The settlement amount is the second largest ever paid by a Big Five accounting firm to settle litigation not associated with the savings & loan crisis, and approximately twice the largest settlement that Andersen had ever paid. It also settles several other related suits against Andersen that arose out of the 1999 collapse of the Baptist Foundation of Arizona ("BFA"), the largest non-profit bankruptcy in American history.

Approximately 13,000 investors, mostly elderly, lost nearly $590 million when BFA reported huge real estate losses dating back to the early 1980s. According to the lawsuits, Chicago-based Andersen failed to disclose financial wrongdoing by the foundation's managers and ignored warnings of potential trouble.

According to the Trust's lead trial lawyer, John P. Coffey, "the settlement is notable not only for its size and percentage of recovery, but also because it achieves our goal of getting significant money back in the victims' hands soon, rather than after a lengthy trial and years of appeals that carried some significant risks."

After litigation costs and attorneys fees, the net recovery to investors from the Andersen settlement alone -- approximately $185 million -- will constitute repayment of about 32.4 percent of the losses suffered by investors.  

Andersen did not admit any wrongdoing in the settlement, but noted "There is no question that investors were the victims of a massive fraud perpetrated by Baptist Foundation of Arizona leadership."

The settlement ends state actions against Andersen as well as  two lawsuits against the firm. The two Andersen partners who worked on the foundation audit have agreed to relinquish their CPA licenses in the state of Arizona.

Andersen Loses Another Big Client

Also Friday, pharmaceuticals company Merck & Co. appointed PricewaterhouseCoopers as its auditor for 2002, ending a 30-year relationship with Arthur Andersen.

"This appointment concludes a rigorous selection process that was part of Merck's annual formal review of auditing services," announced Merck. "Arthur Andersen has provided excellent auditing services to Merck since 1971 and Merck has valued its relationship with the firm."

Since Enron's collapse, this is the second high profile client that Andersen has lost to PwC. SunTrust announced last month that it would end its 60-year, $1.7 million audit relationship with Andersen. 

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