by Tracey Miller-Segarra
New York -- When Ernst & Young revealed in its annual statement last month that global chief executive Richard S. Bobrow was retiring after just 18 months on the job, it was yet another blow to the image of one of the nation’s largest accounting firms.
Although E&Y would not comment on the reasons for Bobrow’s departure, it is widely believed that he stepped down as the result of a nasty divorce proceeding that laid bare the partnership’s closely held financial records to the public — and to its competitors.
James S. Turley, 48, who has held the position of global chairman since 2001, will now also assume the role of chief executive. Turley is based in E&Y’s New York offices.
With the Big Four firms reeling from two years of accounting scandals, as well as controversies over tax shelter advice, the loss of a well-regarded chief executive couldn’t have been more poorly timed, said industry consultant Jay Nisberg.
“It’s sort of a setback for E&Y,” Nisberg said. “My impression is that he was an extremely effective guy, and right now the firm is facing challenges that call for high potential leadership. I think it’s going to be difficult to replace him, and it throws the firm into a political tailspin at a time when it needs its focus.”
The controversy over E&Y’s tax shelters boiled over when the former top executives of telecommunications concern Sprint Corp., chairman and CEO William Esrey and president and chief operating officer Ronald LeMay, were ousted after shelters like the one recommended by E&Y for them came under scrutiny by the Internal Revenue Service. Ernst had devised the shelter to help Esrey and LeMay avoid taxes on some $100 million in gains from stock options.
Last month, Sprint replaced E&Y, which had served as its independent accountant since 1966, with Big Four rival KPMG.
Bobrow, 50, joined the firm in Texas in 1976 and worked his way up through its tax division. During bitter divorce proceedings, Bobrow’s estranged wife sought detailed information about her husband’s finances. The resulting investigation revealed the U.S. firm’s revenue, which was $4.3 billion in 2000, as well as Bobrow’s income, which was $3.2 million in 2001.
It also showed that Bobrow earned $24 million from the $11.3 billion sale of the firm’s consulting unit to Cap Gemini.
Separately, E&Y posted a 30 percent gain in global revenues, to $13.1 billion, for its fiscal year ended June 30. Specifically, its global audit business revenue grew 35 percent, while U.S. revenue rose about 17 percent.
