Divorce granted to feuding Andersens

Falling-out led to lengthy legal battle

An international arbitrator has delivered a compromise ruling on the two-and-a-half year separation battle between accountancy firm Arthur Andersen and its offshoot Andersen Consulting.

It is time to move on independently

Joe Forehand
Andersen Consulting

Under the ruling made by the Paris-based International Chamber of Commerce - which is binding on both parties - links between the two Andersens will be severed immediately.

Andersen Consulting, which was spun off from Arthur Andersen in 1989 but quickly outgrew it, will not have to make a termination payment to leave the umbrella organisation Andersen Worldwide.

Colombian arbitrator Guillermo Gamba ruled that it will lose the right to the Andersen name at the end of the year, but the outcome is being seen as a big victory for the consulting firm.

Arthur Andersen had claimed that Andersen Consulting should pay it $14.5bn (£9.5bn) to leave the organisation.

Resignation

Both sides claimed to have won - but Arthur Andersen chief executive Jim Wadia later announced his resignation.

The decision about the name is a huge victory for us

Jim Wadia
Arthur Andersen

He initially claimed his firm was happy with the ruling, although he described as "unfortunate" the decision not to require a termination payment.

But a few hours later he said he was taking early retirement having spent three years in charge.

"This is a total win for Andersen Consulting," its chief executive Joe Forehand said.

"We have defeated Arthur Andersen's preposterous claim... Now it is time to move on independently."

Turf war

The dispute between the two firms developed in the 1990s when Arthur Andersen began to supplement its core tax and audit operations with consultancy work.

Andersen Consulting claimed its parent company was encroaching on its turf and using annual fees paid to it by the consulting firm to expand its own consultancy business.

Andersen Consulting had sought the return of some of the fees paid since 1989, including $535m of payments from the past two years which are being held in an escrow account.

However, the arbitrator ruled that Arthur Andersen could keep $435m of payments it had already received from Andersen Consulting as well as the $535m in escrow.