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.'"
(January 2004)
