Arbitrator finds compromise for warring Andersens

Arbitrator finds compromise for warring Andersens
REUTERS

LONDON, AUG 7: An international arbitrator on Monday delivered a compromise ruling on a bitter 2-1/2-year battle between accountancy firm Arthur Andersen and its sister firm Andersen Consulting which left both sides claiming victory.

"This is a total win for Andersen Consulting," said its global managing partner Joe Forehand. "We won. It's over... now it's time to move on independently."

But Jim Wadia, Worldwide managing partner at Arthur Andersen, said his firm had good cause to be happy after the 129-page ruling although he called the arbitrator's decision on the termination payment "unfortunate". "After a little bit of celebration, I'm going to get our 78,000 people back to work," Wadia added.

The arbitrator, Colombian lawyer Guillermo Gamba, ruled that while Arthur Andersen (AA) did not breach its contractual obligations with Andersen Consulting (AC), the latter will be allowed to leave the umbrella organisation, Andersen Worldwide, without making a termination payment which could have amounted to as much as $14.5 billion.

But while it does not have to pay to leave the group, Andersen Consulting will have to change its name from the end of this year because the arbitrator ruled that the rights to this belong to Andersen Worldwide.

"The decision about the name is a huge victory for us," Wadia said. "This is very significant because the value of a an organisation is its reputation, its people and its brand -- the value of the brand is not in the word 'Arthur' or the word 'consulting', it's in the name 'Andersen'."

But Wadia declined to say whether AA would now call its consulting business "Andersen Consulting" or whether further legal action would be taken, adding that the firm's lawyers were still reading the full decision.

AC's Forehand dismissed the question of the name saying that the firm was already looking to change given the changing nature of its business. "If anything, this decision simply accelerates that process," he added.

The row between the two firms grew in the 1990s when Arthur Andersen started to take on consultancy work as well as its more traditional tax and audit practices. Andersen Consulting alleged that AA was encroaching on its turf by offering consultancy services to large clients which had previously been the fiefdom of AC.

According to senior sources at both firms, the arbitrator also decided that AA would keep $435 million of transfer payments from AC its has already received and get $535 million of payments from the past two years which are in an escrow account.

The transfer payments have been made from one side of the Andersen business to the other at the end of every Financial year in an agreed sharing of revenues but, after AA started it own consultancy business, the payments became the cause of increasing friction.