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DEATH of Aurther ANDERSEN
CNN | March 13th | LOU DOBBS

Posted on 03/13/2002 2:28:03 PM PST by Roger_W_Isom

LOU DOBBS is reporing that ERNEST YOUNG one of the TOP FIVE ACCOUNTING FIRMS HAS REFUSED TO ACQUIRE AA!!!!! This is NOT good NEWS!!!! if YOUNG refuses to accept AA offer to sell itself to YOUNG that means only one thing FOLKS!!!!

AA is in FAR more seious shape then we realize and we could be looking at the other accountting firms REFUSING TO ACQUIRE AA as early as Mid April!!!!


TOPICS: Breaking News; Business/Economy; News/Current Events
KEYWORDS: corruption; deathknell; enron; enronlist; globalcrossing
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To: SouthCarolinaKit
ANOTHER requirement COULD be that every 5YEARS a DOUBLE audit from another top10 accounting firm to be done in order to back up their numbers ALONG with, say, every FIFTEEN YEARS THREE acounting firms from the top 15.... I KNOW this MIGHT be going overboard but can ANYONE tell me how BEST to prevent another ENRON???? Just curious......
61 posted on 03/13/2002 3:19:43 PM PST by Roger_W_Isom
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To: antaresequity
Enron was nothing more than a corporate daytrader playing with leveraged and risky positions...AA helped them....nothing more....

Damn, finally someone with some insight....

62 posted on 03/13/2002 3:20:26 PM PST by KC Burke
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To: L.N. Smithee
ROFLMAO!!!!!!

Now THATS CUTE!!!!! LOL :-)))))

63 posted on 03/13/2002 3:23:34 PM PST by Roger_W_Isom
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To: neutrino
Not as good as your story, but I've always disliked Andersen since I was a messenger in Chicago 20 years ago. I was schlepping boxes of punch cards to their offices and they were always a pain to deal with.

Sorry, no blazing insights. But every time I hear their name I flash back to their loading dock.
64 posted on 03/13/2002 3:24:56 PM PST by Heyworth
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To: antaresequity
What does the Price to earnings ration of the S&P have to do with KPMG, a Big Five accounting firm? It is a partnership and doesn't have shareholders or an EPS.
65 posted on 03/13/2002 3:27:02 PM PST by cactmh
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To: GovernmentShrinker
Uninsured liability isn't the primary issue as these firms typically are self-insured. Reinsurance for the broader risk would be nice but that isn't the problem either. Re-read my AP article at #14. The real problem is that if the LLC itself is charged with certain crimes, the overall firm can lose its SEC certification for audits. Thus the whole audit end of the business, can't perform certified audits....their core business can't perform.

SEC can grant a waiver if it was an isolated partner office that alone did the wrong doing as they have for all the big five from time to time....but the SEC is waffling,,,,,they want to have the penalty and still have the deep pockets....

So two government agencies, Justice and SEC will equivocate and Andersens employees, I think many more than Enron as I recall, will suffer.

66 posted on 03/13/2002 3:27:23 PM PST by KC Burke
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To: innocentbystander
get over here
67 posted on 03/13/2002 3:29:10 PM PST by KC Burke
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To: Roger_W_Isom
It's hard to say where E&Y is on the food chain. Do you mean in Audit practice, Tax, consulting or all revenues combined? Do you want to know how many clients or what? Their Audit side is good and has been growing nicely. They have a very large Tax practice. Overall I believe they are probably third or fourth of the Big Five.
68 posted on 03/13/2002 3:29:43 PM PST by cactmh
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To: SauronOfMordor
From what I hear the Big Five (and most companies) use down turns in the economy as an excuse to cut the dead weight...Now, this doesn't mean this is true in all cases, especially in a relatively small practice that your cousin was in.
69 posted on 03/13/2002 3:31:36 PM PST by cactmh
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To: KC Burke
These LLCs are the REAL problem folks!!!! the sooner they are done away, THE BETTER!!!!!!!you can simply get into TOO MUCH TROUBLE.... ENRON and their INCESTOUS RELATIONSHIP with AA PROVES IT!!!!! were a judge to declare these ILLEGAL and UNCONSTITUTIONAL would be a WISE first step....
70 posted on 03/13/2002 3:31:51 PM PST by Roger_W_Isom
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To: Endeavor
Anybody remember ValuJet? It used to be an airline.

