Yet another top-drawer client this time the second-largest US carrier Delta Airline has abandoned Andersen, dealing the beleaguered auditing firm another major blow in the struggle to survive its involvement in the Enron scandal.
This latest defection brings to three the number of big companies that have defected from Andersen. Last Friday the pharmaceutical giant Merck switched over to Deloitte & Touche in the first change of auditor in its history, while on Wednesday the leading mortgage group Freddie Mac ended a 30-year link with Andersen. Ford is also reported to be close to a decision to drop Andersen.
As the crisis at the venerable accounting firm deepened, US President George Bush moved to distance himself and his administration from the Enron/Andersen débâcle, by announcing plans to punish senior executives who mislead their shareholders and to tighten regulations on the accounting industry.
"Our goal is better rules so that conflict, suspicion and broken faith can be avoided," Mr Bush said.
Under the plans, chief executives will have to personally guarantee the probity of regular financial statements and other disclosures.
In the case of Enron-like abuses, senior executives will be stripped of their bonuses and other performance-related compensation. If the rules are adopted, directors will have to declare within 48 hours any purchases or sales of stock in their company. Currently they have up to an entire year to do so a period which saw Enron plunge from breathless adulation on Wall Street into the largest bankruptcy in history.
Its demise was a huge embarrassment for Mr Bush and his Republican party, which had received $4m (£3m) in political donations from Enron since 1990, in return for which, it is charged, Mr Bush's administration shaped its energy policies largely to Enron's wishes. Belatedly, Mr Bush has also endorsed calls for an independent regulatory board to oversee accounting firms and for curbs on corporate services offered by accountants that could compromise the integrity of the supposedly independent audits they perform. Both steps have long been urged by outside experts. Much of Mr Bush's plan could be carried through by the main market regulatory authority, the Securities and Exchange Commission, without additional legislation. But critics said that what the White House envisions falls well short of draft legislation already being readied on Capitol Hill.
But none of this will be of much consolation to Andersen. Delta's defection was couched in suitably polite terms, praising "the excellent work" by Andersen's team.
But it had taken the decision "after a thorough evaluation" an evaluation not helped by Andersen's agreement last week to pay $217m to settle a malpractice suit completely unrelated to Enron. This has only fuelled doubts whether the firm has the resources to meet the far more onerous settlement if settlement there is in the Enron case. To contain the crisis of confidence, Andersen recently called in Paul Volcker, the former Fed chairman, to head a powerful oversight board. But so far, even what Mr Volcker calls his "holy water" has failed to reverse the tide.Reuse content