Partners Say Big Accounting Firm May Fold : Services: Laventhol & Horwath has been hurt by the poor economy and malpractice suits. Some of its offices may become independent; some may affiliate with other firms.
Laventhol & Horwath, the nation’s seventh-largest accounting firm, may be dissolved or put into bankruptcy, with some of its offices--including its Orange County operation--forming independent partnerships or affiliating with other firms, partners said Monday.
The firm, whose legal and financial troubles have mounted in recent months, declined to comment.
But its 350 or so partners met over the weekend in Houston to decide the Philadelphia firm’s fate. Options reportedly included dissolution, filing for bankruptcy court protection from creditors and shrinking the firm to a few core offices.
“My understanding is they’re taking whatever actions are necessary to dissolve the firm,” said Richard Pimentel, partner in charge of the San Francisco office, who attended the Houston meeting. No date for the dissolution was given, but a clear message was sent “to go about our lives,” he said.
Other partners and former partners reached Monday echoed Pimentel. Orange County Managing Partner Richard Carpe said he expects the company to file a Chapter 11 bankruptcy petition by month’s end. He doesn’t expect it to survive as a national firm.
“Hmm. I have no information on that,” spokesman Thomas Derr said when asked if the firm is shutting down.
The company released a brief statement by Chief Executive Robert N. Levine, saying that partners had discussed “a number of scenarios regarding both the short-term and long-term future of Laventhol & Horwath.”
“At this time, we cannot comment on any of the business plans discussed at the meeting,” the statement said. “The partners and staff remain dedicated to providing the highest quality of professional service to their clients.”
In an angry statement issued last week, the company acknowledged that “of course, L&H; has problems. Every single accounting firm in the nation has severe problems--many caused by the ‘sue the accountants; they have deep pockets’ mentality so prevalent today. The soft economy has also hurt the profession, L&H; and hundreds of other companies worldwide.”
Laventhol & Horwath, with 50 offices and 3,400 employees, has been hit hard by litigation. The suits, including a multimillion-dollar one arising from the company’s audit of imprisoned evangelist Jim Bakker’s PTL ministry, have alleged poor accounting and consulting work.
The company has been laying off employees. In October, it cut wages for those that remained by 10%--a reduction that it said would last only three months.
In was unclear Monday if pension plans for employees are secure. Some partners said basic pensions are fully insured but that an added amount for partners will be lost. One former partner said pensions were being funded by current and future earnings.
The 40-employee Orange County office of Laventhol & Horwath in Costa Mesa will become independent and will be renamed Carpe, Wachs, Kipper & Davis, after the four partners, Carpe said. Besides Carpe, 42, who will be president and chief executive, the other partners are Brian Wachs, 39, Richard Kipper, 48, and Charles Davis, 38.
“It was our intention to liberate the local office from the national firm and take whatever steps were necessary to see it happen as quickly as possible,” Carpe said.
About 40 of the 50 offices nationwide probably will become independent practices, he said.
Carpe said business is growing at the Costa Mesa office, with projected earnings of $4.5 million for the fiscal year ending Jan. 31, up from $4 million in earnings for the previous year. The office employs 34 accountants, many of whom have expressed a commitment to stay, Carpe said.
“The local market has enabled our audit practice to grow 30% in the current year despite the bad publicity” about the litigation embroiling other Laventhol & Horwath offices, he said. “We have no lawsuits of any kind and have been sitting here building a practice.”
Carpe said he anticipates that the new accounting firm will retain the bulk of its clients. He said while the office has a general accounting business base, it is “big in real estate and leisure time, including hotels and restaurants, and very big in health care.”
In Los Angeles, the Century City office will reorganize into three firms serving the entertainment industry, said partner George Savitsky. They will be Savitsky, Satin & Geibelson, an entertainment business management corporation; Satin & Lever, a music industry accounting firm, and Sills & Adelmann, a film and television accounting firm.
He said he is “90% certain” that the mid-Wilshire office in Los Angeles, which did accounting and consulting work for various industries, will fold. On Monday, only an answering machine greeted calls to the mid-Wilshire office.
Pimentel said the 70-employee San Francisco office will continue to operate, perhaps by affiliating with another accounting firm.
Officials at the San Diego offices could not be reached for comment.
Laventhol & Horwath specializes in audit and consulting work for the hotel, entertainment, real estate and health-care industries. The company had about $350 million in revenue last year.
Times staff writer Leslie Berkman contributed to this story.