I have friends who used to work at Arthur Andersen. Once upon a time, they had a great reputation. And they did fine work.

But they got greedy. The main thing they did was enter into consulting contracts with the same firms, like Enron, whose books they were supposedly auditing on a fair and impartial basis. That made them a player, with a vested interest in making thimgs look good for their client, rather than just auditing letting the chips fall where they may.

In short, like Clark Clifford and many other individuals and organizations, they sold out their reputations for cash. And, since they are in a field where their reputation is the only real commodity they really had to sell, that was the end of the line.

As with other posters, I feel very sorry for the low-level folks at Andersen, the clerks, typists, office workers, who had nothing to do with the rot at the top, but will lose their jobs with everyone else. But as for the partners and officers of Andersen, they are about to get what they richly deserve.

Like ValuJet, Andersen has just "augered in." Too bad some politicians who were up to their eyeballs in this, like Billyjeff Clinton and Senator Chris ("Sandwich") Dodd aren't augering in with them.

Congressman Billybob

Latest column" "Approaching the Heliopause fron 1776."

71 posted on 03/13/2002 3:31:56 PM PST by Congressman Billybob
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To: Roger_W_Isom
Geezus man, where in the heck did you get that KPMG was acquiring AA? You must be smoking something. AND one little note, KPMG doesn't have shareholders...none of the Big Five do because a public accounting firm cannot organize as a corporation...
72 posted on 03/13/2002 3:33:19 PM PST by cactmh
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To: Roger_W_Isom
My husband worked for Citigroup up until last September. I know they have been having a lot of problems.
73 posted on 03/13/2002 3:34:25 PM PST by SpookBrat
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To: KC Burke
Of course not all people in Andersen are rotten, in fact most aren't. However, as someone else noted, corporate cultures are all different throughout the firms and some are a little more shady than others and some are more dorky than others etc.
74 posted on 03/13/2002 3:35:33 PM PST by cactmh
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To: LS
I agree with you. The only difference between you scenario and AA is the synergies, "culture," brand equity associated with that firm. There is not much equity left --- the name has become a liability.

The only aspect that worries me is further concentration in that industry.

75 posted on 03/13/2002 3:35:40 PM PST by TopQuark
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To: KC Burke
your notion that AA could lose SEC certification to conduct AUDITS could EASILY be what the MAJOR drawback is to ANY merger with the remaining top 4....
76 posted on 03/13/2002 3:35:42 PM PST by Roger_W_Isom
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To: KC Burke
Do you work for Andersen?

I remember in the go go years of the late '60s, the '70s and even into the '80s, AA was perhaps the most conservative of the then Big 8 accounting firms. It was probably the most prestigious, and it certainly was the most arrogant. I've done many deals with AA representing one side or the other over the past 20+ years, and I've generally been reasonably happy with their work.

That said, I think the very conservatism of the firm in former days, combined with the firms hubris (which included lobbying along the lines of "you should accept this position because we, Arthur Andersen, the top firm, are putting it forward") and internal culture of self-satisfaction enabled the cowboys who have run AA for the past 5-10 years to get away with a lot of things that if any other big 5 firm did them, they'd have been hauled up short.

Now, they're all going to pay, the partners perhaps most of all: their capital accounts, which were most of their net worth, are worthless given the lawsuits, and they are losing clients left and right. With the reduced payouts that will endure for years as a result of the litigation and the loss of clients, it will be impossible to keep good juniors and hire. They would be better of if it dies.

