Arthur Andersen LLP began talks with a second potential buyer, Ernst & Young LLP, as the fifth-largest accounting firm struggles to survive mounting client defections and the threat of criminal indictment, people familiar with the negotiations said.
Andersen CEO Joseph Berardino met with his Ernst & Young counterpart, James Turley, in New York the past two days, one person said. Andersen also has discussed a buyout by Deloitte & Touche LLP as the US Justice Department prepares obstruction of justice charges over Andersen's destruction of documents tied to its role as Enron Corp's auditor, people familiar with the talks said.
"They need someone to come to the rescue," said Jonathan Hamilton, editor of Public Accounting Report. A transaction with one of the companies may be announced as soon as Wednesday, one person familiar with Andersen said.
Andersen is considering putting its US unit under Chapter 11 bankruptcy protection to fend off legal claims, a person said.
Lawyers who are suing Andersen on behalf of Enron investors say they would oppose any transaction unless there is a provision to pay legal claims against the firm.
The firm is seeking to settle Enron shareholder and investor lawsuits for about US$750 million. Earlier this month Andersen paid US$217 million to settle a separate lawsuit filed by investors in the Baptist Foundation of Arizona. Enron filed for the largest US bankruptcy in December.
A combined Andersen and Deloitte & Touche would have almost US$22 billion in revenue, surpassing PricewaterhouseCoopers LLP as the biggest US accounting firm. A merged Andersen and Ernst & Young would rank second to PricewaterhouseCoopers.
FedEx Corp, the largest overnight delivery company, and Riggs National Corp, the biggest Washington-based bank, dropped Andersen as its auditor today, joining Delta Air Lines Inc, Freddie Mac, Merck & Co and more than 25 other companies.
Separately, Paul Volcker, the former Federal Reserve chairman named to restore Andersen's credibility, said the firm must split its consulting business from its auditing operations.
"There is a strong public interest in a reformed Arthur Andersen able to restore and maintain leadership in the auditing profession," Volcker said in a news conference at his Manhattan office.
Earlier today, the New York Times and the Wall Street Journal reported Andersen was in talks to sell all or part of itself to Deloitte. Berardino and Deloitte & Touche CEO James Copeland are leading the negotiations, the Times said.
Andersen spokesman Patrick Dorton declined to comment on whether the firm held talks with Deloitte or Ernst & Young.
"It's our policy that we would not discuss any rumors or anything to do with strategic plans the firm might have," said Les Zuke, a spokesman for Ernst & Young.
Deloitte spokesman Matthew Batters said, "We are involved in scenario planning exercises to address the current and future issues facing the profession. It's inappropriate for us to discuss these planning exercises in public."
Lawyers representing Enron investors said they are monitoring the Andersen sale talks.
"If Andersen is going to disappear without any provision for liability, that's a material fact I'd want to deal with," said Tom Cunningham, a Houston lawyer who represents Georgia's state pension fund. "It wouldn't surprise me if somebody ran to the courthouse to enjoin this."
An Andersen failure would also cause headaches for regulators. Unless Andersen is rescued, and the majority of its client relationships preserved, regulators would have to deal with more than 2,000 public companies that all needed to change auditors at once, said Dennis Beresford, a University of Georgia accounting professor and former chairman of the Financial Accounting Standards Board.
"Unless Andersen is bought, it would take a couple of years or more to get through the trauma," Beresford said. "It's a real issue as far as how do we keep the overall financial reporting marketplace functioning."
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
INSPIRING: Taiwan has been a model in the Asia-Pacific region with its democratic transition, free and fair elections and open society, the vice president-elect said Taiwan can play a leadership role in the Asia-Pacific region, vice president-elect Hsiao Bi-khim (蕭美琴) told a forum in Taipei yesterday, highlighting the nation’s resilience in the face of geopolitical challenges. “Not only can Taiwan help, but Taiwan can lead ... not only can Taiwan play a leadership role, but Taiwan’s leadership is important to the world,” Hsiao told the annual forum hosted by the Center for Asia-Pacific Resilience and Innovation think tank. Hsiao thanked Taiwan’s international friends for their long-term support, citing the example of US President Joe Biden last month signing into law a bill to provide aid to Taiwan,
China’s intrusive and territorial claims in the Indo-Pacific region are “illegal, coercive, aggressive and deceptive,” new US Indo-Pacific Commander Admiral Samuel Paparo said on Friday, adding that he would continue working with allies and partners to keep the area free and open. Paparo made the remarks at a change-of-command ceremony at Joint Base Pearl Harbor-Hickam in Hawaii, where he took over the command from Admiral John Aquilino. “Our world faces a complex problem set in the troubling actions of the People’s Republic of China [PRC] and its rapid buildup of forces. We must be ready to answer the PRC’s increasingly intrusive and
STATE OF THE NATION: The legislature should invite the president to deliver an address every year, the TPP said, adding that Lai should also have to answer legislators’ questions The Chinese Nationalist Party (KMT) yesterday proposed inviting president-elect William Lai (賴清德) to make a historic first state of the nation address at the legislature following his inauguration on May 20. Lai is expected to face many domestic and international challenges, and should clarify his intended policies with the public’s representatives, KMT caucus secretary-general Hung Meng-kai (洪孟楷) said when making the proposal at a meeting of the legislature’s Procedure Committee. The committee voted to add the item to the agenda for Friday, along with another similar proposal put forward by the Taiwan People’s Party (TPP). The invitation is in line with Article 15-2