As employees at the embattled Andersen accounting firm wait anxiously to hear the details of likely job cuts, the firm’s leaders emerged from a critical meeting ready to embrace a proposal put forward last week by former Federal Reserve Chairman Paul Volcker that includes ditching most of its top management.
After a five-hour meeting, in which top Andersen executives addressed many of the Chicago firm’s 1,600 partners through a closed circuit television broadcast from its St. Charles training facility, no final decisions were made, but partners on the firm’s accounting side were given a mandate to work “aggressively” with Volcker.
Other areas of Andersen’s firm, including its tax practice and business consulting services, opted to go in a “different direction” and negotiate their own deals with rivals, according to one partner who tuned in to the broadcast. “It was a vociferous affair,” said the Andersen partner.
Andersen’s tax practice was said to be near a deal with rival Deloitte Touche Tohmatsu. During Thursday’s meeting, tax and consulting partners argued that because Volcker has proposed separating Andersen’s accounting and consulting functions, his plan to replace management should apply only to the accounting practice, leaving others to strike their own deals.
“We are committed to building the audit firm of the future under the leadership and recommendations of Mr. Volcker,” Larry Gorrell, U.S. managing partner, said. “This course of action will require us to address those non-audit portions of our business that are not consistent with that plan: the tax, business consulting, and corporate finance practices.”
Andersen, which was heavily criticized for its handling of the books of bankrupt Enron Corp., has been struggling to survive its January revelation that employees shredded thousands of documents related to its Enron audits. On March 14 the Justice Department indicted the firm for obstruction of justice as a result of the massive document destruction effort.
On Tuesday Joseph Berardino stepped down as Andersen’s chief executive, saying that his resignation might make saving the firm easier and force the Justice Department to reconsider its position.
Volcker, who was brought in by Andersen in January to suggest changes at the firm amid the deepening scandal, met with senior Andersen auditors in New York on Thursday to discuss the firm’s plans.
One executive close to Volcker said he was likely to embrace the option of taking over management of the accounting side of Andersen, because it would allow him to shape a new Andersen audit business. The former Fed chairman has called a news conference for Friday morning to discuss his next steps.
Meanwhile, Andersen’s employees are waiting for the ax to drop, with reports that thousands of its 28,000-member U.S. workforce could lose their jobs in the next few days.
Little or no information has been forthcoming to employees on the job cuts, many of which are expected to affect the audit business. Andersen has lost many of its most prestigious audit clients in the fallout.
“Everybody is just wondering what is going to happen,” said Michelle Ivy, an executive assistant in the technology risk consulting practice for the past two years. “I’m sure people are concerned, but nothing has been said to us, so we really don’t know what’s happening.”
In St. Charles, where Andersen has a 150-acre training campus, managing partner Paul Minger told employees that no layoffs were planned for this week. In a recent voice mail Minger told employees partners were considering substantially cutting back the campus’ services or closing it entirely.
On a more positive note, hotel operator and Andersen client Marriott International said it won’t back away from the accounting firm, whether its own shareholders want it to or not.
In a proxy statement released Thursday by the Securities and Exchange Commission, Bethesda, Md.-based Marriott said it wouldn’t ask shareholders to vote on the appointment.
Meanwhile, the Justice Department urged a U.S. judge Thursday to allow prosecutors investigating the collapse of Enron to continue questioning employees of Andersen even after the auditor’s criminal indictment on obstruction charges.
Andersen’s lawyers have argued that federal rules prohibit the use of a grand jury in a case where the defendant already has been indicted, and they accused prosecutors of trying inappropriately to strengthen their obstruction case.
