New York, Nov. 13: 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 after 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 revenues 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.