Andersen Partners Weigh Losses From Indictment
By Dana Hedgpeth
Washington Post Staff Writer
Sunday, March 24, 2002; Page A01
Marc E. Andersen plopped his feet on his desk, leaned his 6-foot-4 frame back
in his chair and jauntily swung a golf putter in the air.
Arthur Andersen LLP can survive, he explained, because its ties with clients
run deep. In fact, they'd bombarded the firm with e-mails of
support.
To prove his point, Andersen, a partner in the Vienna office, punched in a phone
number and confidently switched on the speaker phone.
"It's Marc. I've got a reporter here. Would you be willing to talk to her about the great
work we do for you?"
After being transferred to several top executives, he got his response. He switched
from the speaker to the handset. "No, you won't?"
Andersen said. His feet hit the floor.
"Okay, I understand. Thanks." He braced his elbows on his knees and cradled
his head in his hands. "They don't want their name out there
on this," he sighed, slumping into the chair.
Last week was a struggle for Arthur Andersen's 27,000 U.S. employees, as
clients and overseas partners began to leave in greater numbers.
Andersen employees across the country pleaded with clients to keep the
faith, sent e-mail to lawmakers arguing that the government was
treating their firm unfairly and held rallies to take their case to the public and boost morale.
Marc Andersen, 37, who is not related to the founding family, acknowledged
at times that the efforts may do little to keep the firm alive. But
he and others said they had to try. They have been encouraged by
the private messages of support they have received, they said, but
discouraged by how tough the public fight has been.
As Marc Andersen called client after client last week, looking for at
least one who would publicly pat his firm on the back, the answer was
always the same. Arthur Andersen's reputation was so damaged that no company could risk it.
A Cut in Prestige
Not long ago, Arthur Andersen was part of the accounting elite,
and corporate clients were happy to be identified with the firm.
An audit by a Big Five firm, so named because they dominate the
accounting profession, was a kind of Good Housekeeping seal of approval,
especially if the company was hoping to raise money on Wall Street.
The audit work and even more lucrative consulting business resulted in
six-figure salaries for partners such as Andersen.
He saw the accounting firm, founded in 1913, as a stable place to build
a career until retirement, but the collapse of Enron Corp. changed
all that. Major accounting errors at Enron focused attention on Arthur
Andersen, the energy firm's auditor. On March 14, Andersen was
indicted for destroying Enron-related records. Prosecutors said
there was "widespread criminal conduct." Andersen said that the shredding
was done by a small group in the Houston office and complained that it was
unfair to indict the firm.
Last fall, before the Enron debacle, Marc Andersen's biggest task was to get
more exposure for the firm. "I was working on relaunching the
Arthur Andersen brand name to differentiate it from competitors," he said,
pointing to a white binder on his desk with the marketing plan.
Then he reached up and pulled off his bookshelf a three-inch-thick notebook
titled "Mid-Atlantic Market Circle Rapid Response Team."
He held it up as he declared - his voice rising slightly - that this notebook
was now occupying his time. In it were directives from partners
on how to deal with questions from the media and clients on the firm's troubles.
Andersen still has thousands of clients and billions of dollars worth of business.
There are audits to be done and tax forms to be completed.
Andersen staffers are trying to stay focused on the work they have.
But the wind has been knocked out of them. Former Federal Reserve
chairman Paul A. Volcker, who wants to make Andersen an audit-only
firm, proposed last week that he and other members of the firm's
oversight board take control of the company if it could get an agreement
with the government and those who had brought class-action suits.
Gone are the Andersen memos on competitors' business that they
should try to grab, upcoming seminars where they should make sales
pitches and deals they need to jump on. Last week they received
memos with titles such as, "The gloves are off and we're fighting back,"
advising people how to tell Andersen's side of the story.
So little business was coming in last week that when the Philadelphia
team secured a new $700,000 consulting contract, Marc Andersen's
face broke into a smile of relief. Another victory a few weeks earlier,
a new government defense-related contract, had been short-lived
because the General Services Administration suspended Andersen
from new government work. Even as he was celebrating, however, Marc
Andersen acknowledged that $700,000 is a small amount for the
mid-Atlantic region - Philadelphia to Richmond, which generally brings in
more than $30 million in new business annually.
Rallying, by the Book
After the indictment, employees decided they wanted to have a rally
to publicize what they saw as an injustice. So they planned a protest at
the U.S. Capitol - in a way that only accountants could.
The firm's eighth-floor boardroom in Vienna was converted into
"rally central." Dozens of staffers wandered around with leather binders
containing detailed spreadsheets and memos. One memo stated clearly
at the top what the rally's goal was: to put names and faces on the
Andersen firm. Spreadsheets meticulously listed details such as confirmed
and noncommitted speakers, times and dates they were
contacted and the precise time they would speak.
Groups were organized to deal with trash, organize cheerleading efforts,
order $25,000 in T-shirts with the words "I Am Arthur Andersen"
and arrange for buses to transport employees. A caterer was hired
to serve pastries and coffee to protesters at the Capitol.
There was a debate over dress code. Eventually it was agreed that
support staffers, such as secretaries, could wear jeans and orange
T-shirts. But auditors and partners, especially those who might see
clients that day, had to wear their usual suits or business attire under
their Andersen shirts.
Three employees made the trip to the exact rally spot and reported
to the others that it takes seven minutes to drive from Andersen's
Vienna office to the Metro, from which there are 16 subway stops
to Capital South.
