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The Power of an Indictment and the Demise of Arthur Andersen

20 Pages Posted: 20 Jul 2006  

James Kelly


Date Written: July 2006


This article examines the impact an indictment can have against a limited liability partnership of professionals, in particular the Justice Department's prosecution of accounting firm Arthur Andersen. Following a brief chronological description of the factual background of the case, the article then examines the weight an indictment is supposed to have, followed by the standards for issuing an indictment against an entire partnership rather than just the individuals who allegedly performed wrongful acts. The notion of prosecutorial discretion is heavily emphasized, and the factors that contributed to the prosecution of Andersen are discussed. Finally, the implications of this situation are discussed in detail, as they extend beyond Enron and Andersen and are not limited by the passage of the Sarbanes-Oxley Act in 2002. In short, the United States government has the power to destroy a partnership, such as an accounting or law firm, without the burden of trial or having to provide evidence of crime beyond a reasonable doubt.

Keywords: Accounting, Criminal Law and Procedure, Partnerships, Arthur Andersen

JEL Classification: G38, M49, K20

Suggested Citation

Kelly, James, The Power of an Indictment and the Demise of Arthur Andersen (July 2006). Available at SSRN: or

James Kelly (Contact Author)


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