A retired partner of Arthur Andersen, who lost $2.2 million in benefits when the firm collapsed, is suing three accounting firms, saying they unjustly enriched themselves at the expense of about 1,000 retired Andersen partners and their spouses.
The suit, filed in a state court in Indiana, says that the three firms — Deloitte & Touche, Ernst & Young and KPMG — sought to hire away Andersen partners when the firm was in trouble after the collapse of Enron and before its conviction on one count of obstructing justice for shredding Enron documents.
The lawsuit asserts that the three firms, plus a company spun off from KPMG, paid Andersen too little for the right to hire away hundreds of partners, leaving no money to pay the benefits owed to the 1,000 retired partners of Andersen.
Ernst & Young paid Andersen $600,000, the lawsuit states, to release six partners in its Indianapolis office from their agreements not to compete. The price, the suit says, was “vastly inadequate” since the six partners generated $15 million in annual revenue and owed a duty to their retired partners.
The issues raised in the lawsuit illustrate the risks for highly paid partners and accountants, whose primary retirement benefit is often in a plan that is not shielded from creditors, as the pensions of most rank-and-file workers are under a 1974 law. Tens of thousands of highly paid workers have such retirement plans, which are often secured only by the ability of the employer to pay. Even when money is set aside to pay benefits, the pool of funds can be taken by creditors in bankruptcy proceedings.
One defendant, Deloitte & Touche, called the lawsuit frivolous. “The reasons for Andersen's failure are well known,” Deloitte & Touche said, “and had absolutely nothing to do with the fact that other employers were willing to provide employment to the people who decided to leave Andersen when it became clear that the firm could not survive.”
KPMG was equally dismissive: “To suggest that KPMG caused, or contributed to, Andersen's demise is utter nonsense. This suit is a cynical and misguided attempt to lay blame where there is none, and is completely without merit.”
Ernst and Young did not respond to a request for comment.
The suit also named BearingPoint, the former consulting arm of KPMG.
Gilbert L. Viets, who filed the suit on Friday in Marion County Superior Court in Indianapolis, was a managing partner of Andersen's Indianapolis office when he took early retirement in June 2000 after 35 years. Mr. Viets, who was 56 at the time, was to be paid his benefits, including health insurance, over 10 years.
In January, the lawsuit says, Mr. Viets sought to exercise his right to collect his benefits in a lump sum. “Andersen refused to honor his request,” the lawsuit said, “telling Viets that he could receive full payment in September.”
He was rebuffed again in April. In August, the lawsuit said, Mr. Viets was told he would receive reduced payments through November and would then lose the remaining $2.2 million due him.
The legal issues are complex in part because Andersen has not filed for bankruptcy protection, which would make it easier for Mr. Viets and others to assert a fraudulent- conveyance claim. He is not suing Andersen, which has few assets to pay damages.