"We won. We owe them nothing," says Anderson Consulting boss

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The arbitrator appointed by the International Chamber of Commerce has ruled in favor of Andersen Consulting in its disagreement with Andersen Worldwide and Arthur Andersen.

“This is a total win for Andersen Consulting,” said Joe Forehand, global managing partner of Andersen Consulting. “We won. It’s over. We have defeated Arthur Andersen’s preposterous claim that we owe them $14.5 billion. We owe them nothing beyond our contractual transfer payments, which end today. Now it is time to move on independently, continuing to focus on our clients, our people and our ambitious reinvention agenda.”

Dr Guillermo Gamba, the arbitrator, issued a 129-page document in which he found that “Claimants [Andersen Consulting] acted in good faith.”

Under ICC practice the arbitrator’s award is final and binding. “The arbitrator’s award, for all intents and purposes, can not be appealed,” said Barry Ostrager, of Simpson Thacher Bartlett, the attorneys for Andersen Consulting.

The arbitrator also rejected Arthur Andersen’s claim that Andersen Consulting is required to share the technology Andersen Consulting developed by itself. The arbitrator does require Andersen Consulting to surrender the name Andersen Consulting to Andersen Worldwide, effective December 31, 2000, because legal title to the name Andersen Consulting is held by Arthur Andersen.

The decision marks the end of a two-and-a-half year arbitration process that began when Andersen Consulting charged Arthur Andersen with violating the operating agreement that called for the two units to operate in completely separate areas. As part of a September 1989 restructuring, Arthur Andersen and Andersen Consulting were set up as two stand-alone business units chartered with providing separate and complementary services. Under the agreement, Arthur Andersen was to continue as a tax and audit accounting firm, while Andersen Consulting would provide management and technology consulting. The mission of Andersen Worldwide was to provide coordination between the two units and ensure they continued to operate cooperatively and compatibly.

In requesting arbitration in December 1997, Andersen Consulting charged the agreements among the firms had been seriously breached by Arthur Andersen’s expansion into business consulting areas such as technology integration, strategic business planning and business transformation. All are areas in which Andersen Consulting is a recognized leader.

Another major source of contention was the annual transfer payment to Arthur Andersen from the more successful Andersen Consulting. The payment, stipulated in the firms’ operating agreement, was based on the premise the two units would cooperate. But, in effect, the payment has served to finance the continued expansion of Arthur Andersen’s consulting business in competition with Andersen Consulting. In his ruling, the arbitrator upheld Andersen Consulting’s position on these key points.

“We believe a formal separation makes the most sense for both regulatory and sound business reasons,” said Forehand. “Since the two organizations were already operating as separate and distinct businesses, this formal separation was all but inevitable. Andersen Consulting now looks forward to moving into the future as a fully independent organization that continues to provide clients with the value they have come to expect. Finally, today’s ruling will help us continue to pursue the ‘reinvention’ of our company into one better able to help clients succeed in a global economy reshaped by eCommerce.”

Andersen Consulting is an $8.9 billion global management and technology consulting organization which works with clients from a wide range of industries to link their people, processes and technologies to their strategies. It has approximately 65,000 people in 48 countries.

Andersen Consulting

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