In 2002, Arthur Andersen went from a thriving, respected “Big Five” accounting firm that employed over 100,000 people worldwide to a defunct entity that surrendered its license to practice accounting after being convicted of obstruction of justice in the investigation of its client Enron. In the wake of Andersen’s collapse and its short-lived criminal conviction, the government wisely became wary of bringing criminal cases against large corporations because of the collateral damage such cases could cause, commonly referred to as the “Andersen effect.” Criminal indictments in such cases were considered the equivalent of the “corporate death penalty.”1
In a 2005 New York Times op-ed article, Joseph A. Grundfest, a professor at Stanford Law School and former commissioner of the Securities and Exchange Commission, wrote that “Andersen’s demise did serve as a stern reminder to corporate America that prosecutors can bring down or cripple many of America’s leading corporations simply by indicting them on sufficiently serious charges. No trial is necessary.”2
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