For Elana Mourtil, winning a partnership at Arthur Andersen was the American dream. Born in Iran, she moved with her mother and two brothers when she was 11 to Forest Hills, in the New York borough of Queens, where they lived on her mother's earnings as a tailor. She put herself through Queens College _ and helped her mother pay the mortgage _ by working in a local supermarket as a cashier and bookkeeper.
Recruited on campus by Andersen, she worked her way up the ladder over the next 14 years. Her climb culminated last September, when Andersen offered her the chance to become a "participating partner," part of a coveted circle of senior employees who own equity stakes in the big accounting firm.
Like most equity partners, Mourtil took out a loan from Andersen to pay the first installment in her mandatory annual investment in the firm. "What could go wrong?" asks the 36-year-old tax consultant. "The company has been here 89 years. When they offer you a chance at partnership, you jump at it. There's no such thing as due diligence."
With her husband in law school, she figured she would pay back the loan with a hefty pay increase that came with the promotion. "Now," she says, "even if Arthur Andersen doesn't make it, I have to work for years to pay off this loan."
Indicted by the federal government for shredding files connected with its work for Enron Corp., Arthur Andersen is in crisis and may not survive. Enron shareholders _ blaming Andersen for blessing the company's books for years _ are suing for hundreds of millions of dollars, and clients are fleeing.
Federal prosecutors argue that they are punishing a wrongdoer that has admitted to shredding documents. The firm also pledged to stay out of trouble in the wake of another accounting-fraud case involving Waste Management Inc. But often when prosecutors get tough, innocent bystanders, in this case a lot of them, get hurt.
Andersen's travails are a serious blow to all 85,000 of its employees around the world, but they pose an unusual trauma for its 4,700 partners, most of whom had nothing to do with Enron. Like all the Big Five accounting firms, Andersen requires its partners to put money into the firm each year _ generally between $50,000 and $250,000, depending on seniority, salary and other factors. A partner becomes an owner of the business, rewarded with a share of the profits. Generally, partners are expected to bring in $1.5-million to $2-million in new business annually.
Normally it's a gold-plated investment that makes up a big portion of a partner's net worth. Many partners have been paying in for decades and have millions of dollars invested in Arthur Andersen. "Some people have put their life savings into the company," says Marc Andersen, a new partner in Washington.
Now all that money is in peril, subject to the massive claims of Enron shareholders and regulators. Margi Quick, 47, became a tax partner in Los Angeles in September and still owes 99 percent of her loan from the firm. "A lot of people will have to declare bankruptcy if they don't find jobs in three months," she says.
"There are going to be lifestyle adjustments for even the wealthiest," says Dan Broadhurst, 43, a partner who runs Andersen's financial-consulting practice in Chicago. He has five children and "they may not be able to go to the school they want to." He is the sole breadwinner and has cut back his life-insurance policy to save money. "Our retirement, all of our savings, is tied up in the firm. If it doesn't survive, I lose 20 years of savings."
With their careers in jeopardy, Andersen employees are flooding the White House and the Justice Department with calls and e-mails to protest the government's prosecution of the firm. About 500 Andersen employees cheered outside a Houston courthouse Wednesday, where the firm's legal team officially entered its not-guilty plea and won an early trial date.
"Save our jobs," Tina Thomas, an Andersen executive assistant, said Wednesday to the Rev. Jesse Jackson, who stood in the lobby of the firm's Chicago headquarters expressing solidarity with the firm's employees. A 34-year-old single parent, Thomas was teary-eyed as she told Jackson that "I have a new house and two kids. This is devastating."
David Swinehart, a 32-year-old assistant director of campus recruiting in Chicago, sold his house in expectation of buying a new one and must move his family out by April 24. Now he fears that no bank will finance the purchase if he loses his job. Michelle Grant, a 31-year-old global sales manager, and her husband, who also works for Andersen, worry that their uncertain future could halt their plans of adopting a baby from Vietnam. Todd Richards, a 41-year-old senior manager who says his 9-year-old son needs open-heart surgery in June, worries about losing health coverage for his family.
Elana Mourtil's path to Arthur Andersen began in an accounting class at Forest Hills High School. She was riveted by the numbers. She describes herself as conservative and wanted a life of stability.
Arthur Andersen came on campus one day in 1987. The interview went well and the firm invited her for a daylong follow-up at an office on Avenue of the Americas in Manhattan.
"I went home that day and told my mother that I'm going to work for Arthur Andersen," she says. "I was so impressed." At the time, it was part of the Big Eight, and accountants were still writing with pencil on paper spreadsheets.
After she got married to someone she met at the supermarket, she put off having children, as she pulled all-nighters in her bid to become a partner. In 1998, she became a nonequity partner _ the only surviving member of the group of 50 New York tax specialists who joined Andersen the year she did.
Joining the partnership at the member-firm level currently requires an investment of between $50,000 and $90,000. The investments are used to fund the costs of running the businesses and keep control of the firm in the hands of the partners. Auditing firms must be structured as private partnerships, because public companies cannot be audited by public companies under government rules.
Last year, she was at a meeting in New Jersey with 30 other partners when the firm announced that some employees in the Houston office were involved in a massive shredding. Mourtil threw her forehead into her hands. "I couldn't believe anybody would do something so stupid," she says.
She says she didn't know Enron was even a client until recently. "I didn't know these people. I had never heard the name David Duncan. I don't know what he was thinking." Duncan is the Houston partner who was fired after the shredding incident was disclosed.
She called the Justice Department this week and left a message on a line set up to receive Andersen complaints: "I really wish you would withdraw the indictment. You are hurting 85,000 people."
She says that colleagues are either gaining a lot of weight or losing it. She has lost 10 pounds _ and at 5 foot 5 weighs only 105 pounds now.
Many partners have taken out lines of credit against their capital accounts. After the indictment, a California partner received a call from his bank demanding immediate payment of a loan the partner had taken out to care for his dying father-in-law. The partner expects to file for personal bankruptcy.
Some partners have talked about a lawsuit against the federal government. Some newer partners suggest that they may ultimately have a fraud lawsuit against senior partners who may have known there was a time bomb. Mourtil doesn't think she has any recourse. "We are the end of the line, that's the thing. When things go bad, they sue the accountants. Who do we sue?"