After Enron, firm taking back Andersen name
Washington Post
September 2, 2014
Arthur Andersen - Tribune file photo
A painting of Arthur Anderson in a hallway of the building named for him at the Kellogg School of Management at Northwestern University in Evanstonn where he was on the faculty.
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WASHINGTON — The name Arthur Andersen, disgraced in the Enron scandal, took one of the most dramatic falls in U.S. corporate history — but it might be poised to make a comeback in a risky rebranding led by former employees.
In early 2001, the accounting firm was one of the nation's largest and most prosperous, regarded as a gold standard of integrity in the financial world. Within a year, it was decimated and marked as a corporate fraud after the mass shredding of documents during the Enron collapse.
Some of the 85,000 Andersen workers who lost their jobs in the aftermath launched a new firm, with a new name, attempting to distance themselves from the namesake's tarnished auditing practice and the fallout of Enron's vaporized billions of dollars in investor stock.
WTAS has grown into an international tax giant, and its leaders have some unexpected news: The firm will reclaim the old name as AndersenTax.
Chief executive Mark Vorsatz said he knows how crazy the move sounds, but he pointed to company-commissioned research that found that Andersen's name is still held in high esteem.
It is a high-stakes bet that time will heal wounds from a worldwide financial scandal. And a miscalculation could critically damage the reputation the firm has fought fiercely to restore. The multimillion-dollar question: Just how toxic can an international brand become — and still be saved?
A Wall Street golden child for its unbelievable results as a Houston energy trader, Enron was exposed as a "mind-numbingly complex" spider web of financial maneuvering and hidden debts. As the firm's auditor, it was Andersen's job to ensure that the firm told investors the truth in its financial reports. Yet Andersen also benefited handsomely from Enron's millions in the form of consulting services. Some Andersen executives even took jobs on Enron's payroll.
In 2001, while investigators probed Enron's accounting issues, a veteran Andersen auditor ordered a marathon of mass document shredding, destroying thousands of records that could have potentially served as evidence. In 2002, the Justice Department indicted the firm for obstruction of justice, the first criminal charge in history for a major accounting firm. The U.S. Supreme Court later tossed the conviction, and, in 2005, the Justice Department dropped its prosecution, a move an Andersen spokesman at the time said would help remove "an unjustified cloud" over the firm's integrity. The damage to the brand was done.
As Andersen's clients scattered, the former titan fell apart, with staffers defecting to rivals in what was then known as the Big Five.
Led by Vorsatz, an Andersen partner who had served on the firm's family wealth planning team for two decades, two dozen Andersen partners launched WTAS as a tax-only firm, swearing off the lucrative audit business.
The San Francisco-based firm is now one of the world's largest independent tax firms, employing hundreds of workers worldwide and posting more than $145 million in revenue last year. And it has grown quickly, opening its first international branch in Zurich last summer and nine more across Europe since then.
When the firm ran into a trademark conflict with a German company, WTS, Vorsatz opened himself up to the unthinkable: going back to the Andersen brand. He found support from internal committees and began sharing the idea with Andersen alumni, some of whom laughed, were baffled or froze with disbelief. One, he said, cried.
"People are going to throw rocks at you," Vorsatz said he told partners in the firm. "They're going to say, 'You were a sinner. You're all bad people.' . . . But we had a strong culture, too."
The name change's success will depend heavily on how much of Andersen's pre-Enron repute has survived. Founded in 1913, Andersen had long been considered the Marine Corps of American accounting, and for decades recruits were run through a sprawling training and culture-building campus in the Chicago suburb of St. Charles. Even long-separated alumni, Vorsatz said, were reverent to the brand in a way most companies can only dream of.
"We worked hard," a former employee said at a 2012 reunion of one of the firm's alumni groups. "We worked like demons."
Firm executives were emboldened by reputation surveys they commissioned with hundreds of tax-service professionals in the United States, Europe and China, which found that after 12 years out of business, the Andersen name had a better reputation than all but three of the largest accounting firms. Even the WTAS name polled lower, lost in an alphabet soup of other acronym firms such as CBIZ, BDO and KPMG.
Although many respondents said they saw how Andersen could be seen as "a tarnished brand," more viewed the firm as "high quality" and "ethical." The surprising results convinced executives that the massive rebranding was worth the risk. Enron's collapse was an unavoidable element of its story, so why not own it, including the name, which for many still held a certain cachet?
The firm has filed for Andersen trademarks across North America, Europe and Asia, including for a cache of potential expansion opportunities under the corporate umbrella AndersenGlobal. It will shake off the WTAS name — it sounds like a "radio station," Vorsatz said — but will remain tax-only, forsaking the potential for millions of dollars in audit fees.
In a letter sent Tuesday to clients, Vorsatz wrote that he planned to "reclaim [Andersen's] legacy of values" in a manner that would be "independent, transparent and conflict-free." He also underscored the potential dangers of moving swiftly into an old minefield.
"I recognize that discussions about Enron may resurface as a result of this announcement," he wrote. "We recognize that [our] actions are a bold move. We look forward to continuing to work with you as AndersenTax, and I hope you share our excitement."
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