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Decade of The Deal: Arthur Andersen's spectacular fall

Published September 17, 2009 at 8:53 AM

News of Enron Corp.'s massive accounting fraud began trickling out in late 2001. As assistant controller for external reporting and compliance for The Hershey Co., Gerald Urich describes himself as a "curious" observer of the events. He was amazed that a company that had performed so strongly in 2000 could fall so hard, so fast. He wasn't, however, thinking that fallout from Enron would in anyway touch Hershey.

"It seemed to me to be an isolated incident, not one that had any particular implications for Hershey Co. or the rest of corporate America," says Urich, now Hershey's director of external reporting and the national chairman for the financial executives trade group FEI.

That all changed when Arthur Andersen LLP, Enron's auditor, was implicated in the Securities and Exchange Commission's case against the energy trader. Andersen had been Hershey's auditor as well since the company went public in 1927, and Urich and his colleagues were forced to contemplate the notion that the Enron scandal could engulf the fabled accounting firm.

In the weeks following Enron's December 2001 bankruptcy, SEC investigators were diving deep into the relationship between the two firms. The investigation culminated in March 2002, when Andersen was charged with obstruction of justice related to the destruction of Enron-related documents.

As The Deal noted at the time:

About 500 Andersen employees rallied outside the Houston courthouse to protest the government's decision to prosecute the entire partnership for wrongdoing rather than singling out those responsible for the document destruction.

The government didn't budge, and in June, Andersen was found guilty. By that time, it had begun selling off businesses, shed nearly 60% of its workforce and lost a third of its clients, including Hershey.

In this installment of Decade of the Deal -- our series commemorating The Deal's 10th anniversary -- Urich recalls the mood at Hershey as it became apparent its longtime auditor may not survive. See the video above or download it at iTunes. -- Suzanne Stevens

Also see:
Decade of The Deal: Fred Wilson on 1999's dot-com 'casino'
AOL & Time Warner's marriage
Harvey Pitt recalls 9/11
Read our Decade of The Deal topic center Decade of The Deal, The Deal magazine and TheDeal.com

Decade of The Deal, The Deal magazine and TheDeal.com

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