Andersen's New Plea to Escape Charges

Arthur Andersen is to step up its efforts to persuade the US government to drop criminal charges relating to its audit of Enron, which are standing in the way of any rescue takeover by one of its rivals.

After a marathon meeting of its 1,700 partners around the world, the troubled accountancy firm failed to name a successor to Joseph Berardino, who resigned from the chief executive seat this week so that new management could try to save the partnership.

Yesterday though Paul Volcker, the former chairman of the Federal Reserve who has been parachuted in to find a solution for the firm, made it clear that he intended to work hard at getting the criminal charges dropped.

"I can assure you I have a personal interest in the negotiations with [the justice department] because it is one of the conditions for our board to be put in place," Mr Volcker said in New York.

He is leading a proposed rescue plan for the firm that would involve selling off all its non-audit business and handing control of the remaining business to a new, slimmed-down board.

As further details of the plan were revealed yesterday, two senior partners were named to oversee what is expected to be a painful transitional phase.

The two partners are CE Andrews, head of the firm's worldwide audit practice and Larry Reiger, a senior partner.

Andersen is desperately seeking a solution for its long-term survival following the collapse of US energy company Enron, whose accounts it audited.

Andersen faces charges of obstructing justice after it emerged that it shredded documents used in the audit.

The debacle has tarnished the firm's reputation and it has suffered a wave of defections of audit clients amid calls around the world for an overhaul of the relationship between auditors and their clients.

It has raised questions about whether accountancy firms should also be permitted to engage in consultancy work for the same companies whose accounts they audit.

This another reason why the rescue plan being mooted for Andersen would require the non-audit operation of the firm to be sold off.

But the damage to its reputation is already leading the firm to break up, with rival Ernst & Young buying the Australian part of the operation, and the rest of the non-US business likely to go to KPMG.

It is believed that the US business, without its consulting arm, is more likely to survive without the lingering uncertainty of legal action.