EDITORIAL: Learning to avoid an Andersen-like crisis

Andersen is mortally wounded. Once the criminal indictment and investor lawsuits do their damage, there will likely be nothing left as member firms establish new alliances and clients flee.

Andersen is mortally wounded. Once the criminal indictment and investor lawsuits do their damage, there will likely be nothing left as member firms establish new alliances and clients flee.

In spite of that, Andersen has spent the past two weeks attempting to educate journalists on the distinction between Andersen Worldwide and Arthur Andersen LLP. While this smacks of futility, the situation offers insight to multinational PR firms that could face similar problems with global partners.

Technically, there is a difference between the two Andersens. Andersen Worldwide is the coordinating body for member firms around the world.

Arthur Andersen LLP is the member firm in the US. The distinction is significant in a court of law, but worthless in the court of public opinion. An informal survey of media reports surrounding Enron show remarkably little confusion between the two.

The press is clearly not the only target for this educational effort.

As an article on Reuters News Service notes, there are gathering legal storms for Andersen Worldwide and member firms outside the US. Recent lawsuits being filed by Enron investors are naming not only Arthur Andersen, but Andersen Worldwide and some international partners in an effort to tap a larger payout pool.

Another explanation for the company's educational movement at this late stage is to give member firms, which had no part in Enron's debacle, greater leverage as they negotiate relationships with the other accounting giants.

Employees of partner firms may also find some comfort in the distinction.

But Andersen's own success in building its global brand will ultimately foil this effort. Just 14 months ago, Arthur Andersen, following reorganization, rebranded itself as Andersen Worldwide. Joe Berardino, then managing partner and CEO, heralded the brand as an asset that "draws on our heritage of professionalism, integrity, quality service, and trust."

Berardino said the name stands for "a unique one-firm global operating approach

as the basis for building a powerful global brand. Now that the name is under threat, Andersen Worldwide seeks to distance itself from its wayward US partner. But you can't ask others to buy into a unified brand strategy, only to abandon it when a member runs into trouble.

Moreover, Andersen's confidence over its "one-firm approach

success will last in the minds of clients and staffers, who will wonder if alleged questionable practices extended beyond US borders.

The other problem is Berardino himself, who resigned as CEO of Andersen Worldwide in March. In spite of the company's claim that each member firm has its own governance and leadership, Berardino believed that his continuing as CEO of the coordinating entity was impeding efforts to salvage the US arm. From a PR perspective, Berardino is inextricably linked to Enron's unseemly demise, to the shredding of documents. The taint of his resignation sticks to all the firms that practiced under his lead.

As PR firms grow globally, often through acquisitions in local markets, the Andersen lesson is significant. Reuters notes that whether Andersen fails or succeeds in defending the worldwide entity and its member firms against the threat of litigation, other international service firms will learn much about their potential exposure to a similar threat. Multi-nationals must understand their own vulnerability to an Andersen-scale crisis and formulate the necessary legal and reputational protection.

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