Deloitte says it won't pursue deal with Arthur Andersen

NEW YORK - Deloitte Touche Tohmatsu called off talks Wednesday for a purchase of some or all of the assets of Arthur Andersen LLP, the big five accounting firm under intense scrutiny because of its role in Enron Corp.&#39;s collapse. <br> <br> In a statement, New York-based Deloitte said it didn&#39;t want to &#34;pursue a business combination with Andersen Worldwide.&#34; <br> <br> The company said that negotiations between the two companies that started last week ended Wednesday &#34;due to Andersen&#39;s unresolved litigation and legal issues.&#34; <br> <br> Justice Department prosecutors have been negotiating with Andersen and repeatedly have threatened the big accounting firm with indictment for destroying documents in the Enron case, according to people familiar with the negotiations. <br> <br> It&#39;s possible that Andersen could plead guilty to obstruction of justice for the shredding of Enron-related documents at Andersen&#39;s Houston office last fall. Yet that could bar Andersen from performing audits and approving financial reports that companies file with the Securities and Exchange Commission, the core of its business -- unless Andersen were granted a waiver. <br> <br> Experts have said that the biggest stumbling block to a sale of Chicago-based Andersen is its potentially huge liability costs related to Enron&#39;s bankruptcy. Andersen auditors signed off on questionable accounting practices that, when uncovered late last year, led to the company&#39;s collapse. <br> <br> The decision by Deloitte to back off from a deal with Andersen significantly raises the possibility that it could &#34;default, probably within the next month or so,&#34; said Ed Ketz, an accounting professor at Penn State&#39;s Smeal College of Business. <br> <br> An Andersen spokesman didn&#39;t immediately return a telephone message left Wednesday night seeking comment. <br> <br> Andersen&#39;s legal problems also cost it another potential merger partner on Wednesday, when rival Ernst & Young confirmed it also had been talking with Andersen but decided to scrap the idea of a combination. <br> <br> That means other possible suitors -- most notably KPMG and PriceWaterhouseCoopers -- probably won&#39;t be interested in buying either parts or all of Andersen, Ketz said. <br> <br> &#34;It looks really bad for Andersen,&#34; he said. &#34;The obvious reason is that you&#39;d like to have Andersen&#39;s assets without the liabilities.&#34; <br> <br> Deloitte said its executives initially had hoped that Andersen would continue as an independent firm, but entered into the merger talks only after &#34;insufficient progress was being made toward that goal.&#34; <br> <br> Experts say Andersen is in dire straits and at risk of going under because it is losing important clients with no end in sight. FedEx Corp. dropped Andersen Monday, following the lead of Delta Air Lines, Freddie Mac, Merck & Co. and SunTrust Banks. <br> <br> And on Wednesday, Household International, the nation&#39;s second-biggest consumer finance firm behind Citigroup, dropped Andersen as its auditor. <br> <br> In a statement, Household said its board of directors had chosen KPMG to replace Andersen, pending final approval by stockholders at its upcoming annual meeting. <br> <br> The company cited the &#34;uncertainty&#34; surrounding Andersen, which has been embroiled in controversy since the collapse of Enron, one of its biggest clients. <br> <br> ------ <br> <br> On the Net: <br> <br> http://www.andersen.com <br> <br> http://www.deloitte.com <br> <br>

http://accesswdun.com/article/2002/3/197494