Posted on 03/21/2002 7:51:48 AM PST by Dave S
By IANTHE JEANNE DUGAN and DEVON SPURGEON Staff Reporters of THE WALL STREET JOURNAL
For Elana Mourtil, winning a partnership at Arthur Andersen was the American dream. Born in Iran, she moved with her mother and two brothers when she was 11 years old to Forest Hills, in the New York borough of Queens, where they lived on her mother's earnings as a tailor. She put herself through Queens College -- and helped her mother pay the mortgage -- by working in a local supermarket as a cashier and bookkeeper.
Recruited on campus by Andersen, she worked her way up the ladder over the next 14 years. Her climb culminated last September, when Andersen offered her the chance to become a "participating partner," part of a coveted circle of senior employees who own equity stakes in the big accounting firm.
Like most equity partners, Ms. Mourtil took out a loan from Andersen to pay the first installment in her mandatory annual investment in the firm. "What could go wrong?" asks the 36-year-old tax consultant. "The company has been here 89 years. When they offer you a chance at partnership, you jump at it. There's no such thing as due diligence."
With her husband in law school, she figured she would pay back the loan with a hefty pay increase that came with the promotion. "Now," she says, "even if Arthur Andersen doesn't make it, I have to work for years to pay off this loan."
Indicted by the federal government for shredding files connected with its work for Enron Corp., Arthur Andersen is in crisis and may not survive. Enron shareholders -- blaming Andersen for blessing the company's books for years -- are suing for hundreds of millions of dollars, and clients are fleeing.
Federal prosecutors argue that they are punishing a wrongdoer that has admitted to shredding documents. The firm also pledged to stay out of trouble in the wake of another accounting-fraud case involving Waste Management Inc. But often when prosecutors get tough, innocent bystanders, in this case a lot of them, get hurt.
Andersen's travails are a serious blow to all 85,000 of its employees around the world, but they pose an unusual trauma for its 4,700 partners, most of whom had nothing to do with Enron. Like all the Big Five accounting firms, Andersen requires its partners to put money into the firm each year -- generally between $50,000 and $250,000, depending on seniority, salary and other factors. A partner becomes an owner of the business, rewarded with a share of the profits. Generally, partners are expected to bring in $1.5 million to $2 million in new business annually.
Normally it's a gold-plated investment that makes up a big portion of a partner's net worth. Many partners have been paying in for decades and have millions of dollars invested in Arthur Andersen. "Some people have put their life savings into the company," says Marc Andersen, a new partner in Washington.
Now all that money is in peril, subject to the massive claims of Enron shareholders and regulators. Margi Quick, 47, became a tax partner in Los Angeles in September and still owes 99% of her loan from the firm. "A lot of people will have to declare bankruptcy if they don't find jobs in three months," she says.
"There are going to be lifestyle adjustments for even the wealthiest," says Dan Broadhurst, 43, a partner who runs Andersen's financial-consulting practice in Chicago. He has five children and "they may not be able to go to the school they want to." He is the sole breadwinner and has cut back his life-insurance policy to save money. "Our retirement, all of our savings, is tied up in the firm. If it doesn't survive, l lose 20 years of savings."
With their careers in jeopardy, Andersen employees are flooding the White House and the Justice Department with calls and e-mails to protest the government's prosecution of the firm. About 500 Andersen employees cheered outside a Houston courthouse Wednesday, where the firm's legal team officially entered its not-guilty plea and won an early trial date.
Thursday Andersen employees plan another rally on the Capitol steps in Washington.
"Save our jobs," Tina Thomas, an Andersen executive assistant, said Wednesday to the Rev. Jesse Jackson, who stood in the lobby of the firm's Chicago headquarters expressing solidarity with the firm's employees. A 34-year-old single parent, Ms. Thomas was teary-eyed as she told Mr. Jackson that "I have a new house and two kids. This is devastating."
David Swinehart, a 32-year-old assistant director of campus recruiting in Chicago, sold his house in expectation of buying a new one and must move his family out by April 24. Now he fears that no bank will finance the purchase if he loses his job. Michelle Grant, a 31-year-old global sales manager, and her husband, who also works for Andersen, worry that their uncertain future could halt their plans of adopting a baby from Vietnam. Todd Richards, a 41-year-old senior manager who says his nine-year-old son needs open-heart surgery in June, worries about losing health coverage for his family.
Defiant T-Shirt
Andersen employee Fran Rossman defiantly wore an Andersen T-shirt to her Bally's gym in Chicago. A stranger told her, " 'You are really brave to wear that T-shirt,' " says Ms. Rossman, 41. "On planes I hear people talking to each other saying that those Andersen people are going to get what they deserve. I get e-mail jokes about Andersen from colleagues at other firms. They are all prefaced with, 'You probably won't find this funny... '."
