession's conscience. In "Final Accounting, Barbara Ley Toffler, former Andersen partner-in-charge of Andersen's Ethics & Responsible Business Practices consulting services, reveals that the symptoms of Andersen's fatal disease were evident long before Enron. Drawing on her expertise as a social scientist and her experience as an Andersen insider, Toffler chronicles how a culture of arrogance and greed infected her company and led to enormous lapses in judgment among her peers. "Final Accounting exposes the slow deterioration of values that led not only to Enron but also to the earlier financial scandals of other Andersen clients, including Sunbeam and Waste Management, and illustrates the practices that paved the way for the accounting fiascos at WorldCom and other major companies.
Chronicling the inner workings of Andersen at the height of its success, Toffler reveals "the making of an Android," the peculiar process of employee indoctrination into the Andersen culture; how Androids--both accountants and consultants--lived the mantra "keep the client happy"; and how internal infighting and "billing your brains out" rather than quality work became the all-important goals. Toffler was in a position to know when something was wrong. In her earlier role as ethics consultant, she worked with over 60 major companies and was an internationallyrenowned expert at spotting and correcting ethical lapses. Toffler traces the roots of Andersen's ethical missteps, and shows the gradual decay of a once-proud culture.
Uniquely qualified to discuss the personalities and principles behind one of the greatest shake-ups in United States history, Toffler delivers a chilling report with important ramifications for CEOs and individual investors alike.

"From the Hardcover edition.

Aus dem Klappentext

A withering exposé of the unethical practices that triggered the indictment and collapse of the legendary accounting firm.

Arthur Andersen's conviction on obstruction of justice charges related to the Enron debacle spelled the abrupt end of the 88-year-old accounting firm. Until recently, the venerable firm had been regarded as the accounting profession's conscience. In Final Accounting, Barbara Ley Toffler, former Andersen partner-in-charge of Andersen's Ethics & Responsible Business Practices consulting services, reveals that the symptoms of Andersen's fatal disease were evident long before Enron. Drawing on her expertise as a social scientist and her experience as an Andersen insider, Toffler chronicles how a culture of arrogance and greed infected her company and led to enormous lapses in judgment among her peers. Final Accounting exposes the slow deterioration of values that led not only to Enron but also to the earlier financial scandals of other Andersen clients, including Sunbeam and Waste Management, and illustrates the practices that paved the way for the accounting fiascos at WorldCom and other major companies.

Chronicling the inner workings of Andersen at the height of its success, Toffler reveals "the making of an Android," the peculiar process of employee indoctrination into the Andersen culture; how Androids both accountants and consultants--lived the mantra "keep the client happy"; and how internal infighting and "billing your brains out" rather than quality work became the all-important goals. Toffler was in a position to know when something was wrong. In her earlier role as ethics consultant, she worked with over 60 major companies and was an internationally renowned expert at spotting and correcting ethical lapses. Toffler traces the roots of Andersen's ethical missteps, and shows the gradual decay of a once-proud culture.

Uniquely qualified to discuss the personalities and principles behind one of the greatest shake-ups in United States history, Toffler delivers a chilling report with important ramifications for CEOs and individual investors alike.


From the Hardcover edition.

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Chapter 1



The Andersen Way


The day Arthur Andersen loses the public's trust is the day we are out of business.
--Steve Samek, Country Managing Partner, United States, for Arthur Andersen, on the firm's Independence and Ethical Standards CD-ROM, 1999



"I don't care what you used to charge," barked Robert, a partner in Andersen's Business Consulting unit, at the stricken young manager. "You're at Arthur Andersen now."

Robert had asked the manager, a friendly and straightforward young man who had just joined the Firm, for an estimate to produce a CD-ROM for a large European bank going through a merger. Although intimidated, the manager responded bravely, "That's as high as I can legitimately go. That's the price for my top of the line."

Robert stared at him, disgusted. "We don't do anything for $50,000." The manager looked as if he might melt into a puddle of shame. After giving me a pleading glance, he slunk out of the partner's office, knowing that when he returned he had better have a generously padded price for his piece of the project.

Now it was my turn to endure the wrath of a ravenous Arthur Andersen consultant stalking fees. Robert, the young manager, and I were collaborating on a proposal to help the bank coordinate its compliance manuals and ethics policies and design a brief program to introduce them to employees in the wake of the giant merger. On that day in December 1998, I had already been with Arthur Andersen for more than three years as head of the Ethics and Responsible Business Practices Group, but I had never--and would never--get used to moments like these. I knew I was in for it, too, since I had estimated the fee for my group's portion of the work at $75,000. It was a fair estimate, but not a particularly profitable one for Robert, who as engagement partner on the project would be measured on the total fees.

