News Release

Interviews Available: Andersen Indictment

RUSSELL MOKHIBER
Editor of Corporate Crime Reporter, Mokhiber said today: “Much of the history of corporate crime and violence in this country has never seen the light of day because corporate executives follow closely the advice of corporate counsel — when in doubt, shred it. Corporate lawyers have become so cavalier about the subject that they publicly discuss destruction of documents. Andersen was apparently following to the letter advice often dished out by white-collar defense lawyers, including that of Harvey Pitt, the accounting industry star defense lawyer until he became chair of the Securities and Exchange Commission. White-collar defense lawyers like Pitt often advise corporate clients to implement flexible ‘document retention’ programs so that incriminating documents are destroyed before they see the light of day. In 1994, Pitt co-authored a law review article (‘When Bad Things Happen to Good Companies: A Crisis Management Primer’). ‘At the crux of many corporate crises, there are typically a handful of key documents,’ Pitt wrote. ‘Corporate counsel must take every available opportunity to imbue company executives with the understanding that their documents will take on separate lives when they enter the treadmill of litigation…. Ask executives and employees to imagine all their documents in the hands of a zealous regulator or on the front page of the New York Times…. Each company should have a system of determining the retention and destruction of documents. Obviously, once a subpoena has been issued, or is about to be issued, any existing document destruction policies should be brought to an immediate halt.’ According to the indictment unsealed today, Arthur Andersen stopped the shredding once the subpoena arrived. Wasn’t Andersen just following Pitt’s advice?”

TONY TINKER
Professor of accountancy at Baruch College and author of Paper Prophets: A Social Critique of Accounting, Tinker said today: “It’s not that Arthur Andersen is just a bad apple. The entire accounting system is compromised. We have a system that provides no safeguards against fraud and corruption; the system is designed such that it’s as if the criminals are paying the salaries of the police. Arthur Andersen just happened to get caught; the other big four accounting firms routinely engage in the same practices. These big accounting firms bankroll many professors at universities and many of the politicians in Congress and in the White House. This is a system designed to let corrupt firms like Enron get by. The Securities and Exchange Commission is empowered on paper to regulate these transactions, but politicians who receive significant sums of campaign contributions from the big five accounting firms and large corporations have made sure that the SEC is underfunded, understaffed and toothless. Andersen is being offered as a scapegoat; what we need is fundamental and thorough reform of the system.”
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RICHARD GROSSMAN
Co-director of the Program on Corporations, Law and Democracy, which recently released the book Defying Corporations, Defining Democracy, Grossman said today: “We don’t have to be grateful that public officials seem to finally be holding corporations somewhat accountable. What we have to focus on is the set of laws and constitutional doctrines that have empowered corporations, instead of people, to do the governing in our country.”
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For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020; David Zupan, (541) 484-9167