Arthur Andersen Searches for New CEO
Arthur Andersen Searches for New CEO
Mar. 28, 2002
%mlink(STRY:; PHOTO:XRYR102-032602; AUDIO:%)
CHICAGO (AP) _ Top partners for Arthur Andersen LLP, desperate to prevent the company from collapsing, pressed efforts Wednesday to find a new leader and negotiate the possible sale of Andersen's non-audit businesses.
A day after Joseph Berardino quit as chief executive of Andersen Worldwide _ the legal entity that includes U.S. operation Arthur Andersen _ the troubled firm remained wracked by uncertainty amid dwindling hope for its survival.
A successor to Berardino won't be chosen until next week at the earliest, spokesman Charlie Leonard said. Andersen Worldwide's governance requires that the 18-member board of partners meet to take such an action, and Leonard said no meeting is scheduled until Tuesday in London.
Many partners see former Federal Reserve Chairman Paul Volcker as Andersen's best chance to stay alive. But Volcker's rescue plan, which calls for him to install and head an independent governing board, appears to be on hold unless the government abandons a criminal indictment of Andersen for destroying documents related to bankrupt audit client Enron Corp.
But that is unlikely.
``It doesn't change anything,'' Justice Department spokesman Bryan Sierra said. Neither Berardino's announced resignation nor Volcker's proposal changes the government's plans to prepare for trial May 6, he said.
The Chicago firm's 1,700 U.S. partners, who don't have a direct say in a successor, huddled in conference rooms at Andersen offices across the country Wednesday to discuss strategy and the possible sales of various non-auditing units to its Big Five rivals. By late afternoon, no major decisions had been made or deals consummated, several said, and the mood remained as tense as before Berardino's resignation.
``The organization is incredibly nervous about its future,'' said New York-based partner Jack Gelman.
Deloitte Touche Tohmatsu and KPMG are among the suitors for some of Andersen's U.S. businesses. Andersen's tax partners met in Chicago to discuss a Deloitte term sheet to acquire its tax business, according to a partner who spoke on condition of anonymity.
Rival firms also have been courting Andersen's partners, who can't leave without significant complications unless the partners vote to eliminate their noncompete clause.
Asked about talks Wednesday, Deloitte spokesman Matthew Batters issued a statement saying the accounting firm will work with regulatory agencies ``for an orderly transition of clients and people if Andersen cannot continue as a free-standing firm.''
However, in Australia, Deloitte backed out of talks with Andesen Australia. Instead, Ernst & Young Australia agreed with Andersen Australia to integrate their businesses.
All previous attempts to broker sales of Andersen units have faltered, largely over the issue of Andersen's huge liability from Enron lawsuits.
``We all would like to see Andersen survive this,'' Doug DeRito, a tax partner in the Atlanta office, said of the attempts to peddle Andersen units. ``But I think we need to be responsible and consider other viable options to protect the jobs of 28,000 employees in the U.S.''
The flood of Andersen client losses continued Wednesday. Sysco Corp., a $22 billion food-service marketer and distributor, was the biggest new defection. Andersen has now lost at least 85 public audit clients this year _ a majority of them this month.
Andersen also lost some gambling money Wednesday. New Jersey's Casino Control Commission voted 5-0 to force casinos and their parent companies to sever ties with Andersen by May 15, rejecting arguments that the company's New Jersey unit should not be punished for the actions of a few Andersen ``rogues'' elsewhere.
Some experts said the failure to name a successor to Berardino quickly will cost Andersen even more business.
``The ship now seems without a captain and clients will get more panicky now,'' said Itzhak Sharav, an accounting professor at Columbia University.
Clarke Caywood, a crisis communications expert and professor at Northwestern University, said that in order to restore a sense of trust, Andersen must choose a publicly known leader, not one of its own partners.
``Unless they have somebody who steps up immediately that is extremely recognizable, or unless this committee concept that Paul Volcker is recommending catches fire, the gap in leadership will create an additional crisis,'' he said.
As Andersen negotiates to try to merge its non-U.S. operations with those of KPMG, Japan's Asahi & Co. said Wednesday it will end its partnership with Andersen and merge this fall with KPMG. Asahi employs 2,719 people and has more than 4,000 clients.
Andersen's partner groups in China, Hong Kong, New Zealand and Russia have fled to competing firms in recent days, slowing the Andersen-KPMG talks. But Leonard insisted the talks are going well.
``There were four or five countries where the member firms have announced that they're not going to pursue talks with KPMG, but Andersen exists in 84 countries and the overwhelming majority of those are pursuing discussions and negotiations,'' he said.