Bigger Than Enron

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Bigger Than EnronOn June 15, a Houston jury convicted Arthur Andersen — the 89-year-old accounting firm once known as the gold standard of integrity in auditing — for obstruction of justice in the government’s investigation of Enron, Andersen’s biggest client. With the demise of Andersen, the American business landscape was forever altered. But something else was altered as well: the scandal surrounding Enron and Andersen, together with the wave of other major accounting scandals that have come to light in recent months, has dealt America’s markets an unsettling psychological blow. If we can't trust the auditors, investors wonder, whom can we trust?

The meteoric rise and stunning collapse of Enron caused many to question why the corporate oversight system that was supposed to protect investors failed to sound any alarms about the company’s dubious finances. But Enron and Arthur Andersen turn out to be merely the tip of the iceberg. In the 1990s, more than 700 U.S. companies were forced to correct misleading financial statements as a result of accounting failures, lapses, or outright fraud. Together with Enron — the largest corporate bankruptcy in U.S. history — these failures have cost investors an estimated $200 billion.

Enron’s collapse in late 2001 galvanized Congress and brought urgent calls for reform. The House and Senate held hearings and introduced legislation to reform the accounting industry. But so far no bill has passed both chambers and been signed into law. Instead, after prolonged criticism for moving too slowly and being too soft on the accounting firms, SEC Chairman Harvey Pitt has taken the initiative, announcing on June 20 his proposal for a new Public Accountability Board. Critics, however, still say that his plans are too weak, and question whether he is genuinely prepared to cross his former clients in the accounting industry, which he represented as a top Wall Street lawyer throughout the 1990s.

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Comments and User Reviews

  • Some Guy

    Arthur Andersen was NEVER known as the "gold standard of integrity" in accounting. When they were of of the Big Eight (then the Big Six), they were always known as the dodgy ones who cared more about how many hours they billed than whether they were doing the job they were supposed to do.

    When AA got caught cooking Enron's books, people all over the industry wondered why it had taken so long.

  • robe33

    Very, Very Good Documentary.
    This is corruption, forget countries like Africa, South America in comparison it's a joke and besides Arthur Andersen conviction was overturned.

  • http://www.swarmusa.com CitizenPete

    Watch "Frontline: The Warning"

    Watch "Part 2/2: Bill Murphy of GATA reveals whistle blower Andrew MaGuire to CFTC 3-25-2010"

    Keep your eyes out on WikiLeaks -- they will be releasing some internal bank documents soon.

    You can google both.

  • http://pulse.yahoo.com/_3ORP7RF5C57OLLDXOGLSNMHM2E Carl

    And the ball keeps rolling up hill in Shhht...

  • who_me_yeah_you

    Yes it was. Arthur Andersen himself was an honest hardworking man who believed in education for his staff and their families. He instilled the mantra that AA prime responsibility was to investors not their clients' management. you are speaking of the Bush era conglomerate that swindled to insolvency. AA was the first major accounting firm to recommend stock options be listed on expense reports, disassociated itself from many large client firms after the stock options emergence and was an early voice in raising the sub prime threat at a time when noone was listening. it all went wrong with the wall street boom of the 80's then the dotcom boom. Their earnings were suffering as a result of these high morals and new quick buck managers played the shareholder value/dividend card to push the dinosaur boardmembers and managers out and replace them with aggressive fast buck profit savvy types. These new types as we now know provided amazing profits year on year and just couldn't and wouldn't ever stop making money so the old firms conscience suffocated under the weight of all that money. Then the rot which had set in began to show. You know the rest. They still played the gold standard card even when caught red handed.

  • http://www.facebook.com/vitanovich Petar Vitanovich

    this is bullshit, i believe it but in the end its liberal propaganda. people need to realize capitalism is awesome, but corruption ruins it every time. Its the corruption and Bureaucratic people that run this country we should be attacking. Thats why I cant stand when people attack the Tea Party, Why? Are they scared that the citizens of America arent fit to run their country? Who were our forefathers when they started this country? just like like us. Grow up people, MTV and hip Obama will run you into the ground so far we will be trading jewelry for food.

  • http://pulse.yahoo.com/_VA63NXEEWHPDZ7QY6V3BXUZLE4 Namra

    Your still a little boy Petar. If you don't know the difference between an argument and an assertion, and a fact and an opinion, then go back to your playpen until you can run with the big dogs.

  • MilkMan111

    Im not so sure its bigget than enron, but is shocking to say the least!

    shows how corrupt the USA is, how can these guys get away with this kind of thing ?

  • Abamovich

    They didn't.

  • http://twitter.com/lone_cabby Travis O'Bickles

    Petars comments below sum up our stupidity perfectly.
    According to Petar:
    "this is bullshit, i believe it but in the end its liberal propaganda."
    So Petar is saying:
    1. Its bullshit
    2. but yet Petar believes this bullshit
    3. But it doesnt matter what bullshit Petar believes because its 'liberal propaganda'

    In one line Petar has summed up the the entire reason we accept corruption and why we always will.
    We're so busy looking left and right to see what the 'other' side is doing, we cant see whats right in front of us. As Petar so brilliantly summed it up, we dont even believe the things we know are true.

  • robertallen1

    Compare your last paragraph to the debt ceiling brouhaha.

  • http://twitter.com/lone_cabby Travis O'Bickles

    I agree 100%. Its a perfect example.

  • Brandon Schultz

    Dude in the photo looks like an evil John Cleese

  • firebran9111

    Whose is that guy at the top of the column ? He looks like Dermot Desmond who is a big time financier here in Ireland so what is he doing at top of this piece ?

