Andersen Auditors OK Volcker Plan

Leaders of Andersen’s U.S. auditing practice have told former Federal Reserve Chairman Paul A. Volcker that they will accept his restructuring plan, potentially a key step in Andersen’s scramble to keep at least some portion of the firm intact, sources said Wednesday.

But with the company’s troubles mounting, Andersen is expected to announce layoffs as early as next week, a source said.

Separately, Andersen is in advancing talks to sell its U.S. tax practice to another Big Five accounting firm, with Deloitte Touche Tohmatsu appearing to be the most likely buyer, according to a source close to the matter.

In an ambitious reform plan unveiled Friday, Volcker proposed revamping Andersen by, among other things, splitting its auditing and consulting businesses and overhauling its top management. But the former Fed chairman said his proposal depended on the consent of Andersen partners and an agreement by the Justice Department to dismiss or suspend its prosecution of the firm.

At the time, Andersen labeled the proposal “positive and constructive,” but Volcker and others have asked for a more definitive response. In recent days, Volcker, who was appointed last month to head a special Andersen oversight board, indicated that he would abandon the plan if partners did not embrace his idea.

Volcker could not be reached for comment Wednesday, and Andersen spokesman Charlie Leonard would not comment.

Company officials said they did not have details on layoffs.

“No final decisions on reductions in U.S. personnel have been made. Given the decision by the Justice Department to indict the entire 28,000-person firm, it is inevitable that some reductions in work force will have to be made in the coming months,” the company said in a statement.

All U.S. partners are scheduled to participate in a lengthy teleconference today to help chart the firm’s immediate future

Also this week, top audit partners plan to meet to officially affirm their support, and to begin implementing Volcker’s proposed changes, a source said.

Volcker wants the Justice Department to dismiss or suspend criminal prosecution on an obstruction of justice charge for Andersen’s shredding of documents related to its work for Enron Corp. Andersen has acknowledged destroying documents after Enron disclosed that the Securities and Exchange Commission was examining its off-the-books partnerships.

Andersen denies criminal wrongdoing and is scheduled to go to trial May 6 in Houston.

A Justice Department spokesman declined to comment.

In a move that some experts interpreted as an initial sign of acquiescence toward Volcker’s plan, Andersen Chief Executive Joseph F. Berardino resigned Tuesday. Andersen’s 18-member board of partners will meet Tuesday in London to consider a possible successor, Leonard said.

Volcker’s proposal has stirred considerable controversy within Andersen, with different sets of partners adopting widely divergent stances depending on how it affects them, sources have said.

Some audit partners have latched on to the plan as the best way to salvage the firm.

“The plan is a great idea,” said John Oliver, an audit partner at Andersen’s Vienna, Va., office. “It would be the best opportunity to retain jobs at Andersen.”

However, many tax and consulting partners oppose Volcker’s proposal, saying it could cripple their livelihoods.

“It doesn’t make any sense. It puts me out of my job and my career,” said a tax partner who specializes in international tax work. If the tax group were broken off into an independent unit, as the Volcker plan seems to envision, it would be deprived of access to foreign offices, thus preventing global tax experts from doing their job, the partner said.

Andersen has lost about 60 major clients since December.