In 2014, executives of a San Francisco-based company that had been known since 2007 as Wealth & Tax Advisory Services organized a get-together to celebrate the rebranding of their business as Andersen Tax.
For around two dozen of these executives, the rebranding represented the realization of a dream they’d had for years, because it meant that they were at last openly acknowledging the fact that their business had its origins in a portion of the original tax operations of Arthur Andersen.
“They invited a bunch of us retired Arthur Andersen alumni,” recalls David Buchholz, who had been managing partner of tax from 1976 to 1988, and Arthur Andersen’s longest-serving head of its tax practice in its 82-year history, before retiring in 2002.
Buchholz attended that 2014 get-together, as did, he says, many others who had spent most if not their entire careers with Arthur Andersen.
Fittingly, he adds, the celebration “was held in Chicago, which is where Andersen began.”
At the time that party took place, many people around the world still would have remembered the name “Arthur Andersen” as having belonged to a “Big Five” accountancy firm that collapsed in 2002, after having been found guilty of obstructing justice in connection with auditing work it had done for Enron Corp., the Houston, Texas-based energy company which had filed for bankruptcy itself the year before.
The guilty verdict was overturned by the U.S. Supreme Court in 2005, thus clearing the Andersen name. But it came years too late, as the collapse of the Arthur Andersen business had taken place within months of the initial guilty ruling.
Still, the decision to make a central feature of the new tax business’s past links to Arthur Andersen in 2014, by adopting its name, might not have been an obvious one to some.
Fast-forward five years from that name change (and the get-together organized to celebrate it), though, and you’d struggle to find evidence that the Andersen name is in any way holding back the rapid international expansion of the entity now known as Andersen Global that is currently under way.
The expansion is taking place under what one of those who knows him well describes as the “visionary” leadership of its 64-year-old, San Francisco-based chairman, Mark Vorsatz, who had been an Arthur Andersen partner from 1987 until the firm’s demise in 2002.
Vorsatz, who is also chief executive of Andersen Global’s Andersen Tax LLC division, had headed up a group of some 23 ex-Andersen executives who sought to keep a portion of the original Arthur Andersen business going after its collapse, initially as a subsidiary of HSBC USA Inc. (known as Wealth & Tax Advisory Services), because as, as another long-time associate puts it, “they didn’t want to just go to one of the other big accountancy firms, like most of the other [ex-Andersen employees] ended up doing.”
Presence in 50-plus countries
The latest measure of the success Vorsatz and his partners have had in making this dream a reality came last month, when Andersen Global – which is technically an association of member firms, some of which specialize in tax services, some legal services, and some of which do both – announced the addition of a new country to the list of jurisdictions in which it now has a presence, bringing the total to 53. (At its height, the original Arthur Andersen had offices in some 131 countries.)
The addition of the Oman-based Al Alawi and Co., a 37-year-old law firm with offices in Muscat and Salalah, to the Andersen Global network of collaborating entities also gave Andersen Global its ninth Middle Eastern country in which it has a presence, and its 144th outpost globally, in total.
Some weeks earlier, Botswana-based law firm Moribame Matthews also joined the Andersen Global empire, giving it its twelfth African outpost.
Andersen ‘mystique’ lives on
Some former Arthur Andersen executives insist that there was something special about the company that had been founded by its namesake in Chicago in 1913 that had lived on in spirit, long after the actual business was liquidated and shut down in a matter of months seventeen years ago.
They see this spirit as being a key factor today in the new Andersen business’s ability to attract would-be business partners and employees to its growing global network of offices – and even to what they say is a revived and enduring lore surrounding the Andersen name.
Among them is Buchholz. A Chicago native, he’s one of a trio of former long-time Arthur Andersen executives whom Vorsatz and others at the company jokingly refer to as “the Three Amigos,” who do the serious business of functioning as an advisory board to Vorsatz and his team. (The other two “amigos” are Duane Kullberg, former chief executive and managing partner of Andersen Worldwide, from 1980 to 1989, and Larry Weinbach, a former chief executive and managing partner and chief executive of Andersen Worldwide from 1989 to 1997.)
“After [Andersen Tax] acquired the rights to the Andersen name in 2014, former Arthur Andersen employees started coming to Mark, saying how they were interested in joining the firm,” Buchholz recalls.
“Some had been younger partners, like he had been at the time Arthur Andersen failed; some had been managers. All of them at this point were with other firms, or on their own, and were coming up to him and saying ‘gee, I’d like to get back with Andersen.’
“Soon it was growing faster than anybody thought it could.”
This took place against the backdrop of the fact, as Buchholz points out, that it’s “not easy for someone who has started and maintained their own successful business for a number of years” – as many former Arthur Andersen employees did, after the firm’s collapse in 2002 – “to willingly hand over control of everything they’ve built,” and re-brand their businesses as Andersen Tax, and become a part of it, as many have now done.
As for the decision to go global, Vorsatz insists it was only made sometime around January 2013, when it became clear that the business then still known as Wealth & Tax Advisory Services had no other option if it wanted to keep some of its most important clients, in an ever-more-globalized tax world.
