Partners, Clients Scramble In Wake Of Laventhol Bankruptcy Filing
PHILADELPHIA (AP) _ The collapse of Laventhol & Horwath, the country’s seventh largest accounting firm, has forced large-scale layoffs and left clients searching for help with their year-end audits.
The Philadelphia-based firm Tuesday announced it would file a Chapter 11 bankruptcy petition on Wednesday.
The announcement came after two days of speculation the accounting firm would fold under the weight of several lawsuits. Bank debt stands at $85 million, said the firm, which had 4,200 employees with $350 million in domestic revenue last year.
Robert Levine, the firm’s executive partner, blamed the collapse on high litigation costs and the increasing number of lawsuits being filed against accounting firms.
Response in the firm’s 50 offices nationwide was diverse.
″We will close,″ said Nick Iacuzio, department head of accounting and auditing for the firm’s Boston office. ″It’s very devastating, there’s a lot of sadness and grief.″
Iacuzio has worked in the Boston office for 30 years, starting when the firm was small enough that ″our Christmas party consisted of donuts and coffee on a desk in the library.″
Now, all 160 workers have been let go.
While offices in Ohio, Connecticut and Philadelphia folded, partners and senior executives in the Kansas City, Mo., office say they plan to open a firm of their own.
Stanley H. House, managing partner in Kansas City, said the new firm hoped to be established as early as next week, with the office remaining open through the transition.
The Kansas City office employs 60 accountants and seven supporting staffers, and House said no decision had been made on how many would be hired by the new firm, to be known as House, Park, Morriss & Co.
In Tampa, Fla., two Laventhol partners have already set up their own firm, Aidman, Piser, and Co.
″It’s certainly very hectic right now, but we’ve gotten enthusiastic support from our clients,″ said Philip C. Piser, who with partner Terry Aidman headed Laventhol’s audit and tax practice departments in Tampa before deciding to go out on their own.
Laventhol’s financial problems ″speeded things up a bit,″ he said, adding that the company has helped make the transition as smooth as possible.
Settling financial matters may be rougher for the firm’s 360 partners, who could remain liable for debts created by the national firm, said Leslie D. Corwin, an attorney and partner in the New York-based law firm Morrison, Cohen, Singer & Weinstein.
Once assets are sold off, whatever liabilities are left after the firm’s insurance pays off becomes the responsibility of the individual partners, he said.
″A partner in New York could be liable for debts caused by the Chicago office,″ Corwin said. ″Worse, retired partners could be responsible for debts that began when they were still with the company.″
Some of the company’s clients, meanwhile, had to scramble to find new accountants. But two of Laventhol’s largest clients praised the accounting firm’s work.
″We’ve never had any problems with them in the past,″ said Ed Ashburn, accounting controller for Trans World Airlines Inc., based in Mount Kisco, N.Y. Laventhol handled the airline’s audits for the past four years, he said.
Ashburn said TWA has received several offers from other accounting firms.
Chicago-based Hyatt Corp. had worked with Laventhol on a number of projects over the past 15 years, said Hyatt spokeswoman Karen Rugen.
″They did a fine job for us,″ she said.
Hyatt is reviewing other firms to do its year-end audits, she said. ″We have always dealt with other accounting firms on a variety of projects, so our reviewing process might not be that difficult.″
The lawsuits cited as the major factor in the bankruptcy decision were filed primarily by businesses challenging audits or by shareholders contending they received faulty financial information.
The company reportedly had to pay nine creditor banks at least $30 million last year, of which only $18.5 million was covered by insurance, over its auditing of the Grabill Corp. of Chicago.
Laventhol’s audits of Jim Bakker’s PTL ministry are the subject of an ongoing trial in Charlotte, N.C. Laventhol & Horwath and another accounting firm are charged with overseeing a secret bank account that was used to pay Bakker and others millions in bonuses.