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Andersen loses last big client
CHICAGO - Fast-shrinking Arthur Andersen LLP suffered two more setbacks yesterday with announcements that 25 newly departed partners and 250 other professionals have formed a consulting group and that the last of Andersen's 15 biggest public audit clients has departed.
The departures are just the latest involving its U.S. partners, which once numbered 1,700. Many of them have left during Andersen's rapid decline since the government filed an obstruction of justice charge against the firm in March for destroying documents of its former client, Enron Corp.
Aquila Inc., a $37 billion-a-year energy and risk management company, fled Andersen yesterday for rival KPMG LLP.
After the departures late last week of Costco Wholesale Corp. and UnitedHealth Group Inc., that leaves Andersen with none of its 15 biggest publicly traded clients from last year, based on a list by the industry publication Who Audits America.
Meanwhile, in Houston, Andersen has been fined $250,000 for inflating the stock value of local supermarket chain Randalls Food Markets Inc., a subsidiary of Safeway Inc., and for failing to follow accounting rules in tracking the inventory of another company.
The Texas State Board of Public Accountancy also reprimanded Andersen and a former partner in the cases, which date to 1993 and 1989.
In Chicago, newly founded Huron Consulting Group said it had recruited the largest group of Andersen professionals yet and has landed senior executives from other top accounting firms as it opened a headquarters in the Windy City and other offices in Boston, Houston, New York and San Francisco.
Huron said it already is working with more than 75 clients brought over from Andersen. Huron plans to expand quickly both in the United States and internationally.
The 25 former Andersen partners make up a majority of Huron's 34 directors.
Chicago-based Andersen reached agreements for the formal release of the Andersen employees May 10, said Huron President Gary Holdren, a former partner in Andersen's financial and economic consulting business. Huron opened for business three days later.
Rival Big Five firms have acquired significant numbers of Andersen partners in buying some of its business units. Another deal was announced yesterday when Ernst & Young International said five partners were among the 46 Atlanta-based Andersen employees it had agreed to hire.
Partners from Andersen's overseas affiliates also have bolted the troubled firm, as have most companies with multinational operations.
The latest exodus of at least 10 clients yesterday pushed the total number of Andersen client defections this year to 510, according to the industry monitor Auditor+Trak - nearly a quarter of the 2,300 companies whose books it audited last year.
In the Randalls case, Texas regulators fined Andersen $125,000 over its 1993 appraisal and audit for the chain.
Andersen was dishonest, fraudulent or grossly negligent when it appraised company stock in an employee benefit plan at $21 a share, the board found.
The board said financial information and facts available to Andersen didn't support the stock price.
The other $125,000 fine and reprimand was related to a 1989 audit of World Cycle Corp., which failed in 1990. The board found Andersen didn't follow accounting rules when it checked inventories in 22 World Cycle stores and a warehouse, and improperly took the word of the company that similar inventories were kept in 56 other stores.
Andersen spokesman Patrick Dorton said the firm settled the "very minor litigation ... because it was a small distraction."