Andersen’s OC Office: No Losses So Far, Tough Road Ahead
By CHRIS CZIBORR
Arthur Andersen LLP’s Orange County office hasn’t lost any clients in the wake of the Enron Corp. scandal but faces a critical test in coming weeks.
The firm, which has its OC office in Irvine, could see defections as companies weigh their yearly option to switch auditors or stay put. Most companies have until May to notify the Securities and Exchange Commission of any change.
“In Orange County we have not lost any audit or non-audit clients as a result of Enron,” said Michael Puntoriero, managing partner with Andersen’s Irvine office.
Andersen counts two of OC’s 22 largest public companies as clients: Irvine-based Exult Inc. and Newport Beach-based Health Care Property Investors Inc. The rest of OC’s big public companies are split among the other Big Five accounting firms.
OC officials at the other big accounting firms say they haven’t heard of anyone bolting from Andersen’s OC office so far. Because of the sensitivity of the issue, most declined to speak on the record. But several said Andersen’s OC office faces tough going, even though it had little to do with Enron.
“There are clouds on the horizon,” said one Big Five source. “Maybe there was a mistake made, and maybe there wasn’t,I don’t know. I think it’s important for clients to have total respect for their accountants’ integrity.”
“Enron is tainting Andersen in a significant way,” said another source. “It’s too big of a thing with too high a profile, especially for public companies concerned about their reputation and the profile of their Big Five accounting firm. If you were the CEO of a major public company and had to take a major vote on your shareholder auditors, and you had people who lost money on Enron in your shareholder group, it would be a pretty embarrassing position to be in.”
The Enron fallout also could make it hard for Andersen to retain its best people, sources said.
“If Andersen is going to be shrouded with litigation for a dozen years with a lot of unknowns, then a lot of good people and stars are going to be going to other pastures,” one source said.
But several sources said they haven’t heard of any fallout at OC’s Andersen office,either with employees or business,other than a shared public relations black eye.
“I know nothing official,I have not heard of anything going on with any of their clients or personnel issues or retention issues,” the source said. “We all win some and lose some clients,but the ones I know Andersen lost were already in process before Enron happened.”
But the normal course of clients shifting auditors could be accelerated for Andersen because of Enron, said Larry Parnell, a spokesman at Ernst & Young’s New York headquarters.
“But for Orange County or anywhere else, we’re not discussing prospects,but if a client hires us, we’ll announce it,” he said.
