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Andersen vs. Andersen
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December 18, 1997: 6:39 a.m. ET
Consultants want divorce from accountants, file for arbitrator
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NEW YORK (CNNfn) - The partners of Andersen Consulting, who voted Tuesday to split from accounting firm Arthur Andersen, filed a request that an arbitrator intervene to resolve the disputes related to the two organizations' coordinating body, Andersen Worldwide.
Citing "serious breaches of contract and irreconcilable differences," Andersen Consulting wants the arbitrator to excuse the firm from any further obligation to Arthur Andersen and Andersen Worldwide under the parties' operating agreements.
All of Andersen Consulting's member firms were represented at partnership meetings this week in San Francisco and they unanimously authorized the split-up and arbitration filing. Almost 90 percent of the firm's 1,124 partners attended the meetings in person and all voted in support of the action.
"Our intent is that arbitration will bring to an end our internal structural issues with Arthur Andersen and Andersen Worldwide," said George T. Shaheen, managing partner and CEO of Andersen Consulting.
The split-up and arbitration bring to light the thorny issue of how to deal with the common customer base that both firms share. Further exacerbating the situation is an annual transfer payment to Arthur Andersen from Andersen Consulting.
That payment, stipulated in the firms' operating agreements, is based on the premise of inter-firm cooperation. But, according to Andersen Consulting partners, the payment has, in effect, served to finance the continued expansion of Arthur Andersen's consulting business.
Arthur Andersen and Andersen Consulting were set up as two, stand-alone business units as part of a 1989 restructuring. Andersen Worldwide's primary mission was to provide coordination between the two units and ensure they continued to operate cooperatively and compatibly.
Since then, Arthur Andersen has clearly stated its strategic intent to build a large-scale consulting practice as a means to achieve growth targets not available through its core accounting business.
"Whether or not market forces have driven this strategy for Arthur Andersen, it does not excuse the breach of our formal internal agreements," Shaheen said.
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