Elana Mourtil's path to Arthur Andersen began in an accounting class at Forest Hills High School. She was riveted by the numbers. She describes herself as conservative and wanted a life of stability.
Arthur Andersen came on campus one day in 1987. The interview went well and the firm invited her for a daylong follow-up at an office on Avenue of the Americas in Manhattan.
"I went home that day and told my mother that I'm going to work for Arthur Andersen," she says. "I was so impressed." At the time, it was part of the Big Eight, and accountants were still writing with pencil on paper spreadsheets.
After she got married to someone she met at the supermarket, she put off having children, as she pulled all-nighters in her bid to become a partner. In 1998, she became a nonequity partner -- the only surviving member of the group of 50 New York tax specialists who joined Andersen the year she did.
Joining the partnership at the member-firm level currently requires an investment of between $50,000 and $90,000. The investments are used to fund the costs of running the businesses and keep control of the firm in the hands of the partners. Auditing firms must be structured as private partnerships, because public companies cannot be audited by public companies under government rules.
Last year, she was at a meeting in New Jersey with 30 other partners when the firm announced that some employees in the Houston office were involved in a massive shredding. Ms. Mourtil threw her forehead into her hands. "I couldn't believe anybody would do something so stupid," she says.
She says she didn't know Enron was even a client until recently. "I didn't know these people. I had never heard the name David Duncan. I don't know what he was thinking." Mr. Duncan is the Houston partner who was fired after the shredding incident was disclosed.
She called the Justice Department this week and left a message on a line set up to receive Andersen complaints: "I really wish you would withdraw the indictment. You are hurting 85,000 people."
Losing Weight
She says that colleagues are either gaining a lot of weight or losing it. She has lost 10 pounds -- and at 5 foot 5 weighs only 105 pounds now.
Many partners have taken out lines of credit against their capital accounts. After the indictment, a California partner received a call from his bank demanding immediate payment of a loan the partner had taken out to care for his dying father-in-law. The partner expects to file for personal bankruptcy.
Some partners have talked about a lawsuit against the federal government. Some newer partners suggest that they may ultimately have a fraud lawsuit against senior partners who may have known there was a time bomb. Ms. Mourtil doesn't think she has any recourse. "We are the end of the line, that's the thing. When things go bad, they sue the accountants. Who do we sue?"
Another unanswered question: Whether the firm's pension plan is at risk. Lawyers for the firm are studying the issue, but can't give any hard answers yet.
Adding to their travails, Andersen partners face a hard time finding jobs elsewhere. A noncompete clause that all partners are required to sign prohibits relationships even with former Andersen clients. That means that even if Andersen loses most of its clients, the noncompete clause would still apply, seriously handcuffing former partners.
Later this week, or early next week, partners are expected to take a vote to decide whether to nullify the noncompete agreements. According to firm rules, it takes 100 partners to initiate a vote -- and typically two-thirds to change a rule.
Enron collapsed due to their firm. Global Crossing also died because of their negligence. Hundreds of millions were lost with Waste Management Scandal. All that, and I didnt even mention Lucent or some of Andersens other recent failures.
Maybe the partners feel its unfair that they should suffer for the sins of other partners, even senior management. However, what about the thousands of investors and employees at the companies they screwed.
Is is hard to imagine today, but not tomorrow, that a drug company would meet a similar fate from the government for some kind of screw-up.
When things were going well, none of these refused salary increases or bonus payments because it was the result of some other partners good work. "Oh, wait a second, I did not have anything to do with that XXXXX deal, send my bonus check back to accounting."
My pal who was laid off this month (by an unrelated firm) after 7 years and after star employee of the quarter awards, no prospects of immediate employment, should have it so good, face in the newspaper, sympathy of the nation and so on...
Andersen partners tried to screw America by helping Enron set up phony off-shore tax shelters, now these TRAITORS deserved to be SCREWED.
If the feds get real serious about their criminal investigations, indictments will fly and careers die.
Only an idiot management team would hire Arthur Andersen. Only a fool would not fire them based on currently known corruption from the several sham engagements in the news.
As an aside Andersen can go down the toilet as far as I'm concerned. They are staffed full of corporate droids and who seem to have the 'groupthink' mindset believing that belonging to something as large as Andersen (a mentality which subjugates individuality) is something great. Their arrogance is intolerable especially when coupled with the fact that they are no more than single cells in a very large organism.
