Andersen: One Player in Big Drama
It is possible to view the indictment of Arthur Andersen as the simple story of a few rogue document-shredders in the firm's Houston office, or an act in the larger Enron drama, or a turning point in a morality play at one of the world's great accounting firms. There are those here in Washington who see it as the first of a five-part series on the corruption of the accounting profession.</br></br>But in the broadest sense, Andersen may be seen as just one tragic character in the boom-and-bust saga of the 1990s -- a victim as much as a protagonist in the unfolding drama of cheap capital, fast fortunes and stock-price addiction. It is the story not just of Andersen and Enron but Global Crossing and MicroStrategy, WorldCom and Qwest, the dot-com bust and the two-year bear market and even the global recession.</br></br>In Andersen's case, the path toward criminal indictment began on Wall Street, which by the mid-1990s was awash in money looking to be profitably invested: A surge in retirement savings of baby boomers; a tidal wave of investment capital from overseas investors unimpressed with opportunities at home; hordes of cash generated by newly efficient and profitable U.S. corporations.</br></br>In time, this excess supply drove stock and bond prices through the roof, encouraging companies to rush out with new offerings to soak up the billions of dollars. And with their inflated shares, companies found they had a sought-after currency with which to buy other companies, secure loans, pay back creditors and compensate employees. In time, the stock-fueled demand drove up the price of everything from Park Avenue condos to the wages of hamburger flippers at McDonald's.</br></br>For Andersen, Wall Street's boom presented both challenge and opportunity. In attracting and retaining key professionals, firms like Andersen compete with investment banks, consulting and law firms and large corporations. And by the late 1990s, the compensation for this talent was soaring. MBAs right out of the best business schools could command six-figure packages while top partners came to believe they deserved nothing less than seven.