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Andersen CEO Berardino resigns
CEO of embattled accounting firm steps down in wake of Enron scandal, criminal indictment.
March 26, 2002: 9:12 PM EST
By Luisa Beltran, CNN/Money Staff Writer

Andersen CEO Joseph Berardino

NEW YORK (CNN/Money) - Joseph Berardino, the leader of Arthur Andersen, stepped down Tuesday, a casualty of the Justice Department's indictment of his firm in the aftermath of the Enron Corp. collapse.

"We have a lot of great people who deserve a career," Berardino said in an interview with Lou Dobbs Moneyline Tuesday. "And if my sacrifice helps just a few of those, I will feel really good about what I've done today."

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Berardino, 52, assumed the leadership of Andersen Worldwide SC, the umbrella organization that controls the Andersen partnerships across the world, in January 2001. Arthur Andersen is the U.S. member firm.

Berardino said he would remain in his position over the next few days until a successor is named. An Andersen U.S. management team will provide a plan for the firm, he said.

"While my nature is to keep fighting to protect our people and our clients, the fact is that the improper shredding of documents took place on my watch -- and I believe it is now in the best interests of the firm for me to step down from the CEO position," Berardino said in a statement late Tuesday.

Berardino maintained that Andersen, which has lost over 50 audit clients this year, could still be saved if the DOJ softened its stance against the firm.

"You've heard our people speak out about principle, speaking about their love for their jobs and their profession," he told Dobbs. "There's no question in my mind that the spirit is alive and well."

A firm staggering

Andersen, once the most powerful accounting firm in the world, continues to reel from the federal indictment against it. On March 14, the Department of Justice filed a one-count criminal charge against the firm for allegedly obstructing justice by shredding Enron documents. Andersen has since fought back, launching a massive public relations campaign to publicize the firm's claim of innocence.

"We have been trying to make a negative into a positive but people don't seem to be listening," Berardino told Dobbs.

Former Federal Reserve Chairman Paul Volcker, who heads an oversight committee charged to implement reforms at Andersen, called for a seven-member board to take control of Andersen last week. Volcker also recommended a change in Andersen's senior management and proposed that the Department of Justice consider softening its stance.

Volcker, on Lou Dobbs Moneyline Monday, said the accounting firm has a week in which to meet the Justice Department demands to avoid collapse.

Berardino said that his continuing as CEO of Andersen would have impeded Volcker's and others efforts to save the firm.

But the senior executive could not say how long Andersen could survive.

"We are in deep distress," he said. "I can't begin to predict what the DOJ will do."

Andersen has considered filing for bankruptcy protection and a U.S. management team is now looking at every option, Berardino said. "Clearly [bankruptcy] has to be included as an alternative but it's certainly not where we want to go," he said.

With his resignation, Andersen can still be positive force in the market "if they will let us," Berardino said.

For his part, the senior executive said he will now work to change the accounting profession and aspects of corporate governance.

"I see precious little fresh ideas out there except some of the ones we have put forward," Berardino said. "So I'm going to fight for that no matter where I draw my paycheck, or if I have a paycheck."

The accounting firm has attempted to blame the shredding of Enron documents on a few employees, particularly lead auditor, David Duncan, who was fired in January. Duncan is reportedly negotiating a deal to cooperate with federal prosecutors.

Andersen is now softening its stance towards Duncan. The former auditor could just be guilty of bad judgment, Berardino said.

Andersen served as Enron's auditor for 16 years before it was fired in January. Houston-based Enron allegedly used off-the-books partnerships to hide nearly $1 billion in debt and inflate profits. Andersen, as Enron's outside accountant, signed off on the energy trader's financial statements.

Enron filed the largest bankruptcy in United States history in December.

Too little, too late

Berardino apparently offered his resignation as a last ditch effort to save the once mighty Andersen. The Chicago-based accounting firm, which failed in merger talks with rival Deloitte & Touche and Ernst & Young, is also trying to clinch a merger of its non-U.S. operations with rival KPMG International.

But member firms in various countries have already broken ranks and joined other rivals.

"It's a sad event for Andersen and the entire accounting industry that the CEO of a major firm finds himself in such a position that he needs to resign," said Edward Nusbaum, CEO of Grant Thornton. "They are losing clients every day and it's very unfortunate."

But some think that Berardino's resignation comes too late for Andersen. One accounting industry source said Berardino should have left months ago, when the investigation against Andersen was just gearing up.

"Justice wants blood," said Art Bowman, of Bowman's Accounting Report. "They want to see a fundamental change in the firm and this doesn't indicate anything like that."

Andersen should now think about what is best for their clients and their staff and free them to extend their professional careers elsewhere.

"The longer they hold onto these people the more difficult the negotiations and transition to another firm will become," Bowman said.  Top of page