MEDIA WATCH: Media predicts that Andersen may follow Enron's roadto ruin

Increasingly, it's looking like Enron is a tar baby that is nothing

but trouble for anyone who comes into contact with it. Legislators,

lawyers, former employees, and the media are all scrutinizing the

bankrupt energy firm's accountant, Andersen, to see how it was that

Enron's vast and complex array of shell companies and partnerships that

concealed hundreds of millions in losses earned the seal of approval

from its outside auditors.



Of course, Andersen's admission to destroying a significant amount of

Enron-related paperwork during the last few weeks before its client

declared bankruptcy has not really helped bolster its case that it is

innocent of any wrongdoing. The New York Times (January 13) devoted

nearly 2,000 words regarding the matter on the cover of its Sunday

Business section, proclaiming, "Even if it can escape legal liability,

Andersen faces a public relations disaster."



Media coverage on Andersen's fate has not been optimistic at all. A wide

variety of influential news media outlets agreed that there has been

severe damage to Andersen's reputation, which was depicted as the

lifeblood of an accounting firm. CBS, CNBC, CNN, NPR, Time, The New York

Times, and even Andersen's hometown newspaper, the Chicago Tribune, all

agreed that the firm's credibility had been profoundly shaken.



As if the Enron scandal weren't enough, media coverage reminded

audiences that this was far from the first time that the firm had been

involved in an accounting scandal. National Public Radio took note of

Andersen's past problems, and wondered, "Now that we have the Enron

problem, do we reach a point when we say, 'Something's wrong at

Andersen.'"



With such damage to Andersen's credibility, there was open speculation

as to whether the firm would be able to survive. Sen. Joseph Lieberman

(D-CT), who chairs one of the Senate committees investigating the

matter, has said, "Andersen is a great company with a great name. That

name is being sullied, and ultimately this Enron episode may end this

company's history" (CNN, January 14). A few reports indicated it may

merge or be acquired.



There was further commentary that Andersen's role in the Enron fiasco

damages the entire accounting industry. Some of the reporting indicated

that the peer review system that the industry uses to police itself does

not work, while others called for a review of the accounting industry,

and perhaps the creation of a new system that would provide greater

oversight of the industry. And finally, some reports identified that

providing both accounting and consulting (as Andersen does) to be an

inherent conflict of interests.



In the eyes of CBSMarketWatch. com (January 16), "Andersen's biggest PR

mistake, so far, has been its slow, indecisive reaction to breaking

news." The article went on to quote management communications professor

Irv Schenkler of NYU, who said Andersen "has to get a focus, and it

needs to send the world a clear message to preserve its reputation. It

needs to position its firm as being constructive and setting the wrongs

right. But with all of this clutter in the news, it doesn't seem as if

management has gotten out in front of the news and made its own

news."



Crisis communications experts throughout the coverage urged a full,

complete, and immediate disclosure of Andersen's activities as the only

way to salvage the firm's credibility, and perhaps even its very

life.



See Analysis, p.7.



Evaluation and analysis by CARMA International. Media Watch can be found

at www.carma.com.



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