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Fri, Mar 29, 2002 - Page 21 News List

Rivals scramble to gobble up Andersen's customers


Ed Nussbaum, managing partner of Grant Thornton LLP, has met with Arthur Andersen LLP partners and employees across the country, picked up eight Andersen audit clients and talked to 100 more in the past month.

"We don't want to be vultures but at the same time Andersen seems to be falling apart and those clients need service," Nussbaum said. "We're also talking to individuals throughout the country, both partners and staff of Andersen."

Andersen, indicted on a federal charge of obstruction of justice for shredding documents related to its audits of Enron Corp, has lost more than 70 US audit clients this year.

Grant Thornton, the seventh-biggest US accounting firm, and other US rivals from market leader PricewaterhouseCoopers LLP to No. 10 McGladrey & Pullen, see Andersen's troubles as an opportunity. The key is to get Andersen assets, including partners, without assuming Andersen's legal liabilities, mainly from lawsuits connected to its Enron audits.

That may not be possible now, though the obstacles that have so far made Andersen's competitors reluctant to hire partners or buy parts of its US operations, such as its tax and consulting businesses, may soon be removed, executives and analysts said.

Andersen partners may vote to rescind the non-compete clauses in their contracts that prohibit them from going to work at other firms and taking Andersen clients with them. That decision is one of many that Andersen's management must make in days. The firm also must decide on an interim chief executive officer after Joseph Berardino announced his resignation Tuesday.

Unless the clause is revoked, the other firms are unlikely to hire them, because the clause would allow plaintiffs to pursue claims against the partners' new employer, claiming that hiring the partner contributed to Andersen's inability to satisfy claims, said Notre Dame Law School professor Matthew Barrett.

Andersen partners also must decide whether to support a proposal by former Federal Reserve Chairman Paul Volcker that would separate the auditing business from tax, consulting and other units, and install a panel empowered to reshape practices.

The offer is a bid to persuade the Justice Department to drop its indictment, and plaintiffs to reach a settlement of civil suits.

At the same time, Andersen's client defections will increase the need for its competitors to hire Andersen partners and staff.

PricewaterhouseCoopers and Ernst & Young LLP have gained seven S&P 500 clients each this year from Andersen, which require a lot of people with sufficient experience auditing large companies.

"With all this new business coming in, we obviously need to ramp up our resources," said Steven Silber, a spokesman for PricewaterhouseCoopers. "Andersen has many smart, honest people, and we will look at every one of them."

The pressure can be even greater at smaller firms.

"All of a sudden the floodgates are opening up and we're getting our share of calls from clients looking to make changes," said Mark Hildebrand, chief executive officer of Crowe Chizek LLP, the No. 9 accounting firm. "We've hired Andersen people, a couple just recently, though no partners."

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