VideoIt looks like the Big Five may soon be the Big Four.
According to a report on FT.com, rival KPMG is putting in a bid for Arthur Andersen. If so, that would mean three of the Big Five firms are now competing over the besieged accountancy. In the past few days, Deloitte Touche Tohmatsu and Ernst & Young both entered the Andersen sweepstakes, according to published reports.
Andersen management hopes to make its decision within the next few days, according to FT.com.
But as CFO.com noted yesterday, the sale of Andersen is anything but a done deal. Reportedly, KPMG is mostly interested in Andersen's European operations. The FT.com story claims that advisers to Andersen have said the firm is only interested in selling the entire company—not bits and pieces.
And the New York Times reports that a deal with Deloitte Touche is faltering. Moreover, Andersen executives are apparently less comfortable with the fit of their firm with Ernst & Young.
If Andersen management is unable to find a taker for all of its operations, then each business unit will seek separate buyers, FT.com reported.
Any deal for Andersen—or its parts—will be complicated by legal concerns now hanging over the firm. According to the Times, each of the potential bidders yesterday contacted insurers about potential coverage for Andersen's liabilities. But sources close to the discussions claimed there was little chance that the insurers would be willing to provide such protection.
Andersen management is currently trying to strike an agreement with the Justice Department—before the government indicts the firm for obstruction of justice. Sources say the DOJ could indict Andersen by tomorrow.
Of course, crafting a deal with the Justice Department could be tricky stuff. If Andersen pleads guilty to having destroyed Enron-related audit documents—and Andersen management has already admitted that shredding occurred—the firm could be barred from auditing financial reports. This according to Reuters, citing people familiar with the firm's talks with the Justice Department. So Andersen management is apparently trying to secure assurances from the SEC that the firm could continue to practice before the agency—even if it enters a guilty plea with the DOJ.
According to SEC rules, an accountant or firm convicted of a felony or certain misdemeanors generally is barred from practicing before the agency, according to reports citing SEC spokeswoman Christi Harlan.
Heard on TheStreet.com
In a related story, Andersen dropped TheStreet.com as a client because the financial Web site refused to disavow negative comments made by Jim Cramer, co-founder and board member of that site.
In a March 5 meeting, Tom Duffy, a partner managing Andersen's account with TheStreet.com, asked CEO Tom Clarke to repudiate comments made by Cramer on CNBC's "America Now" program, according to an SEC filing.
When Clarke refused, Andersen notified TheStreet.com that it would resign as the company's auditor. In a letter dated March 5, Duffy wrote that Andersen's resignation stems from "the inability of our firm to continue to work with TheStreet.com in a cooperative manner." He added: "This has been directly caused by what we believe to be inappropriate public comments about our chief executive officer and our firm made by a member of your board of directors."
Having a scandal-ridden auditor walk away from your business—now there's a real hardship. According to a report on TheStreet.com, it has already hired Ernst & Young to replace Andersen.
In Other Accounting Controversies
Global Crossing reported that it has received a request from the U.S. House Energy and Commerce Committee for financial records and documents. Global Crossing management said it is reviewing the request and intends to provide the committee with the documents it needs.
"As we continue to move Global Crossing ahead, we look forward to working with the committee in connection with this request," said John Legere, chief executive officer of Global Crossing.
- eFunds Corp. said the SEC is conducting an informal inquiry of the provider of electronic payment technologies. This follows the company's March 4 announcement regarding the restatement of certain 2001 results relating to the acquisition of Access Cash. The SEC has requested information regarding the company's 2001 financial results.
"eFunds intends to cooperate fully with the SEC and to take all action necessary to enable the SEC to complete its review as expeditiously as possible," said Gus Blanchard, chairman and chief executive officer.
- Internet real-estate Web site Homestore.com Tuesday announced that it has completed an internal audit of past financial statements. The results of the audit? The company has determined that $36.4 million of revenue was improperly recorded during 2000.
Homestore management said it would reduce total 2000 revenues by $41.4 million because of the restatement. As a result, its net loss for the year was actually $146 million, not $115 million.
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