Andersen gets maximum punishment over Enron

The once mighty accounting firm Arthur Andersen was yesterday formally sentenced for its obstruction of justice in the Enron affair – exactly a year since the crisis at the energy trading group burst into public view, triggering a series of corporate scandals unprecedented in modern US history.

The punishment meted out by Judge Melinda Harmon, who presided over Andersen's trial in Houston earlier this year, was the maximum permitted: a fine of $500,000 (£322,000) and a probation period of five years. But at this stage, such sanctions are purely academic.

As the crisis at Andersen's client Enron unfolded, its business and staff melted away. By the time it was found guilty last June of shredding key Enron audit documents in autumn 2001, the 90-year-old Andersen was little more than a shell.

Technically it is still in business. But Andersen now employs less than 3,000 people, compared with 85,000 only 12 months ago. It has stopped auditing public companies, and all of its 1,300 previous clients have switched to other accounting firms.

The sentence came a year to the day after October 16 2001, when Enron – unable any longer to conceal the huge debts hidden inoff-balance-sheet partnerships – disclosed a third-quarter 2001 loss of $618m, and wrote down shareholder equity by $1.2bn.

Barely six weeks later what had been the seventh-largest US company filed for bankruptcy. Its auditors Andersen were subsequently charged with obstruction of justice after David Duncan, its lead partner on the Enron account, struck a plea bargain with prosecutors.

Enron's demise was followed by revelations of wrongdoing at companies including WorldCom and Tyco.The result has been a massive crisis of trust in the US financial markets, hitting energy and telecommunications stocks especially hard, and contributing to a worldwide malaise in share prices.

Enron's collapse in particular spurred Congressional action this summer to overhaul the accounting industry, and hold CEOs personally responsible for the veracity of their companies' figures.