Chicago (May 8, 2002) -- In keeping with its plan to strip away all of its non-audit businesses as part of reform efforts, Andersen said it has closed a deal with Ernst & Young for its Detroit, Ann Arbor, Grand Rapids and Toledo offices.
Under the agreement, 159 Andersen employees, including 14 partners and principals, will join Ernst & Young. Terms of the agreement were not disclosed."To sustain an ongoing business for Andersen, in light of the realized and expected loss of clients, we are reducing the scope and scale of our United States practice," the firm said in a statement released Monday evening. "We are aligning our personnel complement and cost structure with our revenue base."
Separately, the firm said it reached an agreement for a global settlement of legal matters related to its work for the Baptist Foundation of Arizona. The deal, which is subject to final court approval, calls for the payment of $217 million and resolves all litigation brought against Arthur Andersen LLP by BFA investors, the BFA bankruptcy trustee and state regulatory bodies. Andersen did not admit or deny any fault in the matter.
A prior settlement agreement announced in March fell through when Andersen's insurance company said it couldn't pay. In the statement released Monday night, Andersen said it is "hopeful" that payment will be accomplished "through the recapitalization of its insurance carrier."
Andersen had served as auditor to the nonprofit BFA, which filed for bankruptcy in November 1999, a result of both current and former foundation executives perpetuating a Ponzi scheme that masked losses through a series of shell companies. Investors lost nearly $600 million in the scheme.
As part of the deal, retired Arthur Andersen partner Jay Ozer and principal Ann McGrath, each of whom had responsibility over Andersen's audits of the Baptist Foundation, agreed to relinquish their CPA licenses in the state of Arizona, without any finding of guilt or misconduct.
-- Electronic Accountant Newswire staff
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