  • Scewed4vr2008

    C'mon people - stop being such gullible SAPS! They teach us from the day we are born to "shut up and obey" - to TRUST ADULTS! We are never to question authority and when we grow-up the lesson is "do as you are told and pay your taxes". I spent 15 years as a bankruptcy examiner in PA working for people just like these. Nobody is interested in a solution because money is in the hands of the insane. The "monumental screw-ups" are inconsequential when the revenues to "fill the gaps" are UNLIMITED.

  • http://twitter.com/socraticeratic Clay Dawson

    Minimally persuasive; minimally accurate. What I can't stand is when people constantly make unqualified assertions. What reason do you even have to think "the corrupt and bureaucratic people" deserving of blame are different from the most devout capitalists? What reason do you have to think "the people that run this country" are not the most devout capitalists? You make these assumptions; why?

    I agree that corruption is a significant problem, but I'm not convinced (especially by your flawed logic) that corruption is mutually exclusive with capitalism. Why? Because I could argue that capitalism has taken on a role outside of economy over the past half century--conflating economic with government (i.e public) interest-- resulting in what many call "corruption."

    Also, take some time to actually learn about the men you call your "forefathers" before making any generalizations about them. You'll probably find that none of them was uneducated, or of particularly average standing as an American citizen.

    Personally, yes, I am fearful of having the typical American citizen "run the country" because the typical American citizen has terribly narrow capacities for critical thought and/or empathy, if he or she even has an ethical groundwork that is on his or her own account (i.e. arising from personal conviction rather than coercion). Part of the problem is also that many (not all) of our elected leaders are far from being natural leaders; people who lack the courage to lead and are elected to office will be easily corrupted. On the other hand, this can also discourage many capable people from seeking office.

  • ThisDarkChestOfWonders

    Corruption is unavoidable in the monetary system. It promotes competition. Therefore once someone breaks the rules and gets away with it, someone else will mimic the act and so on ad nuasea... The whole system is based on profit and the ones at the top are either the spawn of old lawbreaking psychos, or a new breed all their own. It has nothing to do with political affiliation whatsoever. Both partys are a part of the american government, which borrows most its money from the federal reserve(a private business). So no matter who u vote for corruption is still there, and nothing economically will ever be solved. And the damage is done in the form of the national debt. Realize that if the national debt went to 0 tomorrow, America would have no more money. This is because 97% of the money in our country is debt(not real). The system is set up by bankers (this started a couple thousand years ago and has been perfected at this point) so that everyone everywhere to aquire anything of value (home,car,property) would have to pay interest rates resulting in one rich banker. This includes governments. This would work if we lived on an infinite planet infintely full of resources, which obviously is not the case. So before u follow the mantra "drill baby drill", which is the funniest thing/scariest thing ever said, realize you are crucifying us all as a species through your ignorance. "liberal propaganda" is a term you must learn is in itself banker propaganda used to devide us, against us. Wake up and see whats going on. Look at your reserve notes (cash money). What is it really? What does it represent? Good luck to you and yours.

  • Lary9

    If capitalism is going to survive, it must do two things:
    #1....it must allow itself to hybridize and revitalize its responsiveness to a vibrant middle class and
    #2....it will not attract fresh, educated young imaginations to future careers rife with financial abuse and self-aggrandizement. This problem must be responded to severely, as a crime with zero-tolerance, for it is equivalent to societal "class rape" as sure as any fratboy with some Rohypnol and bad intentions can be guilty of date rape.

    I foresee a future with a solidly interdependent global economy that is well-managed, regulated and that strikes a balance between private and public ownership of both the resources and means of production.

  • ReGreTTe

    If we agree "that corruption is a significant issue", then regardless of any inaccuracies, we should hope to improve our capacity to avoid corruption in all sectors. Without the will to do so, it becomes all but a guarantee that we will drowned in a cascade of the compounded issues resultant from oversights. We cannot afford the few to consume in excess, using our regulatory systems to facilitate their over-consumption.
    If our accounting cannot be relied upon to balance with what resources are available upon the limited sphere of planet earth, then the issue becomes much larger. Forget reclaiming the golden era of economic growth. In this instance, regardless of beraucratic reasoning, even the question of right and wrong takes a back seat to simple math. We cannot sustain the human race if we cannot balance our expenditures with the column marked resources available.
    This is a solvable problem, but it is one that must be solved and we have procrastinated far too long.

  • http://www.facebook.com/profile.php?id=507417335 Maryanne Leahy

    What are the 5 watch dog groups mentioned in the video?

  • http://www.facebook.com/kristopher.soby.3 Kristopher Soby

    why is it always liberal propaganda? the facts are right there it's not propaganda it's people trying to bring forth the truth for a better moral world. if you don't believe something don't just blame it on liberals or conservatives. grow up

  • Rampage

    Capitalism cannot exist along side technoism. We are experiencing the beginning of this conflict. Technology is automating jobs for instance, and producing materials that can easily outlast a human body. That said how can a system which requires products to break continue to sustain when less people will work in the future, and more products will be replaced less often?

  • Lary9

    Because reality (i.e; truth) has a decidedly 'liberal' bias. That's why there are so many liberals and why reality itself unfolds relentlessly and progressively forward. You do see that...right. Right? There is nothing 'conservative' about reality, science, history---you name it--it's all progressive & quite liberal. Thus, liberal policy conforms to reality better.