AFC Enterprises Takes Arthur Andersen to Court
AFC Enterprises wants its former accounting firm, Arthur Andersen, to pay back the fees it received from the fast-food chain from 2000 to 2002 and to cover the cost of professional fees it took to get its books back in order.
"We relied on Arthur Andersen to tell us if we had violated any generally accepted accounting procedures and standards, and they did not do that," said Neal Pope, whose law firm represents AFC.
According to the Associated Press, the suit, which alleges malpractice and breach of contract, seeks unspecified monetary damages from Andersen. The former Big Five accounting firm was convicted of obstruction in 2002 for destroying tons of Enron documents upon news of a Securities and Exchange Commission investigation.
AFC Enterprises, which is based in Atlanta and operates Cinnabon, Church's Chicken and Popeyes Chicken & Biscuits chains, was seriously wounded when its accounting problems led the company to restate it financial statements for 2000 and 2001. That work took a full year.
The chain wants the auditor and three of its former accountants to cover the fees it paid to lawyers and accountants working on the restatements.
The chain faced an informal investigation by the SEC, the loss of proceeds from the sale of Seattle's Best Coffee and a delisting by the Nasdaq stock market. In addition, shareholders sued AFC, claiming the company misled them. The company is still trying to rebuild credibility on Wall Street.