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Saturday, 23 March, 2002, 00:55 GMT
Andersen salvage plan set out
Andersen employees' demonstration in Houston
Andersen staff protest: 'I am the real Andersen'
The man charged with overseeing troubled accounting giant Andersen's future has outlined a plan for a new board to manage the firm.

In return, ex-Federal Reserve chairman Paul Volcker wants the US Justice Department to drop criminal charges against Andersen.

Andersen was indicted last week of obstructing justice in an investigation into the collapse of its client Enron, which became the biggest corporate bankruptcy in US history late last year.

Since the indictment, Andersen has struggled to retain clients and its non-US businesses have agreed mergers with rival firms.

Survival trade-off

Andersen appointed Mr Volcker in February to come up with suggestions to restore its reputation.

Under Mr Volcker's proposals, he would head a new seven-person board to run Andersen.

As part of the package, he wants a ceiling on Andersen's financial liability in law suits over Enron's demise, an end to the US Securities and Exchange Commission inquiry into Andersen's auditing of Enron and a commitment from Andersen senior partners to stay with the firm.

"All that has to come together to make this initiative viable and successful", he said.

He said the new board would be willing to sack senior staff: "There will no doubt be changes at the top."

However, he declined to comment on whether Andersen chief executive Joseph Berardino would be among those to go.

In a statement, Andersen said implementation of the proposals would raise "a question of whether the 'new' firm should properly be subject to prosecution for the acts of its predecessor".

Chicago protests

Earlier on Friday several thousand Andersen employees from its Chicago head office marched through the city to defend the firm's reputation. Protestors wore lapel buttons that said "I am the real Andersen".

Andersen also said merger talks between its non-US operations and KPMG will continue, despite the news that some of its practices are seeking tie-ups with other firms.

Andersen's troubles
Charged with obstructing justice after "tons" of Enron-related documents shredded
Sacked partner in charge of Enron audit, denied corporate responsibility, vowed to defend itself "vigorously" against charges
If found guilty, faces ban from auditing listed firms, effectively putting it out of business
Clients including Merck, Sara Lee, FedEx and Delta drop Andersen as auditor

"Their decision will have no impact on the continuing effort to substantially complete transactions between Andersen Worldwide's non-US member firms and KPMG," the company said in a statement.

On Friday, Andersen's New Zealand operation said it would merge with Ernst and Young.

The same partner was chosen by Andersen's practice in Russia a day earlier, while the Hong Kong and China affiliates of Andersen have said they plan to merge with rival PricewaterhouseCoopers (PwC).

Andersen's 900 employees in Hong Kong and 1,400 in mainland China will join PwC, and it is hoped the operations of the two firms will be combined without any layoffs.

Yvonne Chan, marketing manager of Andersen in Hong Kong, said that "some colleagues were pretty emotional" that the Andersen name will vanish in China as a result of the merger.

The news of the mergers came just hours after the US district court in Houston set 6 May as a trial date for the US arm of the crisis-hit firm, which is charged of obstructing justice by shredding documents relating to the collapse of Enron.

Andersen pleaded not guilty on Wednesday, saying that it wanted a speedy trial to save what remains of its business reputation.

Ban threat

Andersen US is accused of destroying "tons" of paperwork and trying to purge electronic data in order to avoid an investigation into the collapse of Enron, the largest bankruptcy in US corporate history.

The firm, which audited Enron's accounts, faces being barred from auditing stock market-listed companies, which would effectively put it out of business.

There could also be fines of hundreds of thousands of dollars.

Andersen has described the prosecution as "a gross abuse of government power".

The indictment alleges that senior Andersen officials told its employees to destroy thousands of documents within days of notice that the company would be investigated by the US financial regulator, the Securities & Exchange Commission.

The BBC's Mark Gregory
"The federal authorities have taken a tough line"
The BBC's James Whittington
"Since the indictment, some of Andersen's own operations have decided to go their separate ways."
See also:

19 Mar 02 | Business
Questions over Andersen break-up
20 Mar 02 | Business
Andersen pleads not guilty
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