77 posted on 03/13/2002 3:36:15 PM PST by CatoRenasci
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To: Roger_W_Isom
garbage in...garbage out
78 posted on 03/13/2002 3:36:27 PM PST by let freedom sing
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To: SouthCarolinaKit
Snip from Glatner in the Ney York Times
A partnership in a Big Five accounting firm over the years has been as cozy a professional home as anyone could wish for. Those who made partner were paid hundreds of thousands of dollars a year, could retire relatively young, and even amid the industry's many mergers could count on job security.

But the partners in Arthur Andersen's United States practice see all that evaporating.

Regardless of whether Andersen can arrange a rescue by another Big Five firm, partners can expect to lose the equity they have paid into the firm hundreds of thousands of dollars each. Andersen partners have typically relied on that money in retirement to bolster their savings, and the firm's pensions are small by industry standards.

If they simply try to withdraw and join other firms, either individually or in groups, the partners run the risk of being sued for stripping a collapsing firm of money that might otherwise be available to pay claims from investors in Enron , whose books Andersen audited.

And so, many Andersen partners are eager to achieve what is so far eluding the firm a fresh start under the auspices of one of their giant competitors, with the opportunity to build new equity while limiting their liability to the cash they left behind.

"There has to be some kind of firewall around the legal liability," said Mark W. Dirsmith, a professor of accounting at the Smeal College of Business at Pennsylvania State University.

Andersen partners are paid out of the firm's profits based on a complex formula; they pay a fraction of their earnings back each year, building up equity and covering the firm's operating costs.

According to one former partner, when partners retire they receive their equity investment back over a period of 10 years. But with the collapse of Enron, so many individuals, companies and institutions have claims against Andersen's capital that partners are unlikely to be able to take their investments out of the firm without running the risk of lawsuits.

A merger would allow Andersen partners to join a new partnership and build up equity in it, another former Andersen partner noted. Assuming that the Andersen refugees would have to buy into the new partnership, their arrival would not dilute ownership of the acquiring firm, he said.

Important matters that Andersen partners would have to negotiate, he added, are how much the acquiring firm would require them to invest, how quickly they would have to invest it, and whether they would ever receive any payment to make up for their lost equity in Andersen.

"The one thing you never do in a merger is pay off the individual partners" too soon, this former Andersen partner said. "What you don't want to do is make them rich too quickly. You want them to continue working."

Of course, another firm could make whatever accommodations it chose to lure or retain Andersen partners with particular expertise or clientele. And having lost their equity in Andersen, individual partners might set out to make their own deals, rather than loyally participating in any merger the firm succeeded in negotiating. Indeed, some partners have already left.

Most Andersen employees do not have equity in the firm and are paid salaries. An acquiring firm would normally take on such Andersen obligations for at least a year or so, lawyers said, before eliminating overlapping employees and offices, probably through layoffs.

The dwindling of accounting's Big Eight firms to the current Big Five over the last decade has given the industry a lot of experience in mergers not all of it smooth.

A merger of two large professional services firms is not an easy task, said David E. Greene, chairman of the systems and accounting program at the Kelley School of Business at Indiana University.

"You've got cultural differences; you've got different ways of operating; you've got real estate issues that are seemingly always thorny; and all of those are true even without the overhang in this situation," he said. "You're not merging businesses, you're merging people, and that's always a difficult thing to do."

It has taken years for Price Waterhouse and Coopers & Lybrand to effect their merger, Professor Greene said, and some former employees of the two firms who are critics of the combination say the process is still not complete.

A transaction involving Andersen would be complicated by the firm's lack of negotiating power, he said. In past deals, each merger partner retained control in those markets that it previously dominated; in an Andersen deal, the acquirer may be better able to dictate terms, Professor Greene said.

The crucial matter, he added, would be for Andersen to move quickly.

"You're trying to do so much at the same time," he said, "because you want the employees to stay with the merged firm."


79 posted on 03/13/2002 3:36:27 PM PST by KC Burke
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To: cactmh
How about "ALL REVENUES COMBINED????" Thanks for INFO!!! thats nice too KNOW BTW!!!!!
80 posted on 03/13/2002 3:38:05 PM PST by Roger_W_Isom
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