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Enron's and Arther Anderson's accounting fraud did them in. Reputation, while certainly diminished, did not play a role in their bankruptcy. Absolutely worth a

by vlozko 8y ago

Enron's and Arther Anderson's accounting fraud did them in. Reputation, while certainly diminished, did not play a role in their bankruptcy. Absolutely worth a watch if you have a chance: https://www.imdb.com/title/tt1016268/ https://www.imdb.com/title/tt1016268/

ckastner 8y ago
Fraud itself, by definition, is a gain, so that cannot be what did them in. It's the consequences of getting caught that do you in. The consequences can be fines, the consequences may be legal liabilities, etc. But in some industries, the consequence of losing your reputation effectively means losing your business -- eventually resulting in bankruptcy. Quoting the Wikipedia page on Arthur Andersen [1]: > Since the ruling vacated Andersen's felony conviction, it theoretically left Andersen free to resume operations. The damage to the Andersen name was so severe, however, that it has not returned as a viable business even on a limited scale. Perhaps a better example would be Mossack Fonseca [2], the main firm behind the Panama Papers, who shut themselves down recently because what client wants to be associated with that hot mess? Your clients running away will kill you a lot faster than any authority (short of industries where an authority can revoke your license to do business, eg: banking). [1] https://en.wikipedia.org/wiki/Arthur_Andersen#Demise https://en.wikipedia.org/wiki/Arthur_Andersen#Demise [2] https://en.wikipedia.org/wiki/Mossack_Fonseca https://en.wikipedia.org/wiki/Mossack_Fonseca
cameldrv 8y ago
My understanding is that in Andersen's case, had they been convicted of accounting fraud, they either legally or practically couldn't be auditors for a public company. Since Andersen was really just a bunch of people, it made more sense for those people to move to companies without an accounting fraud conviction, so they could do auditing for public companies.

by vlozko 8y ago

ckastner 8y ago

Fraud itself, by definition, is a gain, so that cannot be what did them in. It's the consequences of getting caught that do you in. The consequences can be fines, the consequences may be legal liabilities, etc. But in some industries, the consequence of losing your reputation effectively means losing your business -- eventually resulting in bankruptcy. Quoting the Wikipedia page on Arthur Andersen [1]: > Since the ruling vacated Andersen's felony conviction, it theoretically left Andersen free to resume operations. The damage to the Andersen name was so severe, however, that it has not returned as a viable business even on a limited scale. Perhaps a better example would be Mossack Fonseca [2], the main firm behind the Panama Papers, who shut themselves down recently because what client wants to be associated with that hot mess? Your clients running away will kill you a lot faster than any authority (short of industries where an authority can revoke your license to do business, eg: banking). [1] https://en.wikipedia.org/wiki/Arthur_Andersen#Demise https://en.wikipedia.org/wiki/Arthur_Andersen#Demise [2] https://en.wikipedia.org/wiki/Mossack_Fonseca https://en.wikipedia.org/wiki/Mossack_Fonseca

cameldrv 8y ago

My understanding is that in Andersen's case, had they been convicted of accounting fraud, they either legally or practically couldn't be auditors for a public company. Since Andersen was really just a bunch of people, it made more sense for those people to move to companies without an accounting fraud conviction, so they could do auditing for public companies.