In the late seventies and early eighties, I was with a major Canadian oil and gas company in Calgary. The company had grown extremely rapidly in the seventies. It could do no wrong and its CEO was an almost god like figure the its employees. However, it was too ambitious and got caught in a serious cash crunch just when oil prices collapsed and the Canadian government stopped funneling money into Beaufort Sea oil and gas exploration. To try to overcome its cash crunch, the company issued special shares that purported not to dilute the holdings of existing shareholders and strongly urged its employees to buy. They did because God and His company could do no wrong. I remember my secretary putting a lot of her life savings into the shares. I thought about it, but there was a very skeptical consultant working two floors below me who told me he wouldn't touch the shares with a ten foot pole. He was an accountant, and I figured that he knew something I didn't, so I stayed out. A few months later the company collapsed, and my secretary and ever so many other people lost a good part of their savings. A rather sad story which I feel must have a moral, but I can't quite figure out what it is. Perhaps it's that God doesn't always tell the truth? Perhaps an even higher god is needed that makes him do so.
Ed Weick 577 Melbourne Ave. Ottawa, ON, K2A 1W7 Phone (613) 728 4630 Fax (613) 728 9382 ----- Original Message ----- From: "Lawrence DeBivort" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]>; <[EMAIL PROTECTED]> Sent: Thursday, March 21, 2002 12:20 PM Subject: RE: Andersen > Andersen 'partners' being required to make investments in their own firm? > Why does this sound bizarre?????? And why does it sound like the candidates > are not being offered 'coveted' postions, but being conned into putting the > money into the pockets of more senior partners? A 'partnership' Ponzi > scheme? > > The promise of a 'partnership' is to then receive a portion of the profits > of the company. OK. But if one has to take out a loan to make the investment > required to become a partner, does this not mean that the profit > distribution is inferior to the investment? And is this not a > characteristic of a Ponzi scheme? > > I hope someone can explain this better to me than I can to myself.... > > Lawry, puzzled > > > > > -----Original Message----- > > From: [EMAIL PROTECTED] > > [mailto:[EMAIL PROTECTED]]On Behalf Of > > [EMAIL PROTECTED] > > Sent: Thursday, March 21, 2002 1:09 PM > > To: [EMAIL PROTECTED] > > Subject: Andersen > > > > > > > > Turbulence hits the corner offices. > > > > ==================================== > > > > > > Partners in Peril: > > For Most at Andersen, > > Enron Wasn't a Client, > > But Now It's a Problem > > --- > > Often Those at Top Sunk > > Their Savings Into Firm; > > Today, It's All in Doubt > > --- > > > > > > 03/21/2002 > > The Wall Street Journal > > Page A1 > > > > > > For Elana Mourtil, winning a partnership at Arthur Andersen was the > > American dream. Born in Iran, > > she moved with her mother and two brothers when she was 11 years old to > > Forest Hills, in the New > > York borough of Queens, where they lived on her mother's earnings as a > > tailor. She put herself > > through Queens College -- and helped her mother pay the mortgage -- by > > working in a local > > supermarket as a cashier and bookkeeper. > > > > Recruited on campus by Andersen, she worked her way up the > > ladder over the > > next 14 years. Her > > climb culminated last September, when Andersen offered her the chance to > > become a "participating > > partner," part of a coveted circle of senior employees who own equity > > stakes in the big accounting > > firm. > > > > Like most equity partners, Ms. Mourtil took out a loan from Andersen to > > pay the first installment in > > her mandatory annual investment in the firm. "What could go wrong?" asks > > the 36-year-old tax > > consultant. "The company has been here 89 years. When they offer you a > > chance at partnership, > > you jump at it. There's no such thing as due diligence." > > > > With her husband in law school, she figured she would pay back the loan > > with a hefty pay increase > > that came with the promotion. "Now," she says, "even if Arthur Andersen > > doesn't make it, I have > > to work for years to pay off this loan." > > > > Indicted by the federal government for shredding files > > connected with its > > work for Enron Corp., > > Arthur Andersen is in crisis and may not survive. Enron shareholders -- > > blaming Andersen for > > blessing the company's books for years -- are suing for hundreds of > > millions of dollars, and clients > > are fleeing. > > > > Federal prosecutors argue that they are punishing a wrongdoer that has > > admitted to shredding > > documents. The firm also pledged to stay out of trouble in the wake of > > another accounting-fraud > > case involving Waste Management Inc. But often when prosecutors > > get tough, > > innocent > > bystanders, in this case a lot of them, get hurt. > > > > Andersen's travails are a serious blow to all 85,000 of its employees > > around the world, but they > > pose an unusual trauma for its 4,700 partners, most of whom had > > nothing to > > do with Enron. Like all > > the Big Five accounting firms, Andersen requires its partners > > to put money > > into the firm each year > > -- generally between $50,000 and $250,000, depending on > > seniority, salary > > and other factors. A > > partner becomes an owner of the business, rewarded with a share of the > > profits. Generally, partners > > are expected to bring in $1.5 million to $2 million in new business > > annually. > > > > Normally it's a gold-plated investment that makes up a big portion of a > > partner's net worth. Many > > partners have been paying in for decades and have millions of dollars > > invested in Arthur > > Andersen. "Some people have put their life savings into the > > company," says > > Marc Andersen, a > > new partner in Washington. > > > > Now all that money is in peril, subject to the massive claims of Enron > > shareholders and regulators. > > Margi Quick, 47, became a tax partner in Los Angeles in September and > > still owes 99% of her loan > > from the firm. "A lot of people will have to declare bankruptcy if they > > don't find jobs in three > > months," she says. > > > > "There are going to be lifestyle adjustments for even the wealthiest," > > says Dan Broadhurst, 