Perhaps there is someone here who can explain to me what is so wonderful about working for a very large company. Is it the security? The 'being apart of something greater than yourself' (what's the matter, self-worth so low you have to belong to something which you think is better than yourself)? A sense of belonging (bloody hell you must be lonely if you get a sense of belonging in something as impersonal as a corporation)? A sense of power by association (sorry, but unless you're an executive, it's a sad illusion)? The desire to make a difference, but cannot do so alone (so why the hell choose accounting, does the world really need more accountants, go and work on curing a disease or something really useful like that)? Sorry, I just don't get it. In every person I have met who works for a large company, I ask myself of them, would they have made good concentration camp guards as I see inklings of the same 'give up the individuality' mentality in both.
</end of rant>
While Andersen may not have been blameless, it is shere nonsense to say that these two firms "collapsed" and "died" "because" of Andersen. That idiocy seems to suggest that Enron and Global Crossing did nothing wrong themselves. The indictment was way over the top. The government should have targeted those that were specifically involved in the wrong doing and not the entire company. A staff accountant in Seattle had nothing to do with this and shouldn't be punished.
If Andersen went belly up due to lost business because of it's shattered reputation, that's one thing. But this indictment seems to have been aimed at destroying the company, and that's wrong.
Oh, please, do you really think government action that was aimed at destroying a company is the exact opposite of the company profiting in good times? If Andersen fizzled in the marketplace, fine. Your argument would apply. Here it doesn't.
By the way, since you brought it up, exactly how much were those that WERE NOT involved in other partners' "good work" paid in bonuses and salary increases? Please include positions, dates, amounts, etc. I'm not prepared to assume anything.
Was the layoff due to the government indicting his company for the actions of less than 1% of the company (I don't have the exact figures, so we can say less than 10% if you want to)? Of was it because of a business downturn? If the latter, he isn't in the same boat as Andersen.
It deserves to die.
They all structure themselves such that the only people that can make partner are workaholic, lying, back stabbing, no-life having weasels. Should there be any surprise when they display a lack of ethics?
The lady discribed in the story is 1 of 50 who made partner. How many of those 50 did she step on during her 'way up'?
They all structure themselves such that the only people that can make partner are workaholic, lying, back stabbing, no-life having weasels. Should there be any surprise when they display a lack of ethics?
You're right, however, if Andersen gets convicted, it will send a message to the remaining four: Get your house in order and remember that the investing public is your client.
Jesse Jackson being involved in this should make it look awfully suspicous. LOL.
Cant help you there. I worked for two Fortune 500 companies before going into business for myself ten years ago. If people think there is more security, they are wrong. Not these days.
I would be more sympathetic if Andersen hadnt just signed an agreement with the SEC on Waste Management Case promising to be good from now on and obey the law. Then boom, Enron. Boon, Global Crosing. The SEC is also looking at Qwest, Tyco and others who use suspicous Andersen accounting schemes.
From whats been released so far, top management at Andersen, and at least four offices were involved in this one shreeding case. Dont know how many more where involved in cooking the books, both on the consulting and auditing sides of Andersen. Its a sick organization.
The lawsuits are going to wipe out Andersen regardless of what the government did. All the indictment has done is force Andersen and its partners, and employees to start facing reality. Their investment in Andersen is gone as well as their jobs. Regretful that some should lose their jobs but being accountants, dont they know that companies go under every year.
Not the least bit relevent, unless you can show me that the "innocent" employees knew or should have known that earnings, net income, etc. of the company they worked for were inflated by shennanigans.
Of course it did. Did Andersen create a corporate atmosphere where this sort of thing was winked at?
Well, if you can show me this and that it was truly widespread, I'll come a little closer to your side. But I know people who work for (and have worked for) Andersen and I've never gotten this impression. Further, none of this ever came out until Enron. With all the bad blood between Andersen Consulting (now Accenture) and AA, rumors of this sort of thing would have been going around for years.
I worked for AC (contract) and in my experience AC did have some internal control problems (e.g. paying twice or more on invoices, etc.). These practices cost the company money, but they weren't criminal.
Sure looks like it, given the other fiascos now emerging.
Which other ones? I only know of GC.
Second, it looks to me like the crisis facing Andersen isn't the result of the government indictment, it's the result of all their clients realizing that any dealings with Andersen are now suspect, justifiably or not, and they're bailing on them right and left.
To the extent that this is true, I think I've made clear that I don't have sympathy for these issues given a market place cause. But let's get real: Andersen is NOT a crimial enterprise like the Rose Law Firm.
But all along their unique selling proposition (to use a marketing term) was that they were posessed of absolute integrity and could be trusted absolutely.
I agree, but unless you can show that it was a corporate culture to be dishonest, I can't buy that the whole company was deserving of an indictment.
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