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. Last Updated: 07/27/2016

Andersen Employs Bankruptcy Expert

WASHINGTON/NEW YORK -- Besieged accounting firm Andersen said Monday it had hired a top restructuring and bankruptcy specialist as doubts spread about the firm's surviving the Enron Corp. crisis.

With clients and partners fleeing by the hundreds, Andersen said it had brought aboard Bryan Marsal, a managing director at New York-based turnaround firm Alvarez & Marsal, as chief restructuring manager, said Andersen spokesman Dan Hill.

Marsal will work under contract as a consultant. He will pursue restructuring goals set by former U.S. Federal Reserve Board Chairman Paul Volcker, who is expected to leave soon.

"His objective is to re-engineer Andersen to make it fit within the Volcker reforms," Hill said.

Andersen is scheduled to go to trial on May 6 to face a criminal charge of obstruction of justice stemming from the destruction last fall by its employees of thousands of Enron-related records being sought by federal investigators.

Since being charged in early March, Andersen has lost more than 230 clients. Many of its overseas affiliates have also fled, cutting deals to link up with competitors.

The hiring of Marsal did not mean Chicago-based Andersen was about to file for bankruptcy protection, Hill said. "It is a mischaracterization to say it is a precursor to bankruptcy," Hill said. "Marsal is a restructuring expert, and clearly Andersen has a lot of restructuring in its future."

But Arthur Bowman, editor of the trade journal Bowman's Accounting Report, said Andersen would not likely survive much longer in anything like its past form, even with Marsal.

"It sounds like they're trying to get ready to sell the business and get as much out of it as they can," Bowman said. "They need cash. ... Maybe they need an expert to get the most they can for whatever assets they still have available."

Last week talks between Andersen and the U.S. Justice Department about a settlement of the obstruction charge collapsed, with Andersen's position having been undermined when former partner David Duncan pleaded guilty to obstruction.

Volcker, brought in earlier this year to rescue Andersen, will likely leave the firm in a matter of days, said accounting industry analyst Robert Willens at Lehman Brothers.

"There doesn't seem a whole lot of reason for him to stay," Willens said. "It's not going to be long before he's out."

Volcker has proposed that Andersen transform itself from a massive, multi-service accounting and consulting group like the other Big Five accounting firms, into a smaller, elite corps that only audits the books of corporate clients.

Alvarez & Marsal, founded in 1983 as a turnaround firm, could not be reached for comment.

Antonio Alvarez, a founder of the firm, was promoted to chief executive from chief restructuring officer at bankrupt underwear maker Warnaco Group Inc. in November. Marsal has been closely involved in the rescue of socks and shirts manufacturer Cluett Peabody.

Enron, once the seventh-biggest U.S. company, filed the largest ever U.S. bankruptcy on Dec. 2, wiping out billions of dollars in equity and shaking U.S. stock markets.

Along with the Justice Department, the Securities and Exchange Commission and Congress have been investigating every aspect of the affair for months. Andersen has been swept up because it audited the Houston-based energy trading group's books for years.

Andersen and former top managers of Enron also face massive lawsuits filed by angry Enron investors and former employees. Talks toward settling the lawsuits were in limbo, sources said.