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. Last Updated: 07/27/2016

Andersen Mutiny Set a Global Trend

It wasn't a merger or an acquisition. It was more like a mutiny.

When the American arm of scandal-tarnished auditing giant Andersen was sinking under the weight of the Enron scandal in March, its worldwide affiliates were scrambling to avoid being sucked down with it. In Moscow, Andersen Russia/CIS decided on a drastic course of action that would soon be imitated by Andersen operations in some 50 countries -- all 800 employees simply jumped ship and emerged under the umbrella of former rival Ernst & Young (CIS).

"It was like jumping into a swimming pool from a 10-meter height ... but we didn't know if there was water," said Hans Jochum Horn, until recently the head of Andersen Russia/CIS, in an interview Monday.

"Only when we were 5 meters down did we see that there was water there. And when we finally dove in it was full."

The two firms essentially became one, at least in Russia, on May 16, and on Friday the new, bigger Ernst & Young, which now has a staff of some 1,300, was given the green light to expand by the Anti-Monopoly Ministry.

Horn and Stephen Moosbrugger, the head of Ernst & Young (CIS), said that Andersen's CIS operations would be officially closed within six months to a year, leaving Andersen International only pro-rata proceeds from receivables and the sale of assets.

Although the mass exodus pioneered by Horn became something of a model for dozens of Andersen affiliates around the globe, he said it didn't come without a price.

"[Andersen International] put whatever pressure they could on us, on me specifically, so that we wouldn't go against the organization," Horn said, without elaborating.

"Having lived through the [coup] crisis in 1991, a hiccup -- [the standoff between President Boris Yeltsin and the parliament] -- in 1993 and the economic crisis in 1998, this was by far the most difficult situation," said Horn, who has worked in Russia since 1990.

Moosbrugger applauded his new colleague's bravery.

"The interesting thing about the CIS transaction is that it took a great deal of courage on the part of the CIS practice to join Ernst & Young. It shouldn't be lost on anyone that Andersen CIS went against the wishes of an $8 billion organization," Moosbrugger said.

Despite the swelling of its ranks, however, Ernst & Young plans no staff cuts, Moosbrugger said.

On the contrary, both executives said another 100 people would be hired this summer.

With the old Andersen staff on board and the new hirings, they said the new, improved operation would be able to take on clients of any scale or size within the former Soviet Union.

"It's probably the first time for both [companies] that we can take up any account in the CIS because we have enough people," Horn said.

Earlier, Moosbrugger estimated that the combined company was aiming at having about $100 million in turnover a year.