At one meeting, a worker stood up and drew the Capitol on a board
to show the exact positions of the speakers' podium, the caterers' table
and the protesters. Someone from the Richmond office, listening to the
meeting on the phone, could not visualize it. "I need a map," she
said, and wondered whether someone could send her one by overnight mail.
"It's the big, round building on a Hill," Marc Andersen responded jokingly
into the phone. "It's not hidden."
As the accounting firm employees continued to fire off a series of
detailed questions to pin down exact times and logistics, Marc Andersen
advised them: "Be fluid."
When he got puzzled stares in response, he explained, "This is not
like a meeting with an agenda. We're going to have to roll with it."
Andersen, a former auditor who always wears monogrammed white
dress shirts and navy blue suits, served one year as operations
chairman of the Loudoun County Republican Party, organizing
volunteers and voter-registration drives. He had never participated in a
protest rally before, but he was pumped for this one.
"There's a passion for the firm. We're angry about what's happened with
the indictment and we're directing that anger," he said. "We're
taking the gloves off.
"You can lay down and choose to die, or fight. We're choosing to fight."
He then paused and said to himself, but out loud: "Is that a sound
byte? Sure, sounds good. Turn it into a talking point for later."
At 4:30 Thursday morning, Marc Andersen left his house wearing
pleated khaki pants, a white mock turtleneck, a blue fleece pullover with
Arthur Andersen printed on the front and brown Italian tasseled
loafers - his "rally wear," as he called it.
As the crowd began arriving at the rally site, a Capitol police officer
questioned the faxed permit application, which was hard to read. Marc
Andersen smoothed negotiations by giving the officer a bright orange Arthur
Andersen T-shirt.
He lined up the speakers - a Vietnamese woman who had been in the firm's
word processing department for 19 years, a single mom, a
wire-framed, clean-cut partner - and reminded them: "Be positive;
not negative. It's about putting a face with the Arthur Andersen name."
John Oliver, a partner in the audit division in Vienna, thought the past
few weeks had been "surreal." He broke down in tears as he stood in
the chilly morning air waiting for his chance to speak.
"Andersen was known as the stuffy white-collar firm whose benchmark
was quality and integrity," Oliver said later. He has been with the
firm for 14 years and a partner for three. "For someone to challenge
those qualities, that's what rips me apart. That's what we are all about."
After an hour of speeches, the hundreds of orange T-shirts cleared
the Capitol grounds. Surveying the empty concrete area in front of the
steps, Marc Andersen observed: "We're an orderly bunch.
We don't riot. We don't litter."
A Sense of Insecurity
Marc Andersen was never a rebel before this. Even as a child, he was
thinking of ways to make money, from lemonade stands to selling
seeds and metal Social Security cards. He was the captain of the
crew team at George Mason University, where he met his wife, Shaza, the
daughter of Lebanese immigrants.
She became chief operating officer at Century National Bank in
Washington. He worked as an auditor at CNA Financial Corp., and in sales
and marketing at several companies, including Xerox Corp. and SpaceWorks
Inc., a Rockville high-tech firm. The couple bought a $423,000
brick colonial in Sterling and joined the nearby golf course and
country club. They had two children, now 2 and 6 years old, and took
annual vacations to Disneyland.
In June 1999, he got two job offers: one from Andersen and the other, which
paid one-third more, from a high-tech firm. He turned down
the higher-paying job because he liked the Andersen culture and figured it
was where he would retire. He sold consulting services, and in
September, when Andersen made him a partner, he put up $70,000
of his own money to buy a share of the firm. In charge of sales and
marketing from Philadelphia to Florida and responsible for generating
new revenue in the mid-Atlantic area, Andersen pushed his staff to
beat timetables and win new business. He came home energized
every night - until the Enron-related problems.
Now Andersen tries to keep some semblance of his old routine,
holding his 8:30 a.m. Tuesday meetings with his sales team to hear the
latest developments. But the meetings are short. And most of the time
is spent discussing rumors of mergers and the firm's legal problems,
not new business. Some Andersen partners and salespeople have
given up hope of winning much new business.
"Up until this thing broke in November, Andersen was a highly
respected name," said John A. Klaffky, an Andersen partner in its business
consulting practice. "Literally overnight, we went from that position
to being persona non grata," he said. "You're almost poison.
"We always believed it was going to be a temporary problem
that would eventually go away. The thought was that once we get the Andersen
story out there, we will lose that status of being too hot to handle and
our brand will be restored," Klaffky said. "That was the viable strategy
until the indictment."
Now that the rally is over, Marc Andersen is pushing lawmakers
for help. On Friday he was trying to set up meetings with Virginia
Republicans Rep. Frank R. Wolf and Sen. George Allen.
That afternoon, he was surprised by Volcker's proposal, which might save Arthur
Andersen but force Marc Andersen to leave the firm. Some critics of the
accounting industry say that when accounting firms sell consulting
services to audit clients, which is Marc Andersen's job, that can keep
them from being aggressive, independent auditors.
Marc Andersen isn't sure what he would do if the consulting practice
were spun off. He could market auditing services to new clients to stay
with Arthur Andersen.
"That's one of the questions to be answered," he said. "Which of those
places do I want to go to? I don't know now."
It's hard for Shaza to watch her husband put in 60 hours or more a
week and know the firm might not be around. "Sure, there are times
when I want to tell him to abandon ship. He's working so hard, and
you don't know what the outcome is going to be."
© 2002 The Washington Post Company |
