Resentment at the heart of Andersen

In March last year the top brass at Andersen Worldwide breathed awho should pay what. sigh of relief and declared that its global show was back on the road. A vote by its 2,700 partners in favour of the firm remaining under one umbrella appeared to stave off demands that the world’s largest professional services firm should break up.

But the impression of unification hasn’t lasted. Next month, the accountants will be forced to rebut claims that they have top-sliced the income pooled by partners at the end of each year with the aim of funding its own consulting business.

Andersen Consulting has thrown in other grievances against Arthurs, like poaching staff and misrepresenting its work with clients. But resentment is the overriding emotion – resentment that the accountants can tell them how much money they will pay without discussing what it will be used for.

Jim Wadia, managing partner of Arthur Andersen Worldwide, said last week he would not only rebut the claims but would also issue counter allegations and counter-claims.

Senior partners at Arthurs are angry that Andersen Consulting wants back all the money it has handed over to Arthurs since 1989, when the firm’s consultants were put in one organisation and spun off. Over #300m has been paid into the general pool by Consulting over that time. Last year, the figure climbed to #107m ($173m).

Wadia and his team also resent the idea that Andersen Consulting might walk away with the Andersen name if the allegations against the firm are upheld by the Paris-based International Chambers of Commerce, which is acting as arbitrator.

Wadia is proud of the Andersen name and is not about to give it away.

He can’t understand why Consulting has come to think that all its brand value has been created since 1989, rather than 1954 when the firm started a push into the consulting business.

And this is where the real dispute kicks in. Andersen Consulting wants to continue growing at 25% per year under the Andersen banner without any reference to the accountants.

Arthurs partners, who have listened for two years to claims of double-dealing and subterfuge, are now convinced that Consulting wants to do this outside the firm rather than in. That’s why the rare comments from Arthurs have centred on the payments it will expect when Consulting leaves.

Vernon Ellis, head of Consulting’s European operations, argues the accountants’ mindset is clouded by vague notions of ownership.

His view reveals how the dispute has brought to the surface resentments that are based on levels of citizenship in the firm. Consultants, in short, believe they are treated as second-class citizens. From their standpoint, their coffers are plundered as if they are a country forced to pay reparations in perpetuity after losing the war.

At a meeting of Andersen Consulting partners on 17 December in San Francisco when they decided to file for arbitration, Wadia said he would cap the $173m payment adjusted for inflation. But a question from the audience that asked how long this situation would continue was given the much feared answer: forever.

Ellis refutes any idea that Consulting will need to hand over cash (150% of net income), the Andersen name and all its technology to Andersens if it leaves the fold.

Last week, Ellis said Consulting had been given the exclusive right to use its name and technology. He added that a court does not award costs against the winning side, by which he meant Consulting will walk away scot-free if the arbitrators confirm its allegations.

Nevertheless, he believes the debate about costs is irrelevant. ‘What has concerned us about this debate is that several red herrings are being discussed. It is true there is a starting point of presumptive damages of 150%, but that was drafted in the context of whether a member firm was walking off and leaving a hole in the network.

‘And anyway, we are not walking off into the sunset, we just want to resolve our differences. If the arbitrator decides in Arthurs’ favour, we will carry on inside the firm,’ he said.

Whether Ellis and his colleagues will agree to disguise their humiliation and carry on as before is crucial to the debate.

Observers refuse to believe that Andersen Worldwide can persevere with 57,000 disgruntled Andersen Consulting staff under its wing. Bitterness and feuding will be the order of the day. The situation would only get worse if Consulting’s boss George Shaheen and his cohorts suffered a ‘night of the long knives’.

From this point of view, it is hard to see what Arthurs is fighting over except the Andersen name. The accountants believe they built and own it. But what will they get if they win?

Whatever the firm looks like, it won’t be pretty. The top management at Consulting can’t have come this far, despite what they say, only to roll over when the arbitrator in Paris says their allegations are invalid.

If nothing else, the slanging match that could last two to five years will make any kind of reconciliation impossible.