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Decision splits Andersen
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August 7, 2000: 12:19 p.m. ET
Andersen Consulting arm wins divorce it sought from Arthur Andersen
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NEW YORK (CNNfn) - Andersen Consulting won the divorce it was seeking from its Arthur Andersen roots, splitting the two high-powered business advisors into separate partnerships.
The consulting firm lost its attempt to win some damages from its former parent, and it must give up the use of "Andersen" in its name. But its executives portrayed an arbitrator's decision as a total victory in its three-year battle.
"When the decision came from Paris at about five this morning, we gave a loud yell," Joe Forehand, chief executive of Andersen Consulting, said in a conference call with reporters and analysts Monday. "It took a few minutes to peel us off the ceiling."
Officials of Arthur Andersen, the world's largest accounting firm, also tried to portray the decision as a victory, pointing out that it was not ordered to pay damages, and that it won the return of some payments from Andersen Consulting that had been held in escrow. But at the same time it gave its reaction to the decision, it announced the resignation of Jim Wadia, who as its worldwide managing partner led the firm.
The consulting division has been faster growing than the Arthur Andersen unit, one of the world's leading accounting firms. The two were set up as separate entities owned by their own partners through a 1989 reorganization, although they remained linked under an umbrella company known as Andersen Worldwide.
Under that arrangement, profit sharing between the two firms resulted in payments by Andersen Consulting to Arthur Andersen in all but one of the years since 1989.
 Andersen Consulting filed for arbitration to end that arrangement in 1997, arguing that Arthur Andersen's move into the consulting business violated the agreement. Arthur Andersen's officials argued that the consulting arm owed them billions if its partners wanted out of the Andersen Worldwide agreement.
Hearings by the International Chamber of Commerce ended last November, and the ICC ruled Monday in favor of Andersen Consulting.
"This is a total win for Andersen Consulting" Forehand said. "We won. It's over. We have defeated Arthur Andersen's preposterous claim that we owe them $14.5 billion. We owe them nothing beyond our contractual transfer payments, which end today."
As part of its arbitration, Anderson Consulting had sought the return of $1.2 billion in profit-sharing payments, and that was rejected by the arbitrator. But Forehand said the decision saved his firm billions of dollars compared with a settlement offer it had made to Arthur Andersen that had been rejected.
"This costs us much less by an order of magnitude than what we were willing to settle for prior to arbitration," he said.
Under the ruling, Andersen Consulting will have to forfeit its current name as of Dec. 31. Forehand said the company already had been looking at that move, and that the name change probably will cost in the neighborhood of $100 million.
"This is a small price to pay," he said. "We'll handle it in stride. Market conditions are such that it was probably appropriate to look at changing our name anyway."
Arthur Andersen's statement did not address the parts of the ruling that went against it.
"Certainly it is a disappointment," spokeswoman Julie Hallinan said. "But we're pleased that the arbitrator ruled we did not breach our contractual obligations.
Wadia's departure is immediate. It was termed an early retirement, even though Wadia, 52, is younger than the man who will take his place, at least on an interim basis -- Louis Salvatore, 53, the head of the firm's New York office and the chairman of its oversight committee.
"Given the realization that, in one form or another, both firms would go our separate ways, we had already put in place a business strategy that enables Arthur Andersen to provide a broad array of services on a fully-integrated basis to our clients," Salvatore said. 
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