The horror! A rediscovered notepad.
The man who founded Arthur Andersen & Co. nearly a hundred years ago in Chicago, a young professor conveniently named Arthur Andersen, once refused a client’s plea to ‘cook the books’ during the client’s annual audit, even as Andersen was struggling to pay his employees. He famously proclaimed that “all the money in the city of Chicago” would not lead him to compromise his ideals, and the client, the owner of a railroad utility, fired him. The railroad company, as the story continues, failed, and in the wake of this double bankruptcy—both commercial and moral—the little accounting firm stood, vindicated, in the sturdy terrain of ethical principles. (Two heavy wooden doors, replicas of the firm’s original entrance-way, would become the company’s enduring trademark.) A partner rehearsed this ditty for me when I joined ‘Arthur’ in 1990 as an entry level research economist charged to support the firm’s growing practice in cross-border transactions. In short, my group would assist foreign multinational corporations—mostly Japanese and German—in dodging their fair share of
U.S. tax. These corporations, from
the lands of the former Axis Powers, did staggering American business in
vehicles, machinery, electronics, and other goods, yet in many cases, paid
little or no tax on their U.S.
operations. Given the deep pockets of these clients, Arthur could out-muscle the
understaffed Internal Revenue Service, which otherwise sought to collect. A two
million dollar investment in hiring
the heft of Arthur, for instance, would likely avoid a two billion dollar judgment, and in the end, fewer than all the Yen in
the city of Tokyo and fewer than all the Deutschmarks in the city of Berlin could,
indeed, purchase creative reporting from Arthur. Work-products were often
tailored to please the client, and amid the firm’s break-neck sprint to amass
billable hours, professional objectivity was discarded in the name of profits.
Around the same time, the United States entered a fairly steep recession, one
that underscored the decay of American manufacturing, and where U.S. manufacturers
had shuttered their doors, Japanese and German companies in many industries prospered.
To my knowledge, Arthur did not engage personnel in Tokyo or Berlin to assist
American multinationals in avoiding their fare share of Japanese and German
tax, or if it did, the firm derived little revenue from this activity. The idea
of growth isn’t, by itself, corrupt, but growth uncoupled from the ‘local’
principles upon which Arthur Andersen & Co. was founded, did lead to systemic
corruption. I sat at a cubicle for two years, researching and writing bits and
pieces, occasionally directing small client engagements, leaving in 1992. Numerous
scandals could have erupted in various corners of Arthur, and eventually, some court
actions did materialize. One in particular, involving the audit of Waste
Management, served to weaken the firm’s clean-cut aura, before another case,
Enron, drew considerable attention and toppled both companies in 2002. Before
the Enron debacle, the firm’s consulting wing severed itself from Arthur and
became Accenture, a company that continues to thrive today. At its peak, Arthur
had been the ‘Titanic’ of global auditing firms, with billions of dollars in annual
revenue and a couple hundred thousand audit and consulting employees worldwide.
In its greed, however, the firm misapplied its role as independent auditor and
consultant, enabling other enterprises in their greed to shelter profits (among
other scams). Ten years after Enron, many wealthy corporations—notably led by
the financial services sector—continue to abuse their relationships with money
. . . and the law. It’s easy to argue for oversight, and there should be oversight,
of course, but on the other hand, the larger and wealthier and more arrogant
the corporation, the more it comes to resemble a disease. After Arthur’s
indictment in federal court, its worldwide practice buckled and perished in a
matter of weeks, one client after another dumping its former auditors. I
resigned from the firm for three reasons: a supervisor refused my petition for
a reduction in overtime so I could care for a dying relative; the unethical
commerce at play; and I accepted a small fellowship to write poetry. Ultimately, I,
the little poet, endured.