“We were beginning to find that we were becoming increasingly limited in our ability to serve some of our very high-net-worth clients without having resources outside of the U.S.,” Vorsatz recalled, in a recent telephone interview, from his company’s San Francisco offices.
The offices are located in the city’s financial district, a few blocks from the San Francisco-Oakland Bay Bridge, and just miles from the heart of Silicon Valley – a presumed source of many Andersen Global clients.
“At first we considered working as part of [an existing international accountancy network], but after 18 months of evaluating the available options, we concluded that we would be better off building a network of our own,” Vorsatz says.
“We had, at that point, grown our business in the U.S. 16% compounded since 2002, in a market that probably had grown just 4%.
“But in 2013, we realized that to keep growing at this kind of pace, and to keep servicing some of the clients we had, we needed to be able to offer our own quality solutions outside the U.S.”
Thus it was that Andersen opened its first overseas operation, in Zurich in July 2013.
And not long after that, Vorsatz was living on airplanes and visiting countries that few of his fellow Americans would find easy to locate on a map, let alone pronounce the names of, as he met would-be Andersen business partners around the world.
As the months went by, he and his team completed one deal after another in the Middle East, India, Africa, Latin America, Europe, Eastern Europe and even Russia and Kazakhstan.
It’s a process that is continuing, as Vorsatz – who is still on and off planes – insists they’re far from finished.
“We have a plan laid out for the next two years which is probably aggressive,” Vorsatz says.
“I think we’ll probably end up in somewhere like 80 to 85 countries by the time we’re finished.” In other interviews, Vorsatz has said the final number could be closer to 100 countries, or roughly double Andersen’s current footprint.
Tax and legal
The big difference between Andersen Global and its predecessor, Arthur Andersen, is that the member firms of Andersen Global don’t do auditing work, the specialist accountancy area which led to Arthur Andersen’s downfall.
As the Enron case and others over the years have shown, the auditing business has often proven problematic – which is why the UK’s Competitions and Markets Authority, in fact, recently announced its intention of seeking to change the way major accountancy firms are regulated in Britain, following some recent high-profile cases of auditing irregularities involving certain major UK companies.
But one way Andersen Global is similar to its namesake, as well as to the Big Four accounting firms (KPMG, Ernst & Young, Deloitte and PwC) is that it is a serious international provider of legal services in addition to tax advice.
This reflects a world-wide trend, apart from certain countries, including the U.S. and UK, where it is not, for the moment at least, legal to combine the two as part of a single legal entity.
A recent LegalWeek article detailing Andersen Global’s global expansion plans earlier this year noted the fact that its aggressive move into the international legal arena was taking place even “as the Big Four audit firms continue their march into the legal industry” as well.
“Andersen currently has just over 1,100 legal professionals worldwide, KPMG has 2,300, EY has 2,200, Deloitte has 2,500 and PwC has 3,500,” the LegalWeek article, which appeared in March, noted.
It quoted Vorsatz as saying he believed Andersen would soon be a major contender in the international corporate legal arena, alongside the world’s top law firms and the Big Four.
“If Andersen achieves its target it will top KPMG, EY and Deloitte,” the article went on.
“KPMG currently practices law in 76 countries, EY in 83, and Deloitte in 85.
“PwC says it already practices law in more than 100 countries.
“However, the Big Four are all in expansion mode.”
Back in 2002, a report published just three months after Arthur Andersen collapsed noted that one could still “visit AndersenLegal.com and…find contact details for former Andersen Legal offices in 36 countries worldwide,” which it noted had employed more than 2,800 lawyers” at the time of its collapse and, after just nine years in operation, had become one of the legal profession’s “top ten global players.”
Vorsatz today confirms that at its peak Arthur Andersen had been “one of the largest law firms in the world.”
Any discussion of Andersen Global quickly reaches a point where there are references to “collaborating firms” versus member firms, these “member firms” understood to have been “collaborating firms” that went on to adopt the Andersen name, and thus become a full-fledged Andersen Global partner.
“Quality and like-mindedness/cultural fit” are said to be what Andersen is looking for in the businesses it takes on, as collaborating firms, ahead of inviting them to become Andersen member entities.
Vorsatz and other Andersen executives liken the process of signing up firms as collaborators to “dating,” a process that they note is typically followed after a time (normally around 12 to 24 months) by the corporate equivalent of “marriage,” as Andersen gains another member firm.
“Usually we sign a non-exclusive, non-financial agreement with these companies, to become an Andersen Global ‘collaborating firm,’ and then after a year or two, if it all goes well, they then become members, which involves cost-sharing and profit-sharing elements, and, to use the brand, a small licence fee,” Vorsatz explains.
“Just as we don’t date people we don’t think we’d like to marry, we [at Andersen Global] only enter into these relationships with an expectation that if they like us and we like them, after a year or so, they’ll become Andersen Global member firms.”
This gives the parent company a vast network of businesses that in many cases have their own areas of expertise.
