It remains one of the greatest travesties in the history ofAmerican business: In 2001, the 85,000 employees of one of theworld's largest accounting firms began losing their jobs in droves.Their employer had become tainted by its loose association withEnron Corp., a financial house of cards that was imploding andtaking with it billions of dollars in employee pensions andshareholder investments.

In 2002, accounting firm Arthur Andersen was convicted ofcharges related to Enron's fraudulent practices. The charges hadnothing to do with the quality of their auditing — or any ofEnron's illicit practices. The conviction was appealed, and in2005, the U.S. Supreme Court struck it down in a unanimous vote.But the damage had already been done.

To date, despite millions of records being subpoenaed, there isno evidence Arthur Andersen ever did anything wrong. Still,perceptions are everything: Most people are not aware that theaccounting firm, which led the industry in establishing strict,high standards, became a government scapegoat.

When I speak to groups across the country, I ask the followingquestions. Below are the typical responses I receive — and theactual facts.

What do you remember about Arthur Andersen?

Typical Response: They were the onesthat helped facilitate the Enron fraud. They deserved what theygot.

Fact: Arthur Andersen was the largestand most prestigious firm in the country. It was considered thegold standard of the accounting profession by the businesscommunity.
 

For what was Arthur Andersen indicted?

Typical Response: They messed up theaudit of Enron and signed off on false financial statements.

Fact: They were indicted for shreddingdocuments. These documents were drafts and other items that do notsupport the final product. All accounting firms establish policiesfor routinely shredding such documents.
 

How long was it between the Enron blowup and when ArthurAndersen went out of business?

Typical Response: One tothree years.

Fact: The largest accountingfirm in the world was gone in 90 days.

Was the indictment upheld?

Typical Response: Yes, that is whythey went out of business.

Fact: No. The Supreme Court overruledthe lower court in a 9-0 decision, and came to the conclusionwithin weeks, making it one of their quickest decisions ever.
 

How many people lost their jobs as a result of the falseaccusations?

Typical Response: Have no idea, butthe partners got what they deserved.

Fact: Eighty-five thousand people losttheir jobs and only a few thousand were partners. Most were staffpeople and clericals who made modest sums of money.
 

Who benefited from Arthur Andersen going out ofbusiness?

Typical Response: Everyone — wefinally got rid of those crooks and made a statement to the rest ofbusiness to operate ethically.

Facts: It was not the Arthur Andersenpeople; they lost their jobs. It was not the clients; they had togo through the stress and expense of finding a new auditing firm.It was not the business world in general: It now has fewer firmsfrom which to choose and rates increased. It was their competitorswho benefited — they got Andersen's best people and clients andwere able to increase their rates and profitability.
 

What accounting firms now have ex Arthur Andersenpartners playing leadership roles in their firms?

Typical Response: None

Facts: The “big four,” all the largemiddle-tier firms and many small firms have former Arthur Andersenpartners in leadership positions. Finally, many members of the newPublic Accounting oversight Board (PCAOB), which oversees thesefirms, now have former Arthur Andersen people involved in reviewingthe quality of these firms.