Andersen troubles a boon for Deloitte

By Liz Benston

Friday, June 14, 2002 | 11:07 a.m.

The meltdown of accounting giant Arthur Andersen and the closure of its Las Vegas office have created a windfall for its closest rival and are shaking up the Southern Nevada auditing scene.

Deloitte & Touche has gained Andersen's major gaming clients and most of its key employees in recent weeks, transforming the second-ranked company into the state's largest accounting giant.

Some competitors say they refrained from poaching Andersen's business out of respect for the company, which rose in prominence over the past decade as the preeminent auditor to Nevada's biggest industry.

"I have a lot of respect for the guys at Andersen," said Randy Vallen, managing partner of the Nevada and Arizona practice of PricewaterhouseCoopers. "This is the last thing you want to see happen to a quality firm."

"We weren't going to try and interfere," added Carl Rowe, a director with Las Vegas-based accountants Fair, Anderson & Langerman. "We were giving them the chance to do the best that they could."

Janet Hastie, marketing director for Deloitte's Nevada practice in Las Vegas, has declined to discuss any negotiations with potential or existing clients.

Deloitte already audits the state's largest non-gaming companies, Sierra Health Services and Nevada Power Co. owner Sierra Pacific Resources. Other firms also have picked up some significant non-gaming clients from Andersen. PurchasePro, a provider of Internet services to businesses, hired Grant Thornton, while Florida-based Turnberry Associates, developers of luxury condos off the Strip, went to PricewaterhouseCoopers.

Ameristar Casinos Inc. last month became the last publicly held Las Vegas gaming company to drop Andersen when it hired PWC. Southwest Gas Corp., Andersen's largest local non-gaming client, also went to PWC last month.

Outside of Las Vegas, gaming companies Monarch Casino & Resort, Trump Hotel & Casino and Mohegan Sun have recently dropped Andersen.

Andersen representatives have refused to discuss the local office, instead referring calls to Deloitte.

Experience is a key advantage in the gaming business, said Janet Hastie, marketing director for Deloitte's Nevada practice.

"It's a highly regulated industry," she said. "The best thing (for a client) is an auditor who knows the rules and regulations." Experienced auditors also need to be familiar with regulations in other states where their clients have operations, she said.

The addition of five former Andersen partners with decades of experience in gaming, including former Gaming Control Board member Tom Roche and Steve Comer, founder of the Las Vegas practice, have cemented Deloitte's reputation in an industry that is inherently complex, observers say.

Hastie declined to say how many Andersen employees and clients have joined the firm. She also declined to give names of clients, citing confidentiality agreements.

Deloitte's gaming clients could now make up about 50 percent of its business, Hastie said. The company remains diversified in other sectors, such as real estate, manufacturing, health care and the public sector, she added.

PWC and McGladrey & Pullen say their local offices have picked up some Andersen clients, though they won't reveal names. New clients at PWC include several Indian casinos, some non-gaming accounts and some internal auditing projects for gaming companies, Vallen said. The firm also has hired some managers and staff from Andersen, he said, declining to elaborate.

The influx of employees hasn't changed the firm's focus, which is centered on gaming, real estate, construction, mining and retail industries, he added.

McGladrey has acquired mainly private companies from Andersen, including some indirectly involved in gaming, said partner Glenn Bougie.

The company also is talking to some Andersen employees about joining the practice, Bougie said.

McGladrey and smaller firms that serve mainly private companies say they haven't seen much impact because of Andersen's expertise with larger, publicly traded entities.

"(Clients) are basically going where they have a relationship (with an employee)," Rowe said. The firm has picked up a few clients, including gaming and non-gaming companies, but no Andersen employees, he added.

A significant number of Andersen's 75 or so former employees are still looking for work, said Mike Micone, owner of the Las Vegas branch of staffing agency Accountants Inc. "A lot of them didn't think the ship was going to sink.'

Some employees have chosen not to work at Deloitte, though the firm's expertise and selection criteria are similar to Andersen's. They may not be interested in "starting over" with an accounting firm and are taking jobs with their clients, Micone said.

The Andersen shakeup will likely have a broader local impact down the road.

Clients traditionally seeking firms for accounting and consulting services may split those duties among companies, auditors say. The same goes for internal auditors and external auditors, they add.

That translates into more opportunities for competitors, Bougie said. "We're optimistic about the next couple of years. It's going to be interesting in the accounting and consulting service arena."

Some local Andersen employees already are touting a new venture. Protiviti Inc., a subsidiary of staffing giant Robert Half International of Menlo Park, Calif., launched this month with about 800 employees and 25 branch offices nationwide.

A few former Las Vegas staffers have moved to Protiviti's Los Angeles office, though the firm expects to eventually launch a branch in Las Vegas, said Paul Sachs, a managing director of Protiviti's western practice in Los Angeles.

Sachs, a former Andersen partner, wouldn't say how many Las Vegas employees joined the firm, which offers outsourced and co-sourced internal auditing and risk consulting services rather than external audits. Offering external audits alongside consulting services could invite potential conflicts of interest, industry critics say.

The business was formed in response to Andersen's imminent implosion, Sachs said, offering an opportunity for employees not associated with the company's external accounting practice " to continue in the same high-quality professional service that many of us have done in our careers."

"This is unfortunate about what's happened at Andersen," he added.

Many gaming companies initially stood by Andersen months after it was indicted on federal charges that it obstructed a federal investigation into the business practices of the energy-trading giant Enron. But Andersen's fortunes darkened when New Jersey gambling regulators ordered casinos operating in that state to drop the firm. Andersen's reputation and financial future has become even less certain with the launch of the criminal trial, observers say.