Ex-Andersen partners forfeit status

Accountancy Age

has learnt that Deloitte has undertaken a hard-hitting review of the earning potential of partners and decided a number, including some among the last intake, would only be allowed to remain if they took posts as directors.

The news comes as it also emerged that Andersen partners joining Deloitte were still unclear how much of their capital they would recover from their former firm.

One insider said: ‘We are expecting a significant part of the capital back in cash but we are not sure of the percentage.’

Neither firm was able to confirm details of the deals struck with Andersen partners – a spokesman for Andersen said the deals were governed by strict confidentiality agreements.

Deloitte will be taking on around 230 partners from Andersen – when the deal was announced in April 2002 Andersen had 383 partners, all of whom would have invested in Andersen. Ten partners joined Ernst & Young’s corporate recovery division and the rest will either transfer to Deloitte with non-partner status or leave the firm.

As Deloitte unveiled a 15.7% increase in fee income to £713.6m for the year ending 31 May, it also emerged the firm reportedly paid ‘several tens of million’ of pounds for some of the business assets of the discredited firm, understood to include property leases, IT equipment and office furniture.

Deloitte refused to confirm the figure, though industry experts believed the figure was too high for the business assets alone while a source close to the firm said it was certainly ‘exaggerated’.

However, Deloitte has stressed the deal was not a merger or takeover, simply a ‘transfer of staff and purchase of business assets’ between the firms. Such a deal would minimise the risk of exposing Deloitte partners to the threat of legal action following the collapse of energy trader Enron. Andersen in the US was recently found guilty of obstruction of justice, though the firm is appealing against the verdict.

Announcing the completion of the deal, Deloitte senior partner John Connolly said he was confident that the extended range of skills, services and knowledge that the enlarged firm offered would ‘bring great benefit’ to the firm’s clients and ‘provide many outstanding development opportunities for our partners and staff’.

He said: ‘While the business climate remains challenging, I am confident that Deloitte will be distinguished by quality, characterised by high professional standards and a highly motivated group of talented people committed to providing first class service.’ He added that Deloitte’s business strategy would be based ‘on principles of quality, integrity and efficiency of delivery’.

Andersen senior partner John Ormerod will take up the position of London senior partner at Deloitte.

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