Paul Volcker, the former Federal Reserve chairman who was brought in to save Arthur Andersen LLP, said he would abandon the accounting firm if its partners don't soon support his rescue plan.
"If your own constituency is not there, you've got nothing to work on," Volcker said in an interview Tuesday, hours before Andersen Chief Executive Joseph Berardino said he would resign.
Volcker is pressing Andersen's 1,600 US partners this week to agree to reconstitute the fifth-largest accounting firm as an auditing business divorced from consulting and tax services. He proposed the change, along with a management takeover, to help persuade the Justice Department to drop an obstruction of justice indictment that threatens the firm's survival.
PHOTO: AFP
"They've got to get together and decide who their leadership is going to be and decide with more forcefulness," Volcker said. "The partnership is confused, dispirited, some of them anyway. It is very difficult for them to come to a decision about anything."
Andersen has lost more than 70 US audit clients this year after former audit client Enron Corp admitted overstating revenue and filed the largest US bankruptcy. Andersen was indicted because some staff members destroyed documents related to its Enron auditing after the Securities and Exchange Commission began an investigation. The firm has denied criminal responsibility.
Berardino, a 30-year Andersen employee, said in a statement last night that he was stepping down because he had "concluded that my continuing as worldwide CEO could become an impediment to the efforts of Mr. Volcker and many others to save the US firm. The fact is that the improper shredding of documents took place on my watch."
PHOTO: AP
Andersen's board of partners will meet in London in the next few days to choose an interim CEO and begin finding a permanent replacement, spokesman David Tabolt said. Andersen also replaced Terry Hatchett as North American country manager, Tabolt said.
Volcker on Friday offered to lead a seven-member board that would assume control of Andersen, which employs 85,000 worldwide, if the US government drops the criminal charge, Enron shareholders and creditors settle their lawsuits against the firm and Andersen partners endorse his plan.
"There's a feeling that people are not together," Volcker said. "They've got to get together and they've got do it pretty quickly."
Some Andersen staff members said support for Volcker's plan is splintered by competing interests among partners. They said some partners may prefer to seek positions at other firms instead of gambling that Andersen will survive, perhaps as a much smaller company. They also said consulting partners may lose out if the firm focuses on auditing.
"There is a bloc of partners who want to help this firm survive and a large part of them are in the auditing business," said Jack Gelman, a consulting partner. "There are other partners in the firm who are not sure the firm can continue, or if it does, if it will be big enough to provide them a living."
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