Arthur Andersen head resigns

Jim Wadia resigned as world-wide managing partner of Arthur Andersen yesterday after the accountancy firm failed to secure a $14.5bn (£9.7bn) severance payment from its sister firm Andersen Consulting.

Jim Wadia resigned as world-wide managing partner of Arthur Andersen yesterday after the accountancy firm failed to secure a $14.5bn (£9.7bn) severance payment from its sister firm Andersen Consulting.

The world's largest consultancy firm will, however, have to hand back its name to Arthur Andersen as the price of its independence, according to an arbitration ruling yesterday by the International Chamber of Commerce. The two firms, which became "semi-detached" in 1989, will now go their separate ways, ending years of dispute over whether the consulting arm could become entirely independent.

The settlement of the two-and-half-year arbitration also requires Andersen Consulting to pay about $1bn of historic revenue payments owed to the accounting firm, and hand back certain proprietary IT systems.

Joe Forehand, Andersen Consulting's chief executive, said: "Today's ruling is as good as it gets. We've had a morning of celebration and euphoria. A clean and complete separation between us was prudent and inevitable."

Mr Wadia, 52, denied his unexpected retirement was connected with the ruling by the arbitrator Dr Guillermo Gamba. "We didn't get the termination payment, which is disappointing, but we did get the $1bn, the name and technology. I'm going because there isn't anything left to negotiate." Just hours earlier when the ruling first emerged, Mr Wadia had told Reuters: "This is the high point in my career. I'm 52 years old and I'm not sure how many more high points you can have like this."

The news of Mr Wadia's resignation was broken to Andersen Consulting's senior management by journalists during a media conference call yesterday afternoon. When Mr Forehand was later asked whether the arbitration ruling was open to legal challenge, he replied: "No; perhaps that's one reason why Mr Wadia has resigned."

Sources close to Arthur Andersen say Mr Wadia, a qualified barrister, was put in the top job in 1997 partly because of his tough negotiating skills. He is expected to return to broking corporate deals and advising on tax. The sources denied suggestions he might join an investment bank. Arthur Andersen has set up a 12-partner commission to select a successor.

Mr Forehand insisted that no technology would have to be handed back under Dr Gamba's ruling, and said the firm would take the name change "in our stride. It will only cost $100m to rebrand and advertise a new name". He said no final decision on a name had yet been taken.

The Andersen Consulting boss did not rule out a listing along the lines of the IPO by Goldman Sachs, the investment bank.

The dispute dates back to 1989 when Andersen Consulting agreed to a partial separation, not least because the US Securities and Exchange Commission (SEC) has stiff rules against auditors offering consultancy and other services to audit clients. Under their agreement neither side could walk away without paying the other a sum equal to 150 per cent of the previous year's revenues and forfeiting its name. In Andersen Consulting's case that would have meant $14.5bn.

The agreement was modified in 1990 so the consulting side had to pay 15 per cent of revenues to the accounting firm each year. This provision became a running sore. Then Arthur Andersen set up a new consulting firm, Arthur Andersen Business Consulting, and relations between the two sides deteriorated rapidly.

In 1997 Andersen Consulting went to arbitration, claiming the accountants had broken the agreement by allowing their consultancy side to compete with it. Mr Wadia was convinced this was a ploy to allow Andersen Consulting to walk away without paying a severance payment.