ATLANTA - Arthur Andersen LLP's 10 investment consultants escaped the embarrassment of the guilty verdict handed down for obstruction of justice in the recent high-profile government trial against the firm.
That's because they all left.
In May, six joined Clark/Bardes Consulting, Barrington, Ill., in a carve-out led by Gregg Buckalew, former principal at Andersen.
"We got serious about looking around for new opportunities after the indictments came out in March," Mr. Buckalew said in an interview.
The three consultants specializing in high-net-worth clients went to Deloitte & Touche LLP, New York, last month. And, Frances Armistead joined LCG Associates, Atlanta, as an institutional investment consultant in May .
Clark/Bardes specializes in executive compensation and employee benefits. It recruited 100 Andersen support staff members and 10 former partners to form a human capital practice, and the investment consulting practice is part of that, Mr. Buckalew said.
The plan is to expand the investment consulting practice and establish a presence with offices in New York and Los Angeles during the next few months, he added. Currently, it is operating out of a single office in Atlanta, where all 10 Andersen investment consultants worked.
$7 billion in client assets
Andersen's plan sponsor practice had around $7 billion in client assets, divided among health-care clients, foundations, corporate pension funds and 401(k) plans, Mr. Buckalew said. He noted he has received assurances from most of his clients that they will continue to use his services and that contracts are being prepared.
Singing River Hospital, Pascagoula, Miss., with $115 million in its defined benefit plan, will definitely stick with Mr. Buckalew, said Robert Lewis, chief financial officer.
"We started with Gregg as a consultant in 1992 when he was with Watson Wyatt and followed him to Andersen, and now we're following him to Clark," Mr. Lewis said. "He's been our focus more than Andersen. When I heard the guilty verdict, I didn't even stop to think that he had been at Andersen. While all this was going on with Enron and Andersen, we knew that Gregg would land on his feet and wind up somewhere else. We feel he has performed well for us, and we have transferred our records to Clark.
"We used to have a lot of fixed income in the retirement plan, and he helped us set an allocation policy we felt comfortable with, bringing in equities. We now have a good mixture, around 60% in equities, which is split between different strategies," Mr. Lewis said.
Another Andersen client, the Tallahassee (Fla.) Pension Fund, with $751 million in assets, is preparing a request for proposals for a consultant, said Darrell Thompson, acting clerk-treasurer.
"We have a policy that all contractual services have to be competitively bid, and it's been several years since we bid for a consultant," Mr. Thompson said. Clark, he said, is welcome to bid. The system had been discussing searching for a consultant even before the indictments, he said. He expects the RFP to go out at the end of the month. Andersen had been the plan's consultant since 1997.
Other clients said they will take up the matter at their next board meetings. Deborah Andonie-Wall, senior director of the $2 billion retirement plans at Tenet Healthcare Corp., Santa Barbara, Calif., said: "We have requested that Andersen move our files to Gregg over at Clark and will discuss it at our pension committee meeting July 5. We expect to formalize an agreement. We have been happy with Gregg and his associates."
Officials at the $4.5 billion New York City Deferred Compensation plan, which has used Andersen for fund performance analysis and compliance consulting on a quarterly basis, will discuss what to do about the matter at the July 8 board meeting, said Dean Weltman, counsel.
Political no-no
Mr. Buckalew observed that using Andersen has become a political no-no in both Florida and New York. "They are both under political mandates not to use them. There's no way we could have kept that business if we had stayed at Andersen."
Others that used Andersen's consulting services, according to Nelson Information's 2002 Directory of Plan Sponsors, include the $240 million foundation of Sisters of Mercy of North Carolina, Charlotte; the $56 million defined contribution plan of American Buildings Co., Eufaula, Ala; and the $26.6 million endowment of Warren Wilson College, Asheville, N.C.; Officials at the plans either wouldn't comment or didn't return phone calls.
Separately, the status of the Arthur Andersen employee benefits plans is unclear. According to the 2002 Money Market Directory, its 401(k) plan had about $2.6 billion a year ago, and the defined benefit plan had about $412 million.
Said Mary Brewton, manager of the two plans: "We're not commenting on the pension plan to the press."
The plan covers employees, but not partners, who have their own supplemental, non-qualified plan.
Mr. Buckalew said he didn't have any details about the plans but speculated the 401(k) plan would shrink as people leave and roll it over to their new jobs. The defined benefit plan probably would be frozen, but it will have to be maintained, he said. "People can't roll these over, unless Andersen terminates it and buys annuities for everyone who's covered. It's unlikely that they have made a decision, and I wouldn't expect any for quite a while," he said.
