APOLLO ADVISORS

APOLLO
ADVISORS

When the gilded idols begin to tarnish...

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April 19, 2007

Taking Henry Silverman Private

On the morning of April 19, the private-equity firm Apollo Management acquired Realogy--the company behind real estate brokerages Coldwell Banker, Century 21 and ERA. It was not, by modern standards, a huge transaction: the sale price was $8.5 billion, nowhere near the $39 billion that private-equity titan Blackstone Group recently paid for Equity Offices Trust.

Realogy's passage into private ownership was nonetheless a landmark--because it marked the end of chief executive Henry Silverman's career as boss of a publicly traded corporation.

Silverman, 66, is no household name, but he may be one of the iconic figures of modern American capitalism. Either that or "the Zelig of the corporate world," as he once called himself, evoking Woody Allen's cipher of a character who shows up at major historical moments.

Silverman really has been a player in just about every important business trend of the past three decades. He has watched the rise, fall and resurgence of private equity--what used to be called leveraged buyouts, or LBOs--from inside and out.

"There are certainly cycles," Silverman said, when I talked to him a few days after Realogy went private. "And in the current iteration of the capital markets, clearly the private-equity guys are sitting in the catbird seat."

Two leading catbirds, Blackstone's Stephen Schwarzman and Apollo's Leon Black, happen to be old pals of Silverman's. In the 1980s, Silverman too was an LBO artist, working alongside corporate raider Saul Steinberg and funding his exploits with Michael Milken's Drexel junk bonds. Then, as a partner at Blackstone in the early 1990s, he sniffed a change in the financial winds, cobbled together a few struggling hotel chains (starting with Ramada and Howard Johnson) into Hospitality Franchise Systems (HFS), took the company public and stayed on as CEO.

While private equity plodded along, Silverman built HFS into one of the stars of the 1990s stock-market boom. The company expanded into real estate, then rental cars (Avis). Its share price rose almost 2,000% in four years, and Silverman's net worth rocketed toward $1 billion. He was hailed as a genius.

Then, in 1997, he merged HFS with direct-marketer CUC to form Cendant. CUC was an e-commerce pioneer, giving Silverman a tangential link to the Internet bubble. Under CEO Walter Forbes, now awaiting jail, CUC was also a pioneer at fabricating earnings, Silverman later discovered. This was the first of the big end-of-the-century accounting scandals, and though Silverman and Cendant survived it, the disaster cost him both his genius certification and most of his net worth.

His paychecks remained large enough to attract criticism though, and even as Silverman steered Cendant to a profit peak of $2 billion in 2004, investors were unimpressed. So he heeded their grumbling and broke up the company. The hotels became Wyndham Worldwide, rental cars the Avis Budget Group, travel distribution (Orbitz, Galileo) Travelport, and real estate Realogy. Blackstone bought Travelport last year, and now Realogy belongs to Apollo.

This trip from private equity to public conglomerate and back wasn't pointless. According to company calculations, if you count every spinoff and asset sale--plus a $2.8 billion shareholder lawsuit payout in the wake of the CUC mess--a dollar invested in HFS when it went public in 1992 would be worth more than $14 now--a 22% annual return, or more than double the performance of the S&P 500.

Which means Silverman is probably worth listening to on one of the great questions of our day: Is it better for a company to be traded on a stock exchange or privately held?

"I was asked by the CEO of one of the private-equity firms what my advice would be as to whether to stay private or go public," Silverman said. "My answer was, 'When your stock is going up, being public is great. When your stock is not going up, it's not so great.'"

www.time.com/time/magazine/article/0,9171,1612690,00.html

December 19, 2006

Harrah's agrees to be acquired
by private equity firms: WSJ

By Gabriel Madway

SAN FRANCISCO (MarketWatch) -- Harrah's Entertainment Inc. has agreed to be acquired by private-equity firms Apollo Management and Texas Pacific Group for $16.7 billion plus the assumption of $11 billion in debt, according to a media report Tuesday.

The private equity firms agreed to pay $90 a share for the Las Vegas casino giant, the Wall Street Journal reported on its Web site, citing a person close to the matter.

Two months ago, the firms bid $81 a share, the report said. Harrah's top managers, including CEO Gary Loveman, are expected to be retained by the new owners, the Journal reported.

May 7, 2004

Vail Investor Unhappy
Over Board Makeup

By Paula Moore, The Denver Business Journal

One of Vail Resorts Inc.’s biggest investors has a problem with the Colorado company’s board, in the wake of earnings restatements and a Securities and Exchange Commission investigation into Vail’s finances....

The SEC probe come on the heels of Vail’s October 2002 announcement that it would restate earnings for fiscal 1999 through 2001....

