Andersen plans to sell off its assets

SURVIVAL MEASURES: The firm has decided to cut jobs and sell off most of its non-auditing businesses as it adopts a rescue plan designed by former US Federal Reserve Chairman Paul Volcker


Sat, Mar 30, 2002 - Page 21

Arthur Andersen LLP will sell most non-auditing businesses and adopt former Federal Reserve Chairman Paul Volcker's rescue plan in a bid to survive a criminal charge, client defections and Enron Corp shareholder lawsuits.

On a company conference call today, led by US Managing Partner Larry Gorrell, partners were told the firm will cut jobs and keep in place the non-compete restrictions that prohibit them from taking their clients to a new employer, said people who participated in the call. The clauses would be rescinded for the firm's 1,600 partners in specific units if they are sold.

Andersen, indicted on a charge of obstruction of justice for shredding documents related to its audits of Enron, has been fired by more than 80 US audit clients this year, including 25 Standard & Poor's 500 Index members.

Volcker's offer to take over and reshape the firm is a bid to persuade the Justice Department to drop its indictment and plaintiffs to settle civil suits.

"We are committed to building the audit firm of the future under the leadership and recommendations of Mr. Volcker," Gorrell said in a statement. "We regret the loss of some of clients and remain committed to regaining their trust as an auditing firm -- albeit a smaller one."

There was no discussion on today's call about a replacement for Joseph Berardino, who resigned as chief executive this week, the people said. Another meeting will be held on Tuesday, during which key decisions will be made, they said.

Volcker, who had said he would abandon Andersen unless its partners accepted his plan, will hold a news conference at 10am tomorrow.

The Volcker plan "would simplify things for everybody but it requires so many things to go right it would almost take a miracle for all the interests to go along with it," said Scott Univer, general counsel for BDO Seidman LLP, which is the No. 6 accounting firm and in talks to buy some of Andersen's non-audit operations.

BDO Seidman and other Andersen rivals, such as market leader PricewaterhouseCoopers LLP, 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.

As long as the non-compete agreements remain in place, Andersen's competitors will be reluctant to hire partners or buy parts of its US operations, such as tax and consulting businesses, executives and analysts have said.

Andersen has said US job cuts are inevitable because of the criminal charge though no decision has been made. The Financial Times reported the firm will cut at least 6,000 jobs in the US.

"Given the decision by the Justice Department to indict the entire 28,000-person firm, it is inevitable that some reductions in workforce will have to be made," Chicago-based Andersen said in a statement yesterday.