Local Andersen office
in survival mode

Partners are working on
reassuring staff and clients that
the firm will exist in some form

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By Dave Segal
dsegal@starbulletin.com

It doesn't take an accountant to figure out that Arthur Andersen Hawaii is in survival mode.

With vultures circling around the parent company, Hawaii partners Ross Murakami and Randy Karns have been doggedly reassuring clients that their office will be able to continue serving them. At the same time, they've been telling their employees that they'll still have a job -- somewhere.

The big question, though, is not whether Arthur Andersen will exist in Hawaii, but for how long. With the accounting giant seeming to be fighting now only for its legacy, Murakami and Karns have been negotiating with the parent company to purchase the Hawaii operation.

"There are no known sticking points," Murakami said yesterday. "It's just a matter of writing it and getting it signed."

But Murakami and Karns also are pursuing a backup plan that would involve merging with another Hawaii accounting firm.

"We need to ensure that we have an absolute go-forward strategy of some sort, but we're still evaluating other options," Murakami said. "Whereas we have the opportunity to assume control of the office, if something more attractive comes along, we'll look at it. At least, we have this as a very, very viable option. There are other options, but we have one that we're in control of."

The fate of Arthur Andersen Hawaii's parent firm may hinge on the verdict in the obstruction-of-justice trial that entered its third day of jury deliberations in Houston today.

"One thing I want to emphasize, as it relates to the impending jury verdict, is that it really won't have much of an impact on what we do here in Hawaii," Murakami said. "Obviously, we're hoping that we are found innocent. We continue to believe that there's no reason for the government to pursue and basically kill this firm. It was the Department of Justice's indictment that was effectively like a guilty verdict before the case even went before the jury. It's their action that has killed this firm of 85,000 people worldwide."

Still, the parent company's problems have put Murakami and Karns in a defensive position.

"What we want to do is eliminate uncertainty," Murakami said. "But we have to make sure we do it the right away. We're committed to two things; offering career opportunities to our people and continuing to serve our clients."

Murakami, who said his objective is to make the transition as seamless as possible, said the firm has "incredible support and loyalty" from its clients. "We have lost a very, very small percentage of our clients," he said.

About 20 employees, however, have opted out over the last two months because of the lingering uncertainty.

"A lot of them left public accounting," he said. "They decided they didn't want to continue this. It has been for many of our people a very difficult period and some of them just decided they wanted to move on to other industries."

Hamid Pourjalali, director of the University of Hawaii School of Accountancy, is chagrined that the parent company's problems have cast a pall over the entire industry. He said many of Arthur Andersen Hawaii's employees are UH graduates and shouldn't be painted with the same brush as those on trial in Houston.

"In Hawaii, these Andersen kids are great kids," he said. "I don't believe that we should put Andersen here and Andersen in Texas in the same category. It's just completely different. We have hard-working people here and we have honest people."

Yet, Pourjalali also said Arthur Andersen's troubles have sent a warning flag to the profession.

"It's had two different effects," he said. "It's telling us to be concerned and to be sure how we graduate our students, if we're teaching them appropriate ethical behavior before they leave. That's the nationwide concern. Another concern we should have is obviously we don't want the black eye to be transferred to all of us accountants and accountant educators."

Pourjalali said the department is forecasting that it will graduate about 90 accountants in the 2001-02 school year and 110 in 2002-03.

"The advantage that students have right now is that there are very few graduates in accounting," he said. "So there is a market for them and they can easily find jobs."

Pourjalali, who said his department gets about $70,000 from alumni donations annually, said it gets financial support from nearly all the accounting firms in the state. PricewaterhouseCoopers LLC, for example, is trying to raise $200,000 to create a UH graduate research room for master's students in accountancy, Pourjalali said. The room, which could be ready by the fall, would include data base computers and presentation facilities. KPMG LP currently supports an accounting research center at UH that is earmarked for undergraduates.

"Arthur Andersen also has been supportive of the university," Pourjalali said. "When I made a presentation to them early in the fall, Ross (a UH graduate) wrote me a check for $1,000 right there."

Murakami declined, however, to say how much Arthur Andersen Hawaii has been contributing annually to UH.

Pourjalali said whenever money is contributed to a nonprofit organization by an employee of a Big Five accounting firm, the donation is matched by the parent company. Thus, Pourjalali said, UH receives a double benefit from the Big Five firms of Pricewaterhouse Coopers, KPMG, Deloitte & Touche LLP, Ernst & Young LLP and Arthur Andersen.

"Pretty soon it, though, it will be the Big Four now that Andersen is disintegrating," Pourjalali said.