Emotions running deep as Andersen mess grows

April 08, 2002 - As the woes mount for embattled accounting giant Arthur Andersen LLP, those with first-hand knowledge wonder what will become of the company and the profession itself.

Brian Gordon is one of those trying to fathom how the world came tumbling down on a firm that seemed so strong just a few short years ago.

"It's just incomprehensible," he said when considering the possibility that Andersen might merge with another firm or go under completely.

Gordon, who now runs the local consulting firm Applied Analysis Inc. with partner Jerry Aguero, perhaps understands the workings of Andersen better than most. He spent four years working for both the Las Vegas office and the Silicon Valley office as audit manager from 1996 to 2000.

"I had transferred from the Las Vegas office to Silicon Valley and left the Silicon Valley office in November 2000, when the tech craze was fading," he explained.

The former Anderson employee said there is enough blame to be shared in the mess, which led to last month's indictment of Andersen by a U.S. federal grand jury on charges of obstruction of justice by allegedly destroying documents related to the bankrupt energy trader Enron Corp.

While Gordon said that too much responsibility for the Enron debacle may be placed on Anderson instead of the energy giant's management, he admitted that some of the reported behavior in the Houston Andersen office sounded strange.

"I don't think I've ever had an all-night shredding session, and I don't know many people in accounting who do," Gordon said. "It seems a little suspect. Were they shredding documents related to the audit or unrelated? We may never know, and they haven't been proven guilty by a court of law."

There are times, however, when shredding some documents is not an uncommon practice, he added.

"You may shred documents that weren't important to the audit. If it was related specifically to the audit, it was a minimum seven-year period from an audit (to retain it)," Gordon said, while adding, "it's a fine line between what's legal and what's not legal."

David Chavez is another former employee of Andersen's Las Vegas office. He blamed media overkill and the ongoing investigation in part for the firm's struggles to stay afloat.

"My opinion is that it is the government and the national press hitting this company," Chavez said. "Arthur Andersen hasn't had the chance to defend themselves because they are accountants and have confidentiality issues. They have to defend their clients."

Chavez, who is now a managing partner in his own local firm, Chavez & Koch, worked for Andersen in Las Vegas from 1991 to 1995 and said he feels for the company people who still work there.

"It's just devastating for those employees over there (in the Las Vegas office)," he said. "All the employees are paying for the mistakes probably made by one or two people."

Officials with Andersen's Las Vegas office said they could not comment for this story. Linda Riser, an Arizona-based spokesperson for Andersen, would not comment on any specific office.

Chavez didn't hesitate to speak his mind.

"Andersen has become the scapegoat for the people running the (Enron) company," he said. "Andersen did not freeze the (Enron) employees out of their retirement plans."

But just the appearance of the document shredding at the Houston office went a long way to contribute to Anderson's image problems, he admitted.

As for Andersen in Las Vegas, it hasn't given the Nevada State Board of Accountancy any reason to launch an investigation into its practices, according to board director Johanna Bravo.

Brian Gordon, principal analyst, Applied Analysis.

"The board has not taken any action against the Nevada office of Arthur Andersen. They didn't have anything to do with the office in Houston," she said. "We contacted (the Nevada office), but we haven't gone out and done an investigation. No complaints have come to light in the Nevada office."

Overall, Nevada's licensed CPAs have a very low rate of disciplinary action taken against them, Bravo added.

"In 2001, we had 13 (revocation) hearings for non-payment of license fees and failure to fulfill their continuing education requirements. Out of those, 12 had their licenses revoked," she said. "And we had three hearings for other matters. One of those three (licenses) were revoked."

All and all, not a bad batting average when you consider the state has 2,400 active CPAs, Bravo said. The state adds about 100 new CPAs a year. A check-up of the auditing practices of Nevada CPAs is done every year, with a third of the accountants undergoing the monitoring by the board annually, she explained.

As for what will happen next, as the Andersen / Enron crises continues to unfold, Bravo said the board is monitoring the situation and could "suggest changes in our statutes and regulations." Remaining on top of the matter is key for the board right now, as the profession is changing, she added.

"I think it's important for the states to stay involved, not only for the protection of the public, but to also make sure that there isn't over regulation that makes a hardship on the CPAs."

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Article Copyright ©: V. Miller, LV Business Press