- The Washington Times - Friday, April 5, 2002

CHICAGO (AP) Arthur Andersen LLP announced yesterday that a "significant" number of its U.S. tax partners and professionals will join rival Deloitte & Touche.

Terms were not disclosed.

Andersen's U.S. operations are in jeopardy as a result of the Enron Corp. scandal. The firm hopes to survive as a slimmed-down company focused on auditing.

"This transaction is fully consistent with our commitment to move quickly on the Andersen reforms initiated by Mr. Volcker," said Larry Gorrell, managing partner of Arthur Andersen, the U.S. arm of Andersen Worldwide.

Former Federal Reserve Chairman Paul Volcker is head of an oversight board attempting to reform the company and keep it alive as an independent firm.

"While our firm will retain appropriate tax expertise in a manner consistent with these reforms, Deloitte will provide a significant number of our people with continuing career opportunities and our clients with continued quality service from recognized and respected professionals."

Andersen's employees, meanwhile, were bracing for what the company said would be "inevitable" layoffs among its 28,000 U.S. staffers. Spokesman Patrick Dorton, responding to persistent reports that layoffs could total 6,000 or more, said late yesterday that no final decision had yet been made on a number.

Andersen said it had signed a memorandum of understanding with Deloitte that served as an agreement in principle.

Andersen has 1,700 U.S. partners in tax, consulting and audit services. It was not clear how many would leave under the deal. Andersen said details remain to be worked out but it anticipates a closing date of as soon as April 30.

"Our clients, partners and employees have been and will remain our priorities through this process of reforming and rebuilding Arthur Andersen LLP as a firm focused on quality auditing," Mr. Gorrell said.

Deloitte said in a statement, "Adding professionals from Andersen will add considerable talent to Deloitte & Touche's already high quality practice and gives us the opportunity to accelerate the growth" of that division.

The announcement followed weeks of negotiations between Andersen and other members of the Big Five accounting firms over its assets. The company has been trying to sell off some of its units to raise money, but previous efforts snagged over the issue of liability for the many lawsuits Andersen faces from its role as chief auditor for bankrupt energy trader Enron.

A U.S. federal grand jury indicted Andersen's U.S. arm March 14 on a charge of obstruction of justice for destroying documents related to its audit work for Enron.

Andersen lost dozens of clients in the ensuing weeks.

Auditor Trak, a unit of Atlanta-based Strafford Publications Inc., said yesterday that Andersen has lost 127 public audit clients this year and gained just two. The company handled the audits for 2,311 public U.S. companies last year.

Arthur Bowman, editor of the industry publication Bowman's Accounting Report, said the company desperately needs the cash from the Deloitte deal to stay in business.

"It's probably the best thing they could do for their people and the firm itself, because as tax season ended these people would be looking for jobs elsewhere anyway," he said. "It's better to sell it as a unit and get revenue."

However, he said, the sale signals the formal acknowledgment of once-mighty Andersen that its U.S. operations are breaking up.

Andersen's overseas affiliates already have begun splitting off to merge with rival accounting firms in country after country.

Andersen Worldwide SC, the umbrella group for Andersen's worldwide operations, conceded defeat Tuesday in its strategy of merging its non-U.S. operations en masse with those of rival Big Five accounting firm KPMG, after Andersen's lucrative Spanish affiliate agreed on a separate deal with Deloitte Touche Tohmatsu.

Earlier yesterday, Andersen Worldwide named the chairman of its Board of Partners as acting chief executive, with the key task of trying to manage an orderly selling of those non-U.S. operations.

Aldo Cardoso succeeds former chief executive officer Joe Berardino, who resigned last week as the head of both Andersen Worldwide and Arthur Andersen LLP, the firm's U.S. arm.

Andersen Espana was the group's first Western European unit to go its own way in trying to secure its future. As a key component of Andersen's regional network, its defection effectively killed any remaining chance of a global merger with KPMG.

Since then, Andersen's affiliates in Singapore and Thailand have struck separate agreements to merge with accounting rivals.

Andersen's affiliates in Hong Kong and China plan to merge with PricewaterhouseCoopers, while Andersen units in Russia, Australia and New Zealand are arranging to merge with Ernst & Young.


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