Regulators won’t have Arthur Andersen to kick around anymore.

Management at the Big Five accounting firm acknowledged that its conviction this weekend on an obstruction of justice charge would effectively end the firm’s audit practice. After a week of deliberation, a Houston jury brought back a guilty charge against Andersen on Saturday.

“Unless the jury verdict is set aside by the trial judge, a judgment of conviction could be entered as early as August 31, 2002, depending on the amount of time needed for the government and Andersen to brief and argue post-trial motions,” Andersen management noted in a statement. “If entered, the conviction would be grounds for automatic suspension of Andersen’s ability to practice before the Securities and Exchange Commission.”

AA management added that between now and August 31, it will work to find new accounting firms for Andersen’s remaining clients.

“By Aug. 31, the firm expects to cease practicing before the Commission and expects to begin immediately an orderly process for dealing with state regulators leading to surrender of the firm’s licenses,” it added. “In the meantime, Andersen expects to complete all of its outstanding engagements to provide attest services to its clients.”

The SEC said in a statement that its investigation into Enron Corp.’s bankruptcy—and Andersen’s role in that fiasco—is continuing.

Typically, Andersen is not going down without a fight. The company’s management said it intends to appeal the Houston decision. “In fairness to the jury,” noted Andersen management, “they were not permitted to know the full truth about what happened last fall as a result of the Justice Department’s actions during this trial.”

Management at the embattled accounting firm said its appeal is based on “flawed jury instructions and erroneous evidentiary rulings that precluded Andersen from presenting its entire defense.”

Moreover, Andersen’s management insisted that the verdict represents only a technical conviction.

“Based on the government’s theory of prosecution, any accounting firm or other business today could face a similar punishment for discarding documents,” it said. “By this standard, any company could be prosecuted for following standard document disposal practices, before receiving a subpoena or even an informal request for documents from a third party, even when no person involved in the matter believed that anything they were doing was wrong.”

Management at the Big Five firm added: “It is clear that the government failed to uphold its moral responsibility to the public by indicting and prosecuting a firm of 26,000 innocent people that self-reported its findings, fully cooperated with the Department of Justice, the SEC, and Congress, and worked in good faith to find a solution that would have prevented this trial.”

Andersen is scheduled to be sentenced on October 11 by U.S. District Judge Melinda Harmon. The accounting firm faces fines of at least $500,000 and five years of probation.

Sentencing may only be dirt on the coffin for Andersen, however. With the court decision in Houston this weekend, it appears the firm—in business for more than 70 years—could well be gone before October 11.

Pitt, SEC Commissioners: No Shows?

SEC chairman Harvey Pitt’s promise to avoid potential conflicts of interest could be undermining the commission’s credibility, according to Bloomberg.

Pitt, who promised not to get involved in any issue involving former law clients, did not participate in 29 votes in his first 10 months in office, leaving just one commissioner to decide three cases. This, according to the wire service, which cited SEC records.

In fact, Bloomberg noted that last week the commission charged Ernst & Young with violating auditor-independence rules based on the vote of one commissioner. E&Y, a former Pitt client, is challenging the SEC allegation because it claims the commission deprived it of a “plural, deliberative process,” the wire service article said.

“The Commission’s barely had enough people voting in recent years even with no one recusing themselves,” Patrick McGurn, vice president of Institutional Shareholder Services Inc., told Bloomberg. ISS advises U.S. fund managers on corporate governance.

“As far as my recusals, I think the question is, ‘What is in the best interests of investors?'” Pitt told the New York Financial Writers Association in a speech last Thursday. “Having spent 34 years as a securities lawyer, I know where the bodies are buried. I believe that experience is to the benefit of public investors.”

Bloomberg reviewed 275 commission votes. Twenty of the 29 instances in which Pitt did not vote involved former legal clients of the SEC chairman.

Who’s Right about the Economy?

Is the economy improving?

That would seem to depend upon whom you ask.

According to a recently released survey of economists and investment strategists conducted by KPMG, the economic recovery will continue to gain momentum during the remainder of 2002, accompanied by modest economic growth and low inflation.

Says Neil Wolfson, national partner in charge of KPMG’s investment consulting group: “As the economy rebounds from last year’s recession, gross domestic product and consumer price index figures point to further economic growth this year with low inflation.” Wolfson says the survey group expects accelerating growth with increasing inflation during the next decade.”

Those results tend to jibe with the most recent CFO Global Confidence Survey. In that poll of chief financial officers, 46 percent of finance executives said their attitude toward the domestic economy is either confident or very optimistic, up from 33 percent in the last quarter.

Respondents in the Global Confidence Survey base the rosy outlook on expectations of healthy gains in profits and revenues at their own companies. Nearly 43 percent say they expect next quarter’s profits to beat those of the same period last year by more than 10 percent.

The same number predict revenues will jump by more than 10 percent. Another 26 percent expect profits to grow, but at less than 10 percent.

If CFOs are hopeful for a rebound in the U.S. economy during the next year, they are even more sanguine about a resurgence in the next five years. In fact, 33 percent say they are very optimistic about the economy in the long term, compared with only 20 percent last quarter.

Another 57 percent are confident, and only 9 percent say they have a neutral attitude about the long-term economy.

Chief financial officers and economists appear to be more upbeat about the economy than CEOs at small and midsize companies, however.

As CFO.com reported last week, these executives have become less optimistic that the economy will begin to recover by the end of 2002. The drop in optimism was revealed in a quarterly survey by TEC International, an organization of CEOs of U.S. businesses with annual sales between $1 million and $1 billion.

In the first-quarter survey of CEOs, 86 percent of the corporate executives predicted the economy would recover by year-end. But, in the most recent survey, this optimistic group slipped to 77 percent of the respondents.

Other findings from the KPMG survey of economists and strategists:

• After enjoying surpluses in recent years, the federal budget is projected to have a deficit of $87.5 billion for 2002 and decrease during the next 5- and 10-year periods to $75 billion and $50 billion, respectively.

• GDP is forecast to grow by 2.5 percent in 2002 and increase to 3.2 percent during the next 5 years and 3.5 percent during the next 10 years.

• Inflation, as measured by the change in the CPI, is projected to be 1.7 percent in 2002, and 2.5 percent and 2.6 percent during the next 5- and 10-year periods, respectively.