A number of former Arthur Andersen partners said they felt exonerated Tuesday when the Supreme Court unanimously overturned the conviction that effectively destroyed the once mammoth accounting firm.
But it was a bittersweet victory.
"It's a terrible irony," said Rachelle Bernstein, a former Arthur Andersen partner who is now tax counsel at the National Retail Federation in Washington.
"Obviously, I am happy that the decision was overturned. But the firm collapsed, and I and many of my colleagues suffered substantial financial losses."
Andersen, once among the nation's biggest accounting firms, was convicted in 2002 for obstruction of justice in the investigation of Enron Corp., one of its biggest clients. The accounting firm had shredded thousands of documents related to Enron audits. But what the Justice Department termed obstruction, the accounting firm said was merely a company policy to destroy unnecessary and dated paperwork.
The conviction put Andersen out of business because it could no longer audit public companies. About 28,000 people lost their jobs and thousands of Andersen partners lost their pensions and their equity in the firm.
Like many accounting firms, Andersen's partners provided the firm's working capital by "buying in." Typically, a new partner would take out a loan equal to 25% to 50% of the partner's annual earnings and contribute the borrowed money to the firm. Over time, those loans would be paid off using the partner's share of partnership earnings. But, for a partner who bought in shortly before the company's collapse, none of the loan was paid back that way and the partner personally owed the original amount.
Former partner Vicken Haleblian said he was still paying on the loan he took out to finance his stake in the partnership.
"I lost over $200,000 -- and I was a new partner, so my [losses] were much less than people who had been partners for 10 or 15 years," said Haleblian, 41, who is now a tax partner at the Pasadena office of Holthouse Carlin & Van Trigt.
Bernstein said she, too, had lost a substantial amount and was still making quarterly payments on her loan.
"It screwed up your life," said Rick Grafmeyer, 48, who is now a partner at a small Washington firm. "We all had to hire our own legal counsel. And they were telling us that because we were partners, we were ... liable for all the firm's bills. You had to worry about whether they were going to take away your home."
Said Bernstein: "It's a Pyrrhic victory. I've been depressed all day."