Arthur Andersen executives support Volcker plan

Posted 7:41AM on Friday 29th March 2002 ( 23 years ago )

CHICAGO - Top managers of Arthur Andersen LLP threw their support behind Paul Volcker's long-shot rescue plan Thursday and the firm warned of "inevitable" layoffs ahead, underscoring the shaky state of the once-mighty accounting giant. With the company's options fast dwindling, Andersen's U.S. partners hashed out possible courses of action in a daylong teleconference but reportedly made no immediate decisions. Six days after Volcker made a new proposal to try to salvage the firm, Andersen's U.S. managing partner issued a strong public endorsement of it following a meeting between senior Andersen officials and the former Federal Reserve chairman. "We are committed to building the audit firm of the future under the leadership and recommendations of Mr. Volcker," said Larry Gorrell, who replaced Houston-based Terry Hatchett as managing partner earlier this month. The proposed reforms will be pursued "with speed," he said. Volcker scheduled a news conference for Friday morning in New York. Andersen's 1,700 U.S. partners discussed the Volcker plan in a wide-ranging teleconference before Volcker's meeting with firm executives but reportedly did not vote on it. Several partners did not return phone calls seeking comment. 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 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 Thursday's private session, headed by Gorrell and broadcast 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 final 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. "As a firm, we are considering a number of options that will provide continued high-quality service to our clients and career opportunities for our people." 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, home to 5,300 employees. "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 now lost at least 97 public audit clients this year and gained just two new ones. Southern Co. was among the latest defectors, switching on Thursday to Deloitte Touche Tohmatsu - one of the Big Five rivals that remains in talks with Andersen about buying some of its non-auditing business. Lands' End and AutoNation also fired Andersen. One company the firm has managed to retain, for now, is Marriott International. The hotel operator, which paid Andersen $9 million in fees last year, said its audit committee has recommended retaining Andersen and it won't be putting the decision up for the usual vote of approval by shareholders at its May 3 annual meeting. "We appreciate that so many of our clients have remained with the firm during this difficult time," Gorrell said in his statement. "We regret the loss of some clients and remain committed to regaining their trust as an auditing firm, albeit a smaller one, that will be a leader in the discussion to improve audit standards." Andersen's top executive, chief executive Joe Berardino, resigned Tuesday. No successor has been named. The board of partners of Andersen Worldwide, the legal entity that includes U.S. arm Arthur Andersen, is expected to consider naming an interim choice at a meeting Tuesday in London.

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