- The Washington Times - Friday, March 29, 2002

CHICAGO (AP) Top managers of Arthur Andersen LLP threw their support behind Paul Volcker's long-shot rescue plan yesterday and the company warned of "inevitable" layoffs ahead, underscoring the shaky state of the once-mighty accounting giant.

With the firm's options quickly dwindling, Andersen's U.S. partners hashed out possible courses of action in a daylong teleconference, but reportedly made no immediate decisions.

Andersen's top audit leaders endorsed Mr. Volcker's plan to overhaul the firm in a meeting with the former Federal Reserve chairman in New York, according to an Andersen source close to management who spoke on the condition of anonymity.

While the 1,700 U.S. partners did not vote on the former Federal Reserve chairman's plan, "there is a critical mass of partners who support going forward under the Volcker plan," the source said.

Mr. Volcker scheduled a news conference for today in New York. Andersen partners did not return phone calls seeking comment.

Mr. Volcker's plan calls for him to take over the Chicago-based firm and head a seven-member governing board, for the auditing and consulting businesses to be separated and for other reforms to be made.

But even with Andersen managers and partners on board, the plan has failed to secure its most critical element a government decision to scrap the obstruction-of-justice charge against Andersen for destroying tons of records of Enron Corp., its bankrupt audit client.

Many U.S. partners see Mr. Volcker's involvement as Andersen's only hope for survival, along with selling off non-auditing units to create a leaner firm. Various proposals to sell off tax and consulting businesses reportedly were discussed at yesterday's private session, headed by recently named U.S. managing partner Larry Gorrell and beamed to Andersen offices nationwide from the Chicago headquarters.

Faced by a continuing hemorrhage of clients, Andersen does plan layoffs, a spokesman confirmed. Responding to persistent reports the total could reach 6,000, Patrick Dorton said no decision had been reached.

"Given the decision by the Justice Department to indict the entire 28,000-person firm, it is inevitable that some reductions in work force will have to be made in the coming months," he said.

Employees expect the pink slips any day now.

"Everyone is upset about it but is braced for it," said Katherine Dorn, a campus recruiter at Andersen's Chicago headquarters.

"People are scared. But they know it's kind of a logical progression that if you lose X number of clients, you're going to lose X number of jobs."

Andersen has lost at least 97 public audit clients so far this year and gained just two new ones.

Southern Co. was among the latest defectors, switching yesterday to Deloitte Touche Tohmatsu one of the Big Five rivals that remains in talks with Andersen about buying some of its non-auditing business.


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