Andersen to cease as audit firm tomorrow

Once proud company was destroyed by role as Enron's accountant

August 30, 2002|By NEW YORK TIMES NEWS SERVICE

After 89 years, Arthur Andersen will cease to be an auditor of public companies tomorrow.

The remaining tasks of the once-proud firm, which was convicted in June of obstructing the government's investigation into the collapse of Enron Corp., an Andersen client, are to cope with obligations and shut itself down. Of its roughly 28,000 employees, fewer than 3,000 are left; of more than 1,200 public company audit clients, none will remain.

The remarkable decline of the firm, from its announcement in January that it had discovered improper shredding of documents related to its audit of Enron, has taken less than nine months. The employees who are left will have the thankless task of coping with lawsuits and leases.

Terminal cancer

"It's like a family member who has terminal cancer," said Gary Brentlinger, human resources director for Andersen's offices in Houston; Austin, Texas; San Antonio and New Orleans. "We're watching the firm die."

At the firm's office in Houston, the epicenter of the Enron debacle, Brentlinger will most likely shut off the lights on one more of the 15 floors that the firm once occupied, when it had nearly 1,700 active employees there, instead of fewer than 100 now. The offices in the other cities he oversees have already closed.

Partners who are at the firm and who have recently left say that the firm will not file for bankruptcy protection. Rather, the company will continue to wind down its affairs, negotiating with landlords to get out of leases, operating Andersen's training center, arguing with former clients' new accountants about the accuracy of past audits, and of course defending itself in lawsuits.

The liability of current and former partners in those lawsuits remains uncertain.

The firm will be supported by revenue earned from the audit season that concluded this spring, the sale of different practices and payments by partners getting out of their agreements not to compete against Andersen, partners say.

Little information is available about the financial condition of Andersen, a private partnership, but partners who have seen the financial statements for last year said that given its reduced payroll, it should be able to operate until it has to pay judgments or settlements in lawsuits.

Some also said the firm would convert itself from a partnership to a corporation, providing those who remain at the firm more protection against any future liabilities.

Ironically, the only significant, certain revenue for Andersen in the future will come from its one-time sister consulting firm, now known as Accenture, which was separated from Andersen by an arbitrator's decision two years ago. Partners on the consulting side did not want to share profits with their less-profitable accountant brethren.

Accenture now has more than three years left on a five-year contract to send more than 10,000 employees each year to "Andersen University," Andersen's training campus in St. Charles, Ill. A spokeswoman for Accenture did not disclose the value of the contract.

Messy, complicated

Winding down Andersen's business is a tremendously messy and complicated task. Even as many employees left or were laid off in recent months, others had to sort through audit work papers and other client files and make sure that they could be understood not only by another auditor but also the operator of a document storage center, said Lisa T. Fair, a former Andersen partner in Atlanta who now works for Deloitte & Touche.

"We hold documents that clients have for audits, for lawsuits, for anything like that," Fair said, adding that the Atlanta office of Andersen had entrusted all its documents to a storage facility. "We had to make sure that those things were easily found" by a client's new auditor, she said.

Nightmare of paper

The process converted Andersen's offices into a nightmare of paper and storage boxes, several employees recalled.

"You end up doing a lot more things that you wouldn't normally do," said David C. Meyer, a former Andersen partner who landed at PricewaterhouseCoopers in Houston. There were fewer people to help organize documents, make copies or even carry boxes, he said.

"We probably had 20,000 files in our office alone," Brentlinger said. Andersen staff members have removed papers from its offices in a downtown Houston skyscraper and turned off the lights, leaving only furniture and artwork. Office supplies were donated to local charities. Negotiations over leases remain.

Brentlinger said that from his office, about 80 percent of the professional staff had found new jobs; a lower percentage of support staff - the people who run the mail room, assist partners and perform other services - had found new employers.

The support that Andersen managed to give to its people was impressive, said Dean McMann, chief executive of Ransford, an executive recruiter and adviser to consulting and accounting firms. "This has been the most professional winding down of a firm that I've ever seen," he said.

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