"The message I get from all of this continues the emphasis on firms going from the day-to-day traditional functions of accounting and more to consulting," said Joel Sinkin, an executive at Global Force International, a New York-based mergers and acquisitions advisor to CPA firms. "Clearly, Arthur Andersen recognized their revenues from traditional services would continue to decline. The mistake was not finding ways of cooperating and instead creating unhealthy competition between their own entities."

Norcross, Ga.-based Carlton Collins, a consultant to local CPA firms and member of the K2 Enterprises consortium of consultants said, "This is an interesting topic, but not surprising. Andersen Consulting split off from Arthur Andersen because the consulting side was making so much more money per partner, there was dissention in the ranks."

Collins added, "Every partnership I've ever done work for has eventually gone dysfunctional. People always argue over money and workload. Once this happens, you have instant dysfunction."

The drawn-out battle between the two entities came to a close yesterday when Colombian arbitrator Guillermo Gamba issued a 129-page decision, splitting up the accounting firm  Arthur Andersen and its consulting arm, Andersen Consulting.

The decision, which has been eagerly anticipated by the firms, will force Andersen Consulting to give up the Andersen name and require it to pay about $1 billion to the partners at Arthur Andersen. That money, which consists of regularly scheduled payments between the firms, has been held in escrow since the arbitration began in December 1997.

Andersen Consulting executives said they have not yet decided on their new identity, which will cost about $100 million to register and establish.

"The name we view as a small price in this and it is fairly insignificant in the scheme of things," said Joe Forehand, Andersen Consulting global managing partner and chief executive. "We have never been fearful of changing the name."

The arbitrator also ruled that Andersen Consulting must give back any technology jointly held by the firms, but Andersen Consulting avoided a potentially devastating $14 billion payment that could have been awarded under the contract between the two firms.

Executives at Andersen Consulting said the breakup gives it the flexibility to consider a myriad of business options. It will discuss those options at its partner meeting in October.

Referring to the dispute, Bert Doerhoff, a CPA at a local firm in Jefferson City, Mo. said, "It reaffirms that firms who want to continue the audit function will continue to need to segregate that into a separate wing, which may at some time become a competing business."

But some CPAs at local firms regard the battle of Andersen as merely distant thunder.

"It's interesting," said Alan Weiner, a partner at Holtz Rubenstein & Co. in the New York City area and a former president of the New York state CPA society. "But the AA dispute and resolution is mega-business and affects only the largest of accounting firms and other similar businesses."

"It's true," Weiner added, "that if I looked deeply enough and subtracted a few billion dollars, I could probably find something in the dispute and decision that affects smaller firms, but I don't think the AA split up is anything more than a matter of interest because it concerns an accounting firm with a fine reputation."

Andersen Consulting filed the arbitration case in an effort to break away from Arthur Andersen and Andersen Worldwide, the holding company that oversees the two firms. An arrangement created in 1989 split up the firm into its auditing and consulting practices, but several years later, Arthur Andersen started a consulting unit that began to compete with Andersen Consulting.

At the same time, Andersen Consulting was making hundreds of millions of dollars in payments to Arthur Andersen under the corporate arrangement that required the consulting arm to fork over up to 15 percent of its annual profits. Fed up with the situation, Andersen Consulting filed for arbitration, seeking to break off from the company without making the payments, which could have totaled $14 billion. However, Jim Wadia, worldwide managing partner for Arthur Andersen considers the decision a victory.

"We are pleased that the arbitration has upheld our position and we are now prepared to move ahead with our own business plans," said Wadia. "Arthur Andersen is strong and will continue to serve our clients without interruption -- we have grown at double digits for the past 10 years and we have posted results of 15% growth to date this year.  This action has not distracted us from our ultimate focus -- our people and our clients."

Hours after the arbitrator's ruling was announced, Wadia announced that he is resigning from his position and has chosen to take early retirement from the firm.

"It has been three years since I stepped into this role -- time that has been spent helping our organization focus on being a leading service provider in the new economy.  I am very proud of the progress we have made with our new strategy; we are at a point following this decision to head forward into another period of exceptional growth and development," said Wadia, who had been worldwide managing partner since August 1997.

Louis P. Salvatore, chairman of the Arthur Andersen Oversight Committee of the Andersen Worldwide Board of Partners, has been named interim worldwide managing partner and will serve in that capacity until a new managing partner is appointed, perhaps within the next 90 days, the firm said.

Even though both sides on the battle line claim to have reached a victory, it is hard to deny that bitter feelings between the two entities exist - and may be far from healing.

Perhaps one chief executive of a national firm summed it up best by saying, "The wounds are going to bleed for some time."

-- By Antoinette Alexander

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