Mark Vorsatz, CEO of the recently renamed Andersen Tax, wants to clear up some of the misconceptions about the namesake for his firm, Arthur Andersen, and why he decided to change the name from WTAS.
Last week, the firm announced the decision to make the name change, even though the original Arthur Andersen effectively imploded over a decade ago in the aftermath of the accounting scandals involving Enron, WorldCom and other audit clients (see WTAS Revives Arthur Andersen Name as Andersen Tax and What’s in the Andersen Name?).
In an interview, Vorsatz explained the thinking behind the move, pointing out that he and many of WTAS’s other partners and employees originally came from Arthur Andersen, and that Andersen had enjoyed a mostly positive reputation prior to Enron. In any case, his firm is focusing on tax services and has no plans to expand into audit services, but one of the main reasons for the rebranding was a desire to expand into Europe, where another company had a similar name as WTAS, which originally stood for Wealth and Tax Advisory Services.
“To put the subject matter into context, when Andersen imploded in 2002, we tried to do a U.S. tax-only practice,” Vorsatz told Accounting Today in an interview Tuesday. “We had a group of partners, probably 15 or 20 U.S. tax partners, who met in New York in April of 2002. There was a private equity firm that had raised a significant amount of money that was trying to do a lift-out of the tax group because the tax group wanted to stay in business together. Things moved too quickly and there wasn’t enough time to get something put together and some of the practices were already moving to the Big Four. It just wasn’t something that could get done in that timeframe. A lot of people don’t really appreciate or understand that Andersen basically liquidated in 90 days. Things happened very quickly after the indictment.”
Vorsatz said he and the other tax partners had initially worked out a transaction in which it operated as a wholly owned subsidiary of the banking giant HSBC, but they later negotiated a management buyout that would take effect on Jan. 1, 2008.
“Probably around 2005 or 2006, I was approached by some retired partners who had raised some money from some former clients of Andersen who wanted to kind of restart the organization,” said Vorsatz. “At the time, I didn’t feel the timing was right, and we were owned by HSBC, so it wasn’t feasible. I had been giving it some consideration for a long period of time. Then we started expanding internationally last year. The motivation for that was that many of our clients needed solutions outside the U.S., both individuals and corporate clients. The difficulty was that when we looked at the different networks that were available, they were very fragmented or they had inconsistent quality or just had way too many firms.”
One network that Vorsatz and his partners looked at, for example, had 19 different firms in Germany. “When we evaluated the networks and concluded that wasn’t going to work, I made the decision that we needed to make sure that we were comfortable with the quality of the people that we were working with, and it wasn’t adequate that the guy down the hall knew somebody who he worked with in Slovenia or Germany or the U.K. or India, so he would just give that individual a call,” said Vorsatz. “We needed to go in and do due diligence and be comfortable because if we make a referral to a client to use someone else and it doesn’t work out, it’s going to reflect back on us.”
Around September 2012, Vorsatz began visiting some groups outside the U.S. and he and his partners put together a Swiss holding company. They wanted to differentiate themselves from the Big Four, just as Andersen had.
“A unique quality of Andersen is that we were a global firm, so we had profit sharing globally,” he said. “None of the other firms operate that way. They have different kinds of cost-sharing arrangements or franchises.”
One firm that approached WTAS about an acquisition has 15 different CEOs, five of whom sit on a management committee, and Vorsatz considered that to be far too complicated.
“We decided that, one, we needed to be consistent in quality,” he said. “Number two, we needed to have people that were likeminded culturally. What was important to me and one of my motivations for starting the firm was stewardship, to give the next generation an opportunity that was better than what I had. As we embarked on that process, we started to encounter independent groups that were comprised oftentimes of former partners at Andersen.”
Once WTAS had organized a holding company in Switzerland, which took about six months, it began expanding in Europe, combining forces first with a Swiss firm known as PrimeTax in Zurich, then with the French firm STC in Paris, then with Taxperience, which has offices in the Netherlands and Moscow, and then in Italy with Studio Associato De Vecchi in Milan.
“So 14 months later we now have nine locations,” said Vorsatz. “Last fall I started the discussion, and we all agreed that we needed to have the same name, so we started to look at the issue of the name. There were some trademark impediments to using WTAS. Nobody really liked the name anyway. We had to pick that name in about a two-week period of time. That’s how quickly things transpired when we worked out the agreement with HSBC and then worked through the discussions with Andersen about our buyout. It wasn’t necessarily a thoughtful decision. We knew we were going to re-evaluate the name at some point anyway.”
The original name, Wealth and Tax Advisory Services, had applied to the initial group, which comprised six former Andersen practices that were referred to as Private Client Services, typically catering to wealthier individuals, owner-operator companies, and family businesses.
“It was primarily partners whose skills were in areas like individual taxation and estate planning, so the name fit that group, but starting around 2005, we concluded we needed to build out the type of tax capabilities that we had at Andersen or that you’d have at a Big Four firm,” said Vorsatz. “We started adding partners in corporate and international and working in the fund area or in valuation, and state and local tax, and therefore the name never really fit us after that.”
Last December, Vorsatz recalled he was sitting in Paris with one of his partners after a long week of visiting different groups in Europe.
