MGM MIRAGE drops Andersen

Wednesday, May 8, 2002 | 11:01 a.m.

SUN STAFF AND WIRE REPORTS

Shareholders of Las Vegas-based MGM MIRAGE voted Tuesday to hire a new accounting firm -- parting ways with embattled Arthur Andersen as it deals with fallout from the Enron bankruptcy.

"We are currently evaluating various firms as a successor and expect to announce that selection shortly," Terry Lanni, MGM MIRAGE's chairman and CEO, told about 200 employees and investors who met at the company's Beau Rivage Resort & Casino in Biloxi, Miss.

In March, New Jersey casino regulators barred Andersen from working in its casino industry until it settles a federal criminal indictment in the Enron bankruptcy scandal. This forced the hand of two big Las Vegas-based casino operators with New Jersey investments -- Harrah's Entertainment Inc. and MGM MIRAGE.

MGM MIRAGE is developing The Borgata, a $1 billion casino and entertainment resort, in Atlantic City, with Boyd Gaming Corp. of Las Vegas.

Andersen has lost dozens of clients since it became entangled in the alleged cover-up of Enron's failing financial health, which led to the largest corporate bankruptcy in American history.

Andersen had been the auditor for MGM Grand Inc. since 1986. MGM Grand merged with Mirage Resorts Inc. in 2000.

The Enron scandal and Andersen's struggles have changed the way MGM MIRAGE operates, Lanni told shareholders Tuesday.

MGM MIRAGE has stopped allowing employees to buy its stock directly through the company in the aftermath of the Enron debacle, he said.

Separately, KPMG Consulting Inc. today announced plans to acquire as many as 23 business consulting units of Andersen Worldwide's member firms for up to $284 million.

KPMG said it had signed a letter of intent that covers the consulting business of Andersen member firms in the United States, Europe, Asia and Latin America. Those businesses had combined revenue of about $1.4 billion last fiscal year.

KPMG has already acquired Andersen's consulting business in Hong Kong and China.

Also today, Ernst & Young LLP acquired Arthur Andersen's Pittsburgh audit and tax practices in a deal involving 87 Andersen employees, who will join Ernst & Young's office in that city.

McLean, Va.-based KPMG said completion of the deal is subject to reaching agreements with each of the Andersen member firms. Each deal will require the approval of local partners and regulatory authorities.

Besides the cash, KPMG said it planned to issue up to 6.5 million shares of stock over three years to Andersen's consulting partners who join KPMG Consulting in the deal.

Andersen Worldwide includes Arthur Andersen LLP, the Chicago-based company that audited Enron Corp.'s financial records. Andersen currently is on trial in Houston for an obstruction charge relating to the shredding of Enron-related documents last year.

"Our proposed acquisitions are consistent with KPMG Consulting's stated business goal of strengthening our ability to service our global clients," KPMG Chairman and Chief Executive Rand Blazer said in a statement.

Andersen's operations continue to shrink as more companies have decided to drop the firm as their auditor. But KPMG officials noted that Andersen's consulting business has been able to hold on to its clients while the firm's auditing unit has been hemorrhaging clients.

Blazer said he is impressed with the professionalism and dedication of the Andersen people in the face of the company's difficulty.

"The combined companies will have balance," he said, noting there is little overlap in customers.