NEW YORK (CNN/Money) -
Affiliates of Arthur Andersen in Hong Kong, China and Russia defected to join rival accounting firms Thursday, a week after Andersen was indicted in the United States for shredding documents related to its work for Enron Corp.
Andersen's Hong Kong and China affiliates agreed to join PricewaterhouseCoopers and the firm's Russian practice said it would combine with Ernst & Young.
Andersen failed in negotiations to merge or sell all or part of its business to rivals Ernst & Young and Deloitte & Touche last week. But Andersen has been inching closer to a merger with KPMG International this week in a transaction that would combine the firms' non-U.S. offices.
Andersen's Asia-Pacific member firms have come out in support of the KPMG merger, but the Hong Kong and China affiliates decided to cut their own deal with PwC.
A spokesman for Andersen Worldwide SC, the umbrella firm for the Andersen units, said that the Hong Kong and China partnerships cannot simply leave the network. "They have a very clear contractual obligation that must be met and there is also not an insignificant financial consequence of leaving the network," the spokesman said.
However, the defections will not affect Andersen's attempts to merge with KPMG International.
The merged firm will have 3,000 employees in Hong Kong and 3,000 in mainland China, a PricewaterhouseCoopers spokeswoman said.
The combinations of Andersen's Russian practices with Ernst & Young will be accomplished on an expedited time track and the combined firm will operate under the Ernst & Young name, the firm said.
The Justice Department indicted Chicago-based Andersen last week on one charge of obstructing justice, alleging the firm's employees shredded Enron-related documents after a federal investigation of the collapsed energy company was already underway. The firm has lost numerous audit clients this year due to its association with Enron, including Merck & Co. (MRK: Research, Estimates), Freddie Mac and Delta Airlines (DAL: Research, Estimates).
Enron filed the biggest bankruptcy in U.S. history on Dec. 2.
-- AP contributed to this report
|