“I turned to him and I said, What do you think if we considered changing the name to Andersen?’ At first he thought I was joking, and then he was kind of measuring me and then he was a little bit surprised, and then he said, That would be a bold move.’ Then I said, Well, number one, it best represents the culture of the people.’ Because some of the principles that we espoused at Andersen—and we didn’t have a monopoly on those—were the concepts of stewardship, the fact that we’re one firm in terms of how we operate, and a kind of transparency. We had an open-unit system at Andersen. None of the other firms have that. We have an open-unit system at our firm so every partner in the firm knows how much equity I have in the firm. If you go to any of the Big Four, it’s all a closed-unit system. They don’t have that kind of transparency, so you don’t know what the equity interest in the firm of the guy next to you is. At Andersen we had a global open-unit system, so you knew how much equity every single person in the firm had. When we’ve added partners laterally, they’ve said, Wow, this is refreshing,’ that they come to an organization where there’s transparency. All of our partners get access to all of our financial information. We distribute summary financial information to everyone in our firm, including our executive assistants and administrative people. That doesn’t happen at the other firms.”
Vorsatz felt the name Andersen Tax would reflect the concepts of teamwork and esprit de corps. He joked that the name WTAS also had sounded like too much of a radio station, even in San Francisco where it is based.
“On the East Coast, all the radio stations start with a W,” he said. “I always joke out here, on the West Coast, all the radio stations start with a K, so I say KPMG is a radio station.”
Vorsatz noted that he often introduces himself to prospective clients as a former Andersen partner and the vast majority of his firm’s partners also had worked at Andersen. But he still anticipated there might be some negative reaction from the name change.
“I said internally there are going to be some negative things if we change the name because people are going to say, Oh, you guys were bad guys. You probably worked on Enron.’ I’d say, Look, there were some mistakes that were made.’ Yes, we had a number of instances on the audit side on significant and visible engagements, but the vast majority of the firm was known for our training, for our quality, for those kinds of things about how we invested in our people. So I said, Number one, after the dust settles, there will be some bad things, some good things.’ I will tell you that the response I have gotten from people in the business community and also from former colleagues has been overwhelmingly positive, incredibly positive, far more positive than we could have expected.”
Vorsatz has been talking recently with some former chief executives of Arthur Andersen, including Larry Weinbach and Duane Kullberg, both of whom he plans to meet with in the next few weeks.
“We intend to revisit those relationships and utilize them, and leverage off of them,” he said. His firm is also planning to hold an event on November 1 in Chicago, where Arthur Andersen used to be headquartered. Vorsatz has also been in touch with the head of the Arthur Andersen Alumni Association in the U.S.
“We’re going to reach out to some of these people, so for us it was a natural thing to do and it was something I had thought about for seven or eight years,” Vorsatz said of the name change. “This wasn’t a precipitous decision.”
Vorsatz also commissioned surveys about the name change, and he said the response was overwhelmingly positive. WTAS surveyed 286 people in the United States, the United Kingdom, China and France at companies ranging from $200 million in revenue to $3 billion in revenue, both public and private, including CEOs, CFOs, tax directors and controllers, asking them their opinion of Arthur Andersen.
In the U.S., the very favorable and somewhat favorable responses outnumbered the unfavorable responses by 8 to 1. In the U.K., the ratio was 15 to 1, in France it was 11 to 1, and in China it was 15 to 1.
The next question asked, “If a well-established and respected global tax advisory founded by Arthur Andersen alumni were to change their name to Andersen, how would that affect your likelihood of engaging them to do work with your company? More likely, somewhat likely, no difference, or less likely?” The more likely or somewhat likely in the U.S. versus less likely was 14 to 1.
However, there were some negative reactions too, and Vorsatz acknowledged that in the United States, the U.K. and France, over 60 percent of the respondents indicated that they perceived Andersen as a tarnished brand. Overall, between 44 and 65 percent of the respondents worldwide said a “tarnished brand” strongly or somewhat applies to Arthur Andersen.
“Do I think that the brand got hammered over Enron? Sure, absolutely,” said Vorsatz, adding, “They asked the respondents do you think the brand is tarnished and there were quite a few people who said yes, but I think that was a reflection more of their perception of the marketplace rather than their own opinion.”
The survey takers concluded that this was more a result of “conventional wisdom” rather than the respondent’s own opinion.
On the positive side, the survey found that between 68 and 90 percent of the respondents said the term “ethical” strongly or somewhat applies to Arthur Andersen. Between 58 percent of the respondents in the U.S. and 90 percent in China said they would be more likely to engage “a well-established and respected global tax advisory firm” if it changed its name to Arthur Andersen. Nevertheless, about 1 out of 10 said they would be less likely to engage the firm.
Vorsatz recently spoke with the great granddaughter of the founder of the firm, and he said she is thrilled that the name is being revived. “She talked about how her great grandfather was so ethical, that when the industry felt that they would only respond to government regulation, Arthur Andersen and following him, Leonard Spacek, said no, we should define the standards for our industry. We should focus on quality. We should hold ourselves to higher levels of accountability. We should not just respond to what the government does.”
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