11 new companies dump Andersen

Posted 8:07AM on Thursday 11th April 2002 ( 23 years ago )

CHICAGO - Arthur Andersen LLP can now add another big client from its home city and affiliates in three more countries to the fast-growing list of companies cutting ties to the accounting firm in the wake of the Enron scandal. Walgreen Co. was among 11 public companies to dump Andersen on Tuesday, along with International Paper Co. and Oracle Corp. That brings the total of defections this year to 158 - more than 100 since the company was indicted last month on a criminal charge of obstruction of justice for destroying Enron records. Meanwhile, after announcing plans for 7,000 U.S. layoffs, struggling Andersen continued to try to split off its tax and consulting businesses for badly needed cash. Andersen spokesman Patrick Dorton confirmed that the San Francisco leveraged-buyout firm Fox Paine & Co. had signed a memorandum of intent to acquire the entire tax unit. The Wall Street Journal reported that the tentative deal for 4,000 staff and 450 partners would be for $800 million to $900 million. "Any transaction that we consider will be consistent with the reforms we have outlined and part of our plan to build the audit firm of the future," Dorton said. He did not give details of the agreement and a Fox Paine spokesman declined comment. The deal would top last week's tentative agreement with Deloitte & Touche for an unspecified number of Andersen tax partners to join that rival firm. Walgreen, which said in January year it was extending its 76-year relationship with Andersen because it had full confidence in its auditors, announced it will replace the struggling company with a firm yet to be selected. The drugstore chain, located in suburban Deerfield, Ill., indicated its board made the move after monitoring Andersen's situation for several weeks. It paid the accounting firm about $500,000 in fees last year. Also on Tuesday, Stamford, Conn.-based International Paper said it decided to replace Andersen with Deloitte & Touche LLP as did Jasper, Ind.-based furniture maker Kimball International Inc. Walgreen follows Sara Lee, Abbott Laboratories, Northern Trust and Brunswick among other Chicago-area Fortune 500 companies that have severed decades-long relationships with the embattled Enron auditor since a criminal indictment was announced against the firm on March 14. Oracle was the other major corporation to fire Andersen on Tuesday, announcing it is going with Ernst & Young instead. "Unfortunately, we believe we are forced to change auditors given the breakup that started to occur within Arthur Andersen's global practices in the past few weeks," said Jeffrey Henley, Oracle's chief financial officer. Industry analyst Arthur Bowman said there are likely to be many other client defections from Andersen soon. "Even though it's the end of the usual season for auditor changes, there are lots of companies who are right on the edge making decisions," he said. Andersen affiliates in more than a dozen countries have now cut deals to join competing firms. On Tuesday, Andersen partners in Chile and Poland announced separately that they will join Ernst & Young. Andersen's Brazilian affiliate, meanwhile, said it is merging with Deloitte Touche Tohmatsu.

http://accesswdun.com/article/2002/4/196189