C. The Punishment of Dissenters
Andersen had an “up or out” environment, in which employees either moved up the ranks or were moved out of the firm. By the late 1990s, the sure and possibly only way for Andersen employees to move up the ranks was “to keep both their bosses and the people at Enron happy” and the sure way was to approve every transaction. By contrast, the sure way for Andersen employees to move out of the firm was to dissent to an Enron transaction. At Andersen, displeasing “Crown Jewel” clients was a cardinal sin, and Enron was the Crown Jewel of Crown Jewels.
The experience of Andersen partner Carl Bass exemplifies the “yes-man” culture at Andersen.Bass was a senior partner in Andersen’s Houston office. He served on the prestigious “Professional Standards Group [(PSG)], an internal team of accounting experts that reviewed” and approved troublesome “accounting issues” confronting local offices. “For decades, the [PSG’s] word was accepted as law at Andersen.”
Enron was considered one of Andersen’s “highest-risk clients.” In February 2001, Bass, who had been assigned “to monitor . . . high-risk audit[s], strongly objected to Enron’s accounting.”
Bass’s objection was overruled by local partners in the Houston office; Andersen was the only Big Five accounting firm that allowed local partners to overrule the PSG. Thereafter, Bass continued to object to Enron’s accounting and, not surprisingly, tensions grew between Bass and Enron. Enron “considered him a roadblock to their rapid fire deal-making.” Rather than stand up for Bass – a member of the PSG – Andersen, in an unprecedented move that was protested by most of the members of the PSG, demoted Bass by removing him from all oversight of the Enron account. Bass, it seems, was demoted for being “too rules-oriented.” The demotion was no small matter, as it apparently was approved by Andersen’s CEO Joe Berardino.
Bass paid the price for saying “no” to a rogue client. At least two other Andersen accountants – Jennifer Stevenson and Pattie Grutzmacher – were also removed from the Enron engagement for challenging Enron’s use of SPEs. Undoubtedly, these demotions sent a clear message to all
Andersen employees, presumably including Temple. As one Andersen employee later explained: “[I]f you didn’t act a certain way . . . it could jeopardize your existence on the Enron engagement.”
The message was clear: “Keep the client happy, no matter what the consequences."
In this environment, how could one expect Nancy Temple, a relatively junior in-house lawyer who had recently been assigned to the Enron account, to say “no” to Enron or senior Andersen partners when she had recently witnessed the demotion of a senior partner for the very same act? The demotions of Bass, Stevenson, and Grutzmacher prove that Andersen did not want independent, professional advice. Thus, Andersen’s culture presented Temple with an excruciating dilemma: protect Andersen by instructing its employees to destroy Enron’s documents or destroy her career. Unfortunately, she chose the former and, ironically, destroyed Andersen.
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