NEW YORK (CNNfn) - Paul Volcker, the former Federal Reserve chairman who headed Arthur Andersen LLP's Independent Oversight Board, said Thursday that the troubled accounting firm helped along its own undoing because it was hesitant to initiate changes in firm practice in order to stay alive.
"If they were more enthusiastic about it initially, they might possibly have saved themselves some trouble," Volcker told an audience at a financial conference hosted by Baruch College in New York City. "But they ran into this indictment problem and class action problem, and arguably, given that problem, there was nothing they could do."
Andersen gave Volcker sweeping authority over reforming the firm's management and practices after getting caught up in the Enron scandal. Earlier this year, the firm's Independent Oversight Board, headed by Volcker, detailed a number of changes Andersen needed to make to save itself from disintegration, including settling all outstanding legal entanglements. Volcker's plan failed to be enacted once settlement talks between the Justice Department and Andersen collapsed.
Volcker has been an outspoken critic of the accounting industry, saying the accounting model itself is under pressure for reform.
| || ||
|| || |
"If nothing else comes out of this in terms of legislation, but some kind of oversight body that has investigatory and disciplinary authority, I really do think it's essential," Volcker said. "And it will help the industry. They won't like it, but it gives them a terrific defense when they get into an argument with their client."
The Justice Department in March indicted Andersen on one count of obstruction of justice, after Andersen admitted to destroying documents related to Enron's collapse. The trial is set to begin in Houston on Monday.