SEC Seen as Key to Success in DOJ-Andersen Talks
While Andersen employees were still trying to find their way through the political maze, former Securities & Exchange Commission (SEC) Chairman David Ruder took center stage on a televised Lou Dobbs show to explain how the maze got created and how the firm can get through it.
A Sound Litigation Strategy Gone Awry
Appearing on the April 2, 2002 Moneyline show, Mr. Ruder called the indictment by the Department of Justice (DOJ) "premature and unnecessary" and said he doubted if the SEC had been consulted prior to the DOJ's action. He said the situation could have been successfully resolved through more involvement by the SEC and use of traditional processes for regulating accounting firms (i.e., through injunctions, rather than indictments).
Mr. Ruder, who is now a professor of law at Northwestern University, said several factors interfered with the normal regulatory process. First, the Justice Department developed its litigation strategy and took the lead without realizing how much the SEC could help with that strategy. Second, the process was complicated by claims that current SEC Chairman Harvey Pitt should recuse himself.
Supporters Look to The SEC to Right The Wrongs
"I think now the thing for the Justice Department to do," said Mr. Ruder, "is to lift the indictment, cooperate with Andersen and the SEC to get the kind of arrangement that will allow Andersen to continue in business." He acknowledged Chairman Pitt's difficult situation but said, "I think that he can go to the Justice Department and do it with Steve Cutler, his enforcement chief, and say, let's cooperate to create an environment in which we can force Andersen … to do the many, many things that Andersen itself has already suggested it will do."
Prior guests on the show have also spoken out against the indictment. These guests include Thomas Donohue, the chief executive of the U.S. Chamber of Commerce (who said "I really think it's wrong"), Democratic Rep. John LaFalce of New York ("I have many reservations about that indictment") and Philip Livingston, chief executive of Financial Executives International ("I wish [Justice] hadn't made their decision"). (Lou Dobbs's Defense of Andersen On CNN Show Raises Eyebrows, Wall Street Journal, April 2, 2002).
At least one off-show litigation expert has come to the same conclusions. The latest episode in Mark Cheffers six-part series of lessons from the Enron collapse on accountingmalpractice.com concludes, "Public policy considerations demand an end to the indictment." The public seems to agree, too. "I've received a ton of viewer mail about Andersen and the Justice Department," says Mr. Dobbs. "Most people agree with my position that the Justice Department has overreached in indicting Andersen as a firm." But it still remains to be seen whether all this public sentiment will help or hinder the chances of cooperation between the SEC and DOJ.