The sudden end of Andersen Legal
In a matter of months Andersen Legal turned from being the most successful of the accountancy-tied law firms, with a network across 36 countries, into disparate rubble. Spectators’ reactions varied from glee to pity to fear.
But the collapse of Enron and Andersen altered not just the face of the legal profession, it also changed the way business was done and viewed.
It was the advice of a lawyer that had finally toppled the Enron empire and exposed the scam that had been conning investors and employees for years. Nancy Temple, in-house legal adviser to Andersen, Enron’s auditors, wrote an email in which she suggested “deleting some language that might suggest we have concluded the release is misleading”.
In June a US jury found Andersen guilty of obstruction of justice and the firm surrendered its auditor’s licences. And although three years later the jury’s decision was unanimously reversed by the Supreme Court, the damage was long done by then.
As lawsuits were rolling in against Andersen Worldwide, the network began to disintegrate. In March 2002 leading Spanish firm Garrigues and Scottish firm Dundas & Wilson quit Andersen Legal following the Department of Justice indictment.
The partners of Andersen’s accounting arm were thrown a lifeline by Deloitte Touche Tohmatsu, but the seven UK partners of Andersen Legal, including managing partner Tony Williams, who formerly ran Clifford Chance, were left to face US class actions by themselves.
Eventually Andersen Legal, its network firms and 2,800 lawyers disbanded: the brand name had become a liability. Williams spent most of his last days trying to secure places for his 23 London trainees with City firms. His grace under pressure earned him the Partner of the Year accolade at The Lawyer Awards.
In July 2002 the Sarbanes-Oxley Act was created as a direct response to the saga. It subjects US directors, accountants and lawyers to highly onerous rules on corporate governance and ethics, with the threat of jail for non-compliance.
Sarbanes-Oxley advisory work is now a lucrative niche for lawyers in the US and overseas, and some say that the stringent US regulations encouraged companies to set up in the UK, which indirectly helped contribute to London’s rapid rise as a financial centre to rival New York.
A financial footnote: by the end of 2002 the advisers in the Enron saga had billed almost £200m in fees.
The commercial bar throws a tantrum
On 1 April record numbers took silk as Lord Irvine flooded the market with 113 QCs, compared with 77 in 2001 and an average of 71 since 1994. Usually 14 per cent of applicants were successful, but in 2002 the success rate was more than 26 per cent.
It was a remarkable reversal of fortune for the commercial bar. In 2001 only one commercial set, Essex Court Chambers, received new silks and the commercial bar exerted considerable political pressure to ensure it was better represented.
Oh, for goodness’ sake
Hammonds, which in 1999 had employed Saatchi to come up with a £1m ad campaign focusing on the firm’s northern origins, with references to flat caps and whippets, announced that it was now focused on television.
“Splendid,” commented The Lawyer. “No doubt Parkinson is lining up Chris Jones this very minute. Or maybe Hammonds is concentrating on the graveyard slot of local news bulletins – because frankly, boys, that’s the only telly you’re likely to get.”
The kings of floats rise to the top
In the last IPO boom but this one, Linklaters came out top in The Lawyer’s survey, for both issuers and and underwriters; and on AIM, Memery Crystal romped away with the lead.
By July, however, the IPO market was starting to falter, with several high-profile floats being pulled. Linklaters’ David Cheyne admitted that the firm had therefore begun to discount on deals, but his stance was not followed by magic circle rivals.
These merger talks went nowhere…
– Squire Sanders and Watson Farley
… but these ones did
Cleveland-based Jones Day took over Gouldens, but bowed to Gouldens’ demand of guaranteed profit for 25 partners over the next two years.
In return Gouldens became an offshoot of the most rigorously centralised management of any international law firm.
Sinclair Roche & Temperley (SRT) merged with Stephenson Harwood in the first part of 2002, but in August a judgment in the Somatra professional negligence case against SRT found that a former SRT partner was found to have deceived, and on one occasion lied, to his client. The legacy SRT was left facing a liability of £9m.
Tech? What, us? Never heard of it
As technology suddenly became unfashionable, IT-focused boutique Tarlo Lyons performed a strategy U-turn and said it was refocusing on commercial property and litigation.
And a semi-putsch at A&O
Allen & Overy managing partner John Rink stepped down a year early, but The Lawyer revealed that he had been asked to do so a year previously by a cabal of powerful partners.
The firm’s election saw banking head David Morley take charge.
Tower Snow, Clifford Chance
Few people could singly persuade a major global law firm to make the most audacious move it had ever contemplated. But one person who did it was smooth-tongued Brobeck partner Tower Snow, and the firm was Clifford Chance, whose desire to be first mover is virtually embedded in its DNA.
Clifford Chance took an 11-partner team from Brobeck’s San Francisco office to set up its first-ever presence on the West Coast of the US.
The move at the time threatened to redraw the US legal map. The mass departure certainly precipitated Brobeck’s downfall, which took place the following year, plus a number of inevitable lawsuits. Snow’s departure was operatic – Brobeck not only immediately barred him entrance to the office, but broke the key of his door in the lock.
However, the Clifford Chance West Coast experiment was doomed. Just two years later the operation was wound down. Snow’s former firm Brobeck tried talks with Morgan Lewis and sought a loyalty oath from its partnership, but dissolved the following year.