Arthur Andersen refugees reflect on what went wrong

Author: Ed Cohen

Two Notre Dame alumni who held leadership positions with Arthur Andersen say mind-boggling corporate structures, pressure to keep earnings looking good to Wall Street, and negligent board directors all contributed to the wave of scandals that rocked the business world and toppled their long-venerated accounting firm at the turn of the 21st century.

They also say Arthur Andersen was unfairly scapegoated for having been Enron’s and WorldCom’s auditor but that the accounting profession as a whole strayed from its traditional concern for keeping business on the straight and narrow.

Before being implicated in scandal, Arthur Andersen enjoyed a reputation for high ethical standards and quality work. For many years it was the No. 1 employer of Notre Dame graduates, sometimes hiring more than 100 people from a single graduating class.

Thomas Fischer ‘69, a former president of the Notre Dame Alumni Association, was managing partner of the Andersen’s Milwaukee office until January 2002, when he took an already-planned retirement. Later that month it became known that the Justice Department intended to seek criminal obstruction-of-justice charges against the firm for its employees having shredded documents in the Enron case.

Fischer says he never witnessed any wrongdoing or felt pressure to cook books while at Andersen. So he believes it was unfair that the company was put out of business by the notoriety. Its demise cost more than 80,000 employees their jobs, 675 of them in Milwaukee.

“A lot of people would like to believe that Arthur Andersen was doing some kind of drive-by auditing and all the bad things that happened in the accounting profession were all centered in Arthur Andersen,” he says. “Nothing is farther from the truth. All firms were run basically the same way.”

Fischer blames the wave of corporate scandals on what he calls a “social and economic blow-off” that occurred in the United States in the late 1990s. People thought the good times would never end, and many were willing to bend rules to keep them rolling, he says. One of the symptoms of the culture, he says, was excessive compensation paid to CEOs.

“Accountants used to be the part of business that stood up and said, ‘This is not right, this doesn’t make sense,’” Fischer says. He says he hopes the profession will one day “stand up and be the backbone and the moral compass of the business world that it used to be and is not today.”

Joe J. Tapajna ’73, former worldwide managing tax practice director for Arthur Andersen, is now national professional practice director for tax at Deloitte and Touche in Chicago. He also teaches a graduate-level course in tax accounting at Notre Dame.

Tapajna says that when he entered the profession in the 1970s, accounting emphasized professionalism and caution. Accountants were outspoken about following procedures and adhering to the spirit rather than merely the letter of the law. Both he and Fischer credit professors they had at Notre Dame—Tapajna mentions the late Pete Brady; Fischer, Ray Powell—with emphasizing the importance of understanding not only the rules of accounting but their purposes.

Tapajna says that in the 1980s and ’90s accurate accounting became much more difficult as businesses became more complex and the investment community demanded information faster. He notes that Enron, the giant energy-trader, consisted of thousands of subsidiaries with management acquiring and disposing of companies on almost a daily basis.

“[A]t best, you were always trying to come up with approximately the right answer instead of the right answer.”

Both professionals also say that board members failed in their responsibility to provide appropriate oversight of management’s activities.

“It isn’t really ethics,” says Fischer, “it’s ‘do your job.’”