In the UK alone, for example, Andersen currently has five entities, one of which is a branded London-based Andersen Tax office, and four collaborating businesses; Mark Davies & Associates and Milestone International Tax Partners, both in London; RBC VAT Ltd in Reading; and Claritas Tax Ltd, in Birmingham. There’s also an Andersen Tax office in Dublin, Ireland.
The Arthur Andersen ‘ethos’
The collapse of Arthur Andersen in 2002 is still seen by many who used to work at the firm as an unspeakably sad ending for what they saw as a special business, in spite of its size.
Some who knew the company back in the day, but who didn’t work for it, point out that it was known for working its employees hard – in exchange for higher salaries than their rivals were typically paid. It was also known for being open to innovation: it was among the first such firms to introduce computer-assisted auditing techniques.
An accountant who worked for one of Arthur Andersen’s rivals in Belfast in the 1980s recalls that Andersen trainees there were “seen as something of an elite.”
“Many accounting graduates regarded Andersen as the firm to work for – a leader rather than a follower [in the accounting profession],” he adds.
Many of those who worked for Arthur Andersen, though, still speak of what Buchholz calls its “culture and comradery, and sense of duty, to leave the place better than it was left to us.”
“I would say that this is the one reason Mark has done all this,” Buchholz adds, referring to Vorsatz, and his building of the Andersen successor business.
“Even though he could have gone to one of the other accounting firms and been very successful, and with fewer headaches than he’s had building this firm.”
Weinbach, the former CEO of Andersen Worldwide and one of Voratz’s other “Three Amigos”, describes the Arthur Andersen culture as being so strong that those who left the company after it collapsed did so with a “mental tattoo” of the company’s logo that, for many, endured for years, and ultimately drew them to join Voratz’s company after they heard about it.
“I talk to a lot of the partners, and if they came to Andersen Global from another firm, they don’t quite understand it, this tattoo,” he adds.
“But you’d be amazed at how strong that tattoo is, it’s stayed with all of us.
“You say the words ‘Arthur Andersen’ to me now, and you’ll see I still light up. Even though I’ve been away from the firm for over 20 years.”
His advice to Voratz with Andersen Global, Weinbach adds, has been to re-create the Arthur Andersen culture, and keep it up.”
Vorsatz says this has been his strategy all along. And its one of the reasons, he notes, that the company has shunned offers of investment from such outside entities as private equity firms.
“I get calls from them every month,” he says of the private equity sector.
“But our goal is to remain independent, so we are able to build a better firm for the next generation.
“We also invest a lot in training, in fact, I think we may have the only private label master’s degree program, through the University of San Francisco, through which we currently have over 100 people enrolled globally, and which we’re looking to expand.
“Arthur Andersen, as you may have heard, had a reputation of spending way more money on training than any other firm, and we are continuing that tradition here. This is one of our core values, and it’s our core values, I think, that attract people, as customers and employees.
“We also have a training program in St Charles, Illinois, through a facility that’s owned by a former Arthur Andersen entity, and we do a lot of regional training as well, such as a four-day program we’re doing in Venice in May, for all of the partners in Europe.
“We have no interest in monetizing this,” he continues, referring to Andersen Global.
“It’s not about the money.
“I own the biggest equity interest in the U.S., and I want to build this for the next generation.
“I think that would be a very satisfying legacy to leave.”
For his part, Weinbach stresses the credit Vorsatz deserves for “being the one to come forward and say, ‘let’s resurrect Andersen’ – and then doing it.”
1913: Arthur Andersen is founded in Chicago, as Andersen, DeLany & Co.; name changed in 1918 to Arthur Andersen & Co.
1947: Founder and namesake Arthur Andersen dies.
August 2000: Arthur Andersen’s Andersen Consulting operation is spun off and renamed Accenture.
March, 2002: Arthur Andersen is charged with obstruction of justice, after it emerges that it had destroyed documents relating to its work as an auditor of Enron, the energy company that was coming to be seen as having been built on fraudulent accounting practices.
June 2002: Arthur Andersen is convicted of the obstruction of justice charges, and effectively ceases trading.
July 2002: A tax practice portion of what had been Arthur Andersen is acquired by HSBC USA Inc., which uses it as the basis for a new subsidiary, Wealth & Tax Advisory Services USA Inc (WTAS). The new HSBC Private Client Services Group was seen as serving “the wealth and tax advisory needs of high-net-worth individuals.”
June 2005: U.S. Supreme Court reverses its conviction of Arthur Andersen
December 31, 2007: HSBC USA Inc sells Wealth & Tax Advisory Services to 23 WTAS managing directors in an MBO, in exchange for a reported US$5m in cash and deferred notes, with a principal amount totalling US$60.85m.
September 2, 2014: WTAS adopts the name Andersen Tax. (The Andersen Global name evolves later, as the parent association of member firms of which Andersen Tax is the founding member.)
April, 2019: Andersen Global announces it has a presence in some 50 countries around the world, with the addition of a new “collaborating” law firm in Zambia, Mulenga Mundashi Kasonde Legal Practitioners. The firm also marks its eleventh African outpost, and brings the number of countries in which Andersen Global’s member or collaborating firms offer legal services to 41.