Andersen Consulting: A Frankenstein Monster?

In 1989, Andersen Consulting was spun off from Arthur Andersen as a separate company for the sole purpose of performing technology consulting. The idea was that AC would perform the consulting services for Andersen's clients, and Andersen would stick to auditing, tax, and general accounting services. Because the consulting business was seen as being more lucrative, it was agreed that AC would pay a 15% percentage of its annual revenues to Andersen. Shortly thereafter, the seeds of war were planted.

Andersen now claims that since the beginning, AC has been planning to break away from its roots completely, while AC claims Andersen has been stealing its business. Who's right? Perhaps they both are.

It was always agreed that Andersen could continue to perform consulting services, for client firms with annual revenues under $175 million. Andersen claims AC stopped performing services for some of the higher revenue companies, thus resulting in Andersen needing to step up to the plate and provide services for some of its larger clients.

Meanwhile, AC is balking at the annual fee they have to pay Andersen when Andersen is undercutting them in bidding wars for performing consulting services.

It’s a mean and dirty battle, with a lot of money and the right to the name Andersen Consulting at stake. An international arbitrator, Guillermo Gamba, representing the International Chamber of Commerce in Paris, will soon decide the fate of the two firms. As for the possibility of father and son patching up their differences and working together again in harmony -- don't count on it.


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