Late last year, analysts at San Francisco-based proxy consulting firm Glass, Lewis & Co. urged Vail stockholders to withhold their votes on six of seven board members up for re-election, including Stritz and Micheletto. In a December proxy analysis, Glass, Lewis found Vail and its auditors have discovered accounting errors affecting multiple years of financial reports.

James Donohue, Vail’s CFO since 1996, was reassigned last November, a week after Vail announced the restatements cut profits by more than $3 million....

Glas, Lewis analysts also gave Vail’s executive compensation program an “F” for paying top managers more than the median pay at peer companies. Though Vail execs made more money than top management at comparable companies, the resort owner fared worse financially, according to Bebel.

Vail CEO Adam Aron, for example, took home $6.7 million last year, including his $704,615 salary and perks such as $5.6 million in real estate and club memberships worth more than $400,000.

In fiscal 2003, Vail reported an $8.5 million loss on revenue of $710.4 million.

All 11 of Vail’s executive officers, from Aron to Vail Resorts Development President James Thompson, sit on the company’s 17-person board.

The board also includes Robert Katz and Marc Rowan, both of whom are affiliated with Vail founder and majority owner Apollo Partners LP of Purchase, N.Y. Katz and Rowan formerly were at defunct Wall Street leveraged-buyout giant Drexel Burhnam Lambert with Apollo founder Leon Black....

... Continued at Vail Resorts

May 21, 2004

Blackstone, Apollo and Goldman Sachs prepare $4.7 billion IPO for Ondeo Nalco

www.altassets.com/news/arc/lists/d47.php

The private equity consortium, which acquired Ondeo Nalco from French conglomerate Suez for $4.2 billion, is planning to float the US water treatment business less than seven months after completing the deal....

For more on the other members in this consortium, GO TO > > > Blackstone Group; Dirty Gold in Goldman Sachs

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January 30, 2002

Multibillion-Dollar Junk Bond Portfolio Undersold For Major Loss to State

Attorney General Lockyer Expands Lawsuit Alleging
Conspiracy to Raid Executive Life

Office of the Attorney General - State of California

FOR IMMEDIATE RELEASE

(SACRAMENTO) - Attorney General Bill Lockyer today added four associates from former junk bond purveyor Drexel Burnham Lambert to a lawsuit alleging an international conspiracy used to illegally acquire assets held by the state and reap billions of dollars from the State of California and policyholders in the wake of the failure of Executive Life Insurance Co.

The complaint filed earlier against more than a dozen companies and individuals, including Credit Lyonnais, a bank once owned by the French government, was amended Wednesday to include Leon Black, John Hannan, Craig Cogut, Eric B. Siegel and several companies they operated in the alleged scheme.

"The additional defendants result from our ongoing investigation in this case," Lockyer said.

"We believe an illegal scheme of secret arrangements and hidden profits was used to essentially cheat the state and policyholders. Covert business arrangements that illegally included foreign investors were used to acquire the assets and bond portfolio of Executive Life at fire-sale prices."

When seized by the California Insurance Commissioner in April 1991, Executive Life was one of the largest life insurance companies in the United States, and it owned one of the largest portfolios of junk bonds in the world, which was valued at more than $6 billion. The decline of the junk bond market earlier left the company financially impaired. The Commissioner's restructuring plan called for a package deal in which both the bond portfolio and the insurance company had to be sold together.

The complaint alleges that a group of investors led by Altus Finance, an investment subsidiary of Credit Lyonnais, the giant French-owned bank, contracted secretly in August 1991 with a small, financially troubled French auto insurer, MAAF Assurances, and several other small companies to act as "fronts" to conceal the bank's true involvement in the purchase of Executive Life assets.

The secret arrangements hiding the bank's true involvement violated federal banking laws, as well as state insurance laws that prohibit foreign governments from owning California insurance companies. . . .

The complaint states that the deceit cost California an opportunity to reap substantial benefits from the sale of the insurance business and the junk bonds that would have ultimately benefitted Executive Life policyholders and retirees, as well as the state.

The complaint adds that the sale would have been rejected if the Insurance Commissioner had known of the true interests of Black and others with former ties to Drexel, which worked years earlier with Executive Life to amass the company's huge junk bond portfolio.

Pending in federal court in Los Angeles, the complaint alleges violation of California's False Claims Act and state unfair business practices laws.

Additionally, the complaint alleges that the conspiracy constituted a racketeering enterprise under federal civil RICO (Racketeer Influenced And Corrupt Organizations) law. . . .

The complaint stems from a two-year investigation by the Attorney General's False Claims section.

From Den of Thieves, by James B. Stewart:

Above the Law

As Michael Milken’s business grew, so did Frederick Joseph’s, if not at so spectacular a rate. Joseph moved quickly to improve the quality of investment bankers at Drexel, hiring several people he had earlier recruited to Shearson, among them John Kissick, Herbert Bachelor, Fred McCarthy, John Sorte and David Kay, whom he put in charge of an infant mergers-and-acquisitions department