The year was 2002. Arthur Andersen was charged with, and convicted of, felony obstruction of justice. Most clients fled it. States rescinded its license to practice there, and eventually AA turned in its national certificate. Although never officially dissolved, Arthur Andersen was no more.
To the thumping of a foot, the guttural melody of the Queen classic would come pumping out of many accountants, “Another one bites the dust.” It was reminiscent of gallows humor, except no AA accountant had a noose slipped down around the neck.
Laventhol and Horwath (LH) was the first. In 1990, it was number seven nationally, next behind the Big 6. It was a big deal. Its Philadelphia office, by itself, would have ranked in the top ten.
Now, BDO Seidman is in the news. It has been sued for $10.7 BILLION USD. It is not a laughing matter, although my first thought is to wonder if BDO represents Biting Dust Ok. A copy of the lawsuit is here.
BDO is number 7 in the US, behind the Big 4, McGladrey, and Grant Thornton. It is a bid deal. BDO has long wanted to be one of the big guys (i.e., Big 4). The magnitude of this lawsuit makes it the Big 1.
All BDO employees must be going through a difficult time. We know how painful it was for those at LH. A well written newspaper story, “1990: The other big accounting firm meltdown,” describes the last days. Employees had already taken a 10% cut in pay. Retirees were hit even harder. Partners and senior employees received daily calls to donate money to prop up the firm’s cash position. After the bankruptcy, partners and senior employees had to pay an additional $75,000 on average. Retired partners had to pay, also. Those able to keep working were OK, the retirees weren’t. Many went back to work, some into their 80s.
BDO employees will be in a better position, because it is a limited liability partnership, a form of business not available to Laventhol and Horwath. Their homes should be safe.
Although the potential for an accounting firm’s death is essential for the audit model to function as intended, it doesn’t make it any less cruel.
BDO, I wish you the best.
Debit and credit – – David Albecht