Andersen Troubles May Have Ripple Effect on Market

N E W   Y O R K, March 14, 2002 -- The demise of the 89-year-old accounting firm Arthur Andersen would clearly be devastating for many of its 85,000 employees, who were in no mood to talk today.

"No comment," said one employee outside the company's Chicago headquarters.

"We're all worried," confessed another.

The Justice Department today announced the firm's indictment on one count of obstruction of justice relating to the collapse of former energy giant Enron Corp., putting the firm's future in jeopardy.

Recognizing the potential consequences of the firm's legal woes, a letter from Andersen attorneys to the Justice Department on Wednesday emphasizes that more than 99 percent of company employees "had no involvement in the events at issue," and would be left "without their livelihoods" if the firm collapsed.

And the hundreds of thousands of Enron investors now suing Andersen for fraud would also be losers if Andersen went out of business.

"There's no question, this is bad news," said Eli Gottesdiener, a lawyer representing plaintiffs against the firm. "This is going to make it more difficult for us to collect and it could mean we'll collect less."

Big Firms May Be Left in Lurch

But the greatest worry on Wall Street — and in Washington — is what would happen to the 2,300 publicly traded companies Andersen audits. Among them are global corporations such as United Airlines, Worldcom, and Georgia Pacific.

As required by law, many are now preparing annual reports to their shareholders, and without an auditor to certify those reports  due on March 31 — their businesses could be thrown into chaos.

"Almost one-fifith of all American corporations are dependent upon Arthur Andersen," said John Coffee, professor at Columbia Law School in New York. "You disqualify them and you seriously interrupt the business and disclosure of about one-fifth of publicly held companies. That's a crisis."

That's especially true, since the remaining four of the Big Five accounting firms are in no position to take over Andersen's clients right now.

"If Andersen dies, the final four are not staffed to handle the 2,300 clients that would be on the market," said Arthur Bowman of Bowman's Accounting Report.

It all has the makings of a big crisis in investor confidence. As a result, sources have indicated to ABCNEWS, Securities and Exchange Commission Chairman Harvey Pitt could take steps to aid the firm's clients, such as extending the March 31 deadline.

"We have an obligation to protect investors, and, as we are announcing today, we have taken necessary actions to assure a continuing and orderly flow ofinformation to investors and the U.S. capital markets." said Pitt in a statment released this afternoon. "Any effects of the indictment are expected to be temporary."