TENS OF THOUSANDS of alumni of the near-dead firm of Arthur Andersen LLP were handed bittersweet vindication this week by the U.S. Supreme Court's upending of the accounting giant's 2002 criminal conviction for shredding documents related to the meltdown of its major client, Enron Corp.
More broadly, the high court ruling may provide added ammunition to corporate America's backlash against the federal government's crackdown on white-collar crime and the stiffer accounting rules imposed by Sarbanes-Oxley, the 2002 corporate accountability law.
After all, an 89-year-old firm -- which once employed almost 90,000 people worldwide and enjoyed a high reputation -- was swiftly brought to its deathbed by a conviction that turns out to have been based on faulty jury instructions by the trial judge.
We have sympathy for that line of thought -- but only some.
Keep in mind that this week's ruling didn't find Andersen innocent. It turned only on the narrow issue of jury instructions as to whether there was criminal intent at Andersen in destroying documents -- shredding carried out per a legal company policy but even as its client, Enron, was known to be under criminal investigation.
Also keep in mind that when aggressively creative accounting turned bankrupt, if not downright fraudulent, at not just Enron but also WorldCom, Waste Management, Global Crossing and Qwest, Andersen was the auditor in every case.
Vexed federal prosecutors may not seek to retry Andersen. Given that the once dominant firm has been reduced to a suggestion of its former self, the main effect in pursuing the case may be its impact on related cases -- including more than 100 civil lawsuits against former Andersen partners who can no longer be referred to as convicted felons.
In the meantime, corporate interests are expected to try to use the Andersen ruling to attack Sarbanes-Oxley's tighter auditing rules.
But Americans should be pleased that it has gone a long way toward clarifying the responsibilities of auditors, including their duties as document custodians.
And for all the corporate chafing under Sarbanes-Oxley, the much more extensive auditing requirements under the new law have meant much greater demand for accountants, a last laugh for many former Andersen accountants even before this week's legal vindication.