43, a > > partner who runs Andersen's financial-consulting practice in Chicago. He > > has five children and > > "they may not be able to go to the school they want to." He is the sole > > breadwinner and has cut > > back his life-insurance policy to save money. "Our retirement, > > all of our > > savings, is tied up in the > > firm. If it doesn't survive, l lose 20 years of savings." > > > > With their careers in jeopardy, Andersen employees are flooding > > the White > > House and the Justice > > Department with calls and e-mails to protest the government's > > prosecution > > of the firm. About 500 > > Andersen employees cheered outside a Houston courthouse yesterday, where > > the firm's legal team > > officially entered its not-guilty plea and won an early trial date. > > > > Today Andersen employees plan another rally on the Capitol steps in > > Washington. > > > > "Save our jobs," Tina Thomas, an Andersen executive assistant, said > > yesterday to the Rev. Jesse > > Jackson, who stood in the lobby of the firm's Chicago headquarters > > expressing solidarity with the > > firm's employees. A 34-year-old single parent, Ms. Thomas was teary-eyed > > as she told Mr. Jackson > > that "I have a new house and two kids. This is devastating." > > > > David Swinehart, a 32-year-old assistant director of campus > > recruiting in > > Chicago, sold his house in > > expectation of buying a new one and must move his family out by > > April 24. > > Now he fears that no > > bank will finance the purchase if he loses his job. Michelle Grant, a > > 31-year-old global sales > > manager, and her husband, who also works for Andersen, worry that their > > uncertain future could > > halt their plans of adopting a baby from Vietnam. Todd Richards, a > > 41-year-old senior manager who > > says his nine-year-old son needs open-heart surgery in June, > > worries about > > losing health coverage > > for his family. > > > > Andersen employee Fran Rossman defiantly wore an Andersen T-shirt to her > > Bally's gym in > > Chicago. A stranger told her, "`You are really brave to wear that > > T-shirt,'" says Ms. Rossman, 41. > > "On planes I hear people talking to each other saying that > > those Andersen > > people are going to get > > what they deserve. I get e-mail jokes about Andersen from colleagues at > > other firms. They are all > > prefaced with, `You probably won't find this funny . . . '." > > > > Elana Mourtil's path to Arthur Andersen began in an accounting class at > > Forest Hills High School. > > She was riveted by the numbers. She describes herself as > > conservative and > > wanted a life of > > stability. > > > > Arthur Andersen came on campus one day in 1987. The interview went well > > and the firm invited her > > for a daylong follow-up at an office on Avenue of the Americas in > > Manhattan. > > > > "I went home that day and told my mother that I'm going to work > > for Arthur > > Andersen," she says. > > "I was so impressed." At the time, it was part of the Big Eight, and > > accountants were still writing > > with pencil on paper spreadsheets. > > > > After she got married to someone she met at the supermarket, she put off > > having children, as she > > pulled all-nighters in her bid to become a partner. In 1998, > > she became a > > nonequity partner -- the > > only surviving member of the group of 50 New York tax specialists who > > joined Andersen the year > > she did. > > > > Joining the partnership at the member-firm level currently requires an > > investment of between > > $50,000 and $90,000. The investments are used to fund the costs > > of running > > the businesses and > > keep control of the firm in the hands of the partners. Auditing > > firms must > > be structured as private > > partnerships, because public companies cannot be audited by public > > companies under government > > rules. > > > > Last year, she was at a meeting in New Jersey with 30 other > > partners when > > the firm announced that > > some employees in the Houston office were involved in a massive > > shredding. > > Ms. Mourtil threw > > her forehead into her hands. "I couldn't believe anybody would do > > something so stupid," she says. > > > > She says she didn't know Enron was even a client until > > recently. "I didn't > > know these people. I had > > never heard the name David Duncan. I don't know what he was > > thinking." Mr. > > Duncan is the > > Houston partner who was fired after the shredding incident was > > disclosed. > > > > She called the Justice Department this week and left a message on a line > > set up to receive Andersen > > complaints: "I really wish you would withdraw the indictment. You are > > hurting 85,000 people." > > > > She says that colleagues are either gaining a lot of weight or > > losing it. > > She has lost 10 pounds -- > > and at 5 foot 5 weighs only 105 pounds now. > > > > Many partners have taken out lines of credit against their capital > > accounts. After the indictment, a > > California partner received a call from his bank demanding immediate > > payment of a loan the partner > > had taken out to care for his dying father-in-law. The partner > > expects to > > file for personal > > bankruptcy. > > > > Some partners have talked about a lawsuit against the federal > > government. > > Some newer partners > > suggest that they may ultimately have a fraud lawsuit against senior > > partners who may have known > > there was a time bomb. Ms. Mourtil doesn't think she has any > > recourse. "We > > are the end of the line, > > that's the thing. When things go bad, they sue the accountants. > > Who do we > > sue?" > > > > Another unanswered question: Whether the firm's pension plan is at risk. > > Lawyers for the firm are > > studying the issue, but can't give any hard answers yet. > > > > Adding to their travails, Andersen partners face a hard time > > finding jobs > > elsewhere. A noncompete > > clause that all partners are required to sign prohibits > > relationships even > > with former Andersen > > clients. That means that even if Andersen loses most of its clients, the > > noncompete clause would > > still apply, seriously handcuffing former partners. > > > > Later this week, or early next week, partners are expected to > > take a vote > > to decide whether to nullify > > the noncompete agreements. According to firm rules, it takes > > 100 partners > > to initiate a vote -- and > > typically two-thirds to change a rule. > > > > --- > > >
