Andersen Legal network faces massive claims over Enron

The Andersen Legal Network has received another blow as US class action law firms indicated they would sue the Andersen Worldwide Partnership


Key Andersen Legal partners, including senior partner Tony Williams, face massive claims as they are members of the unlimited Andersen Worldwide Partnership.
The setback comes as the network was saved from collapse by merger talks between Andersen and KPMG parent companies. Several Andersen Legal members, including Garrigues and Andersen Luther, indicated to The Lawyer that they were kept in the network by the merger talks (see box). But the major impediment to a merger is the potential liability of And-ersen’s non-US partners.
Seattle-based class action firms Hagens Berman and Keller Rohrback represent former Enron employees who saw their shares and pension funds wiped out as Enron collapsed. Joint lead counsel Steve Berman said: “We intend to attack the Worldwide Partnership. We have a deadline of 1 April to file an amended complaint.”
In a blow for Andersen’s UK-based partners, Berman also said: “The document shredding in London is the main reason for attacking the worldwide partnership.” Berman declined to comment on how he would prove the supposedly ring-fenced Andersen Worldwide liable.
Finers Stephens Innocent partner and partnership expert Michael Simmons said: “We’re in a whole new world of litigation. This has never happened before, but it could well be that the whole umbrella structure of the Andersen partnerships comes crashing down. Andersen was using various vehicles for channelling its work, but the partnerships were trading together with a view to a profit and using common branding. I see no reason why a Houston court would not be swayed by this.”
Simmons warned that as the litigation is US-based, Andersen partners could be liable for triple damages. The attempt to extend liability has been restricted to class action firms which try to join as many defendants as possible to a claim. Should Enron’s creditors attack non-US partners, it could sound the death knell for any merger.

Merger talks: latest
The KPMG merger talks arrived just in time to prevent the collapse of the Andersen Legal network. But several member firms are still investigating alternatives to the merger.

Andersen Legal Russia
The firm is in talks with Ernst & Young, although a spokesman contended that a deal with KPMG was still possible.

Garrigues, Spain
Last week, Garrigues told The Lawyer that it was close to quitting the network. However, the firm is now on board the KPMG merger talks. The partnership will vote in the next few days; it will consider whether to follow the KPMG merger, revert to independence, or join another international alliance.

Andersen Luther, Germany
According to sources at the German firm, it is participating in the KPMG merger talks and intends to stay within the network.

Dundas & Wilson, Scotland
A KPMG merger is problematic as KLegal already has a strong Scottish presence following the McGrigors merger. Managing partner Chris Campbell told The Lawyer: “It’s highly unlikely that we’ll be part of any KPMG deal. We’re not talking to anyone else. We don’t feel we need to do a deal.”

Garretts, England
Manchester and Birmingham are believed to be in talks with other firms, although in recent years Andersen Legal has refocused on London at the expense of the regions. The Cambridge office went over to Taylor Joynson Garrett this January. Two key partners have left the London office. Giles Thieffry and Douglas Colliver, both capital markets partners, have resigned. Colliver has retired and Thieffry has not yet decided where he will go. Andersen Legal managing partner Tony Williams said: “Neither of those two departures had anything to do with the Enron issue.”

Kwok & Yi, Hong Kong
Andersen’s Hong Kong and Chinese accounting practices have left KPMG to join PricewaterhouseCoopers. Kwok & Yi managing partner Larry Kwok said: “We’ve had approaches, but we’re not part of the Chinese deal. We’ll follow the collective wisdom of the Andersen Network.” He said that Kwok & Yi was not dependant on tax work and could easily survive as a standalone firm.

Rajah & Tann, Singapore
Like Garrigues, Rajah & Tann has removed the Andersen branding from its publicity. A Rajah & Tann spokeswoman said that no decision had been made on the firm’s future. However, she said that the firm intended to further develop its joint venture with US firm Weil Gotshal & Manges.