The row between Arthur Andersen and Andersen Consulting has deepened into a war of words and figures over the so-called “Florida Accords” under which the firms were set up in 1989.
Andersen Consulting now wants the return of $400m paid to Arthur Andersen since 1994, which it alleges has been used to finance a competitive practice.
“The request for arbitration is based on Arthur Andersen’s overlapping and competitive business consulting practice, and the confusion it has created in the marketplace. The $400m is secondary; what we had hoped is that Arthur Andersen would have remedied its breach but it does not intend to,” said Ken Ross, director of media and analysts at Andersen Consulting.
Meanwhile, Arthur Andersen’s price for a divorce has escalated, and the firm claims that the Florida Accords have no validity, in that it was not voted on and was only drafted in the form of a memo. By contrast it claims that inter-firm regulations would impose severe penalties on the departing consultants.
“The scenario is either that it can leave and pay $10bn, or that it can leave but it can’t take the technology and methodologies with it – the latter is our property,” said an Arthur Andersen spokesman. “We don’t want to cripple Andersen Consulting, the deal is negotiable, and we are there to facilitate its exit,” he added. “It is our understanding that this arbitration means there will definitely be a split, our question is what will the cost and settlement be.”
But Ross retorted: “This notion of breaking away mentioned in the press: that is not what we are doing. Arthur Andersen has breached the operating principles and there are irreconcilable differences, so we have sought arbitration.”
He said that Andersen Consulting is following the arbitration rules set up by the board of partners in 1991. These state that if there is an inter-firm dispute the firms must go to the ICC. He claims the compensation clause has no relevance in the current arbitration proceedings.
“Arthur Andersen is throwing outlandish numbers to the media as a smoke screen, and this is irresponsible,” said Ross.
Arbitration has now been delayed for a month, which the consulting arm says is at Arthur Andersen’s request. However, the accountants deny this, saying that the delay is at the request of the International Chamber of Commerce, due to the complexity of the case.
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