And I was right. As Robert loomed over me, linebacker-broad shoulders flexing ominously, he reminded me of nothing so much as Zero Mostel's transformation into a rhinoceros in the Ionesco play of that name.

"What's this $75,000?" he shouted, reverting to the machine-gun style of speaking he used to keep anyone from sneaking in a contrary word or thought. "What do you mean, $75,000? This is the big time, young lady." (I didn't take that as a compliment.) "What kind of a consultant are you?"

"A good one, Robert," I managed to squeeze into the ongoing barrage of invective. "And for our piece of the project, that's a high-end estimate." But Robert was having none of it. "You make that $150,000," he ordered. "Back into it."

I did.

Robert put together the final budget, which I never saw, and personally delivered it to the bank's general counsel, who in our two preproposal planning meetings had been very receptive to our ideas and enthusiastic about the project. I shuddered to imagine the con game that was about to be played on him. So, not having heard from Robert, I called him to find out what had happened. "What's with the proposal?" I asked. He told me he had delivered it. "What was the bottom line?" I said, holding my breath. "Six hundred thousand dollars," he said, coolly. I shouldn't have been surprised by this point--I'd been through the game so many times before at the Firm--but for some reason, I was overcome by a wave of revulsion.

"You mean your piece is almost $400,000? For a few first-year-staff xeroxing policies and typing up a manual?"

"This is Arthur Andersen," came his reply. "That's the way we do it around here."

"And what did the general counsel say when he saw that number?"

"Nothing," said Robert, brusquely. "He just stood there. But don't worry. It was just sticker shock. He'll get over it."

He might, but I wouldn't. "I've got sticker shock, too, Robert. Who's going to pay that kind of money for what we're offering?" His answer was simple. "Relax. We're Arthur Andersen. They need us. They'll pay." I hung up the phone.

At that moment, something snapped. Sure, I was angry, but what I felt most profoundly was utter humiliation, for myself and also for the Firm, which was using its good name to overbill and underdeliver. I wasn't a na*f, shocked to get a taste of the real world; I'd been on the Harvard Business School faculty and successfully consulted to Fortune 500 companies for fifteen years before joining this firm with a more than eighty-year reputation for excellence and dignity. But this place was beginning to look more and more like the "bad example" I used to cite to clients. Called The Firm by everyone who worked there, Arthur Andersen felt like the real-life version of John Grisham's famous novel. The prestigious name was being used to justify behavior that never would have been tolerated in the past, behavior that was wrong. I resolved to stop acting like a sheep.



That experience flashed back to me some three years later, on March 26, 2002, as I watched reports on a support rally for Andersen, which had just been indicted by the U.S. Department of Justice for its involvement with the collapse of Enron Corp., its star client. On that miserable day, even the weather gods scorned the Firm. Sheets of freezing rain landed on uncovered heads, trickled slowly down cold noses, and slid down the now-soggy T-shirts of several hundred employees of Andersen's New York office. It was the fifth day of spring, but one of the coldest, most unforgiving days of the year--and the day Andersen had picked for a last-ditch public gathering to try to save itself from corporate extinction.

Just as everyone began to assemble, the drizzle became a torrent. "I am Arthur Andersen," blared the stark black letters on the bright orange T-shirts. But the expressions on the employees' faces telegraphed a different message: "I am wishing I were anywhere else in the world." They put on a good show all the same, these young accountants, consultants, and tax specialists, because they had to: Their jobs and their careers were at stake.

On this terrible gray day, Andersen employees tried to show the world that their 88-year-old accounting and consulting firm still had some fight in it. They stood there, shivering on the black stone entryway to the Alliance Capital Building on the Avenue of the Americas, chanting their firm's name and holding up hand-scrawled posters whose messages, blurred by raindrops, looked for anyone else to blame.

"Even Iraq got a trial before execution."

"I didn't shred, my kid needs to be fed."

"I worked 0 hours at Enron."

"DOJ WHAT?" ("Sucks" was the preferred answer.)

"It takes a real Jack-Ashcroft to put 28,000 people in the streets."

"It wasn't me."

One thirty-something guy had shown up with his baby. She napped in her pink coat, oblivious to the crowd of clean-cut, earnest young professionals in their soaked clothes, bemoaning the fate of their once-proud firm.

A carefully selected rainbow of Andersen employees and partners, from the midcareer mom to the African immigrant, came to the podium to tell their stories. Each of them struck the same chord: Andersen was a wonderful place to work. It was a company that had provided each of them many opportunities and a great career. The best thing about Andersen was the people. And why was the U.S. government punishing a hallowed institution with 85,000 global employees for the mistakes of a few? After each speech, the designated cheerleader, a peppy young man with glasses and a bullhorn, led the chant:...