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Volcker Hits Hurdles in Bid to Rescue Andersen

April 19, 2002|JERRY HIRSCH | TIMES STAFF WRITER

Efforts by former Federal Reserve Chairman Paul A. Volcker to save accounting firm Arthur Andersen by transforming it into a smaller audit-oriented business have been stymied by dissent within the firm, according to people familiar with the situation.

Consulting partners, who would have to find new work under Volcker's plan, have withheld support, as have partners who have lost major clients and have little stake in a revived firm.

That has resulted in a series of conflicting signals. Although Andersen's leadership has said it supports Volcker's plan, key executives have either overtly or tacitly agreed to deals by individual offices to merge with other firms, people familiar with the situation say.

"It is clear that the passage of time has made all of this much more difficult," Volcker said Thursday. "When I announced a willingness to take a leading role at Andersen a month ago, I said we needed action on a variety of issues in days, not months."

Volcker offered to take control of Andersen on March 22, following the firm's criminal indictment. Andersen's partners approved the plan a week later, after the resignation of Joseph F. Berardino, the firm's chief executive.

Heading Volcker's list of actions was reaching an agreement with the Justice Department to suspend or defer its prosecution, an action that looks increasingly remote with the collapse of talks Thursday. A trial is scheduled to start May 6.

Andersen had hoped the Justice Department would defer prosecution of the firm for destroying documents sought in the probe of its accounting work for Enron Corp.

Volcker also sought a quick settlement of class-action lawsuits filed by Enron employees and investors against the firm. But serious talks on that front broke off Wednesday, and people familiar with the cases say they expect no movement until July.

Volcker, who did not take an active role in either the criminal or civil negotiations, said he still believes that his vision of an audit-oriented firm remains a worthy goal.

"Look at all the problems of which Arthur Andersen has become a poster child for the industry but the other firms have been far from exempt," he said. "The profession has a clear public responsibility and it needs to discharge that with a minimum of conflicts."

He plans to let the Andersen drama play out and see what's left to work with.

"There's no particular need for me to make a decision or set a deadline," Volcker said.

"A decision will make itself when we see if the firm is strong enough to go on."

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