Raiders From Rival Firms Roil Andersen's Retired Partners
Worried that raiders from rival firms are making deals to buy Andersen's business units at less than fair value and hire its partners despite non-compete contracts, a group of Andersen's retired partners has filed a request for a restraining order. The retired partners are seeking emergency arbitration to enforce non-compete and member firm contracts and secure the funding of their pensions and other retiree benefits.
According to the Chicago Tribune, Andersen's retired partners are limited in their ability to withdraw pension funds. Their monthly maximum withdrawal is $3,500 in basic retirement pay. Additionally, some who took early retirement received an incremental sum (typically equal to one year's salary), with the option of taking it as a lump sum or over a ten-year period. Many who chose the ten-year option have subsequently sought unsuccessfully to have their payments accelerated. ("Former Andersen Partners Ask Judge to Block Planned Merger Deals," April 30, 2002).
"We feel they have delayed unreasonably," said former Andersen CEO Duane Kullberg. "We want the court to stop any transactions and have them set aside the retirement benefits."
A press release issued by the attorneys for the retired partners said, "It is now apparent that the Andersen leaders and partners in many countries are acting as both sellers and buyers and therefore have irreconcilable conflicts of interest in negotiating arms-length divestiture terms with successor firms." The retired partners are concerned that these conflicts are resulting in deals that set divestiture prices below fair value, waive valuable contracts with partners and member firms throughout the world, and fail to fund pensions properly.
The press release also says the retired partners are by far the largest creditor of Andersen in the U.S. and also globally because of reciprocal income guarantees under member firm contracts. The Tribune cites estimates by former partners that place the firm's total liability to these partners somewhere in the neighborhood of $800 million. A spokesperson for Andersen reportedly told the Tribune, "We have not broken any promises to our retired partners. We have had regular communications with them, and we are committed to treating partners and their families as fairly as possible. Any transactions would provide fair value to the firm."