NEW YORK, March 29 (UPI) -- Former Federal Reserve chairman Paul A. Volcker Friday said he believes Arthur Andersen LLP can survive as an auditing business if it splits off tax and consulting services to remove any possible conflict of interest.
Andersen's top partners on Thursday agreed to the long-shot rescue plan after senior management held a five-hour closed-circuit videoconference to discuss restructuring in the wake of the federal indictment against the firm for shredding of tons of Enron-related documents.
Volcker's plan would replace current executives with an independent seven-member board but is dependent on the Justice Department dropping charges against the beleaguered firm for committing obstruction of justice at its offices in Houston, Chicago, Portland, Ore. and London.
"We have every reason to believe that this firm can be viable and over a period of time. We think it can be attractive to clients as an assured, non-conflicted place of quality audit advice," Volcker told a news conference.
Under the Volcker plan, the embattled accounting giant would sell off about three-quarters of the company, leaving only the audit division with the Arthur Andersen name. About 40 percent of the firm's 28,000 U.S. employees work in the auditing division. Job cuts would be necessary because the leanerm, more focused company would not offer tax advice, consulting or financial services to its clients.
C.E. Andrews, head of Andersen's audit division, was named to oversee restructuring until a new governing board is in place.
"Will be about quality. We will be focused." Andrews said. "I think about it in many respects as returning to the roots of Arthur Andersen."
The 89-year-old Chicago-based firm started as an auditor and grew into one of the Big Five accounting giants.
"We are committed to building the audit firm under the leadership and recommendations of Mr. Volcker," U.S. Managing Partner Larry Gorrell said in a statement. "This course of action will require us to address those non-audit portions of our business that are not consistent with that plan -- the tax, business consulting, and corporate finance practices."
The Justice Department has given no indication that the government would be willing to drop the two-week-old indictment to save Andersen from its legal problems and prosecutors have impaneled a new grand jury to investigate Andersen's relationship to bankrupt Enron.
"I'm not here to say the situation is easy," said Volcker, who was brought in three months ago to suggest changes at Andersen as the Enron scandal deepened. "It is a difficult situation, but I think we see some progress."
