The former head of the Federal Reserve is ready to sacrifice himself

As The Wall Street Journal reported yesterday, former Fed Chairman Paul Volcker has proposed an original rescue plan for Andersen. In his opinion, it is necessary to dismiss the old management of the company, appoint Paul Volcker as its head and begin a reorganization of the company's business, which would make it possible in the future to eliminate the possibility of collusion between the auditor and his client.

Paul Volcker served as Chairman of the US Federal Reserve System (FRS) from 1979 to 1987. Relying on his authority, Andersen in February invited Mr. Volcker to head a specially created independent oversight commission, which was given broad powers to review business practices. The commission's primary goal was to restore public confidence in Andersen in particular and the auditing profession in general.

The former head of the Federal Reserve made his proposal to reorganize Andersen last Friday at a specially convened press conference. At this time, news feeds received one after another reports that the company was losing more and more large clients, and its representative offices in other countries were conducting separate negotiations on mergers with competitors (see reference).
According to Paul Volcker's plan, the old management of Andersen should be fired, and management of the company should be transferred to a special committee consisting of seven people, which is ready to be headed by the former head of the Federal Reserve himself. This committee, he said, "will quickly make the necessary changes to the operational management of the company and begin actions to reform it." These actions are not original - they are proposed every time there is any serious audit failure. The separation of the auditing and consulting businesses and other measures in the future will make collusion between the auditor and his client unprofitable.
At the same time, Paul Volcker did not hide the fact that his plan is difficult to implement, since the progress of its implementation will depend on the effectiveness of cooperation of several parties. The US Department of Justice will have to drop the charges brought against Andersen that the company obstructed justice, which is how the destruction of documents related to the Enron audit is classified. The US Securities and Exchange Commission (SEC) must reach an out-of-court settlement with Andersen. Mr. Volcker expects similar actions from lawyers representing Enron's creditors, investors and employees. It also requires Andersen's partners to maintain their partnership with the smaller, less profitable company.
The first two conditions look quite feasible - the Ministry of Justice and the SEC, albeit unofficially, have already stated that Mr. Volcker’s proposal can be considered. It will be much more difficult to reach an agreement with lawyers who are not concerned about Andersen's business, but about the possibility of obtaining maximum compensation for their clients. But the worst situation is with the last condition - the process of disintegration of the Andersen global network has clearly become irreversible.
Yesterday Andersen's Moscow office declined to comment. However, the other day its head, Hans Horn, told Kommersant: “Paul Volcker received complete freedom of action from Andersen and can propose any decisions at his discretion. His authority is so high and indisputable that the Congress and the US government will accept all his proposals unconditionally "Someone may not like his ideas, but it is unlikely that anyone will object to him, express an opposing opinion, or even take opposite actions."
ELENA Kommersant-CHINYAEVA, VITALY Kommersant-BUZA

Newspaper "Kommersant" No. 51 dated March 26, 2002, p. 7

Authors:

Elena Chinyaeva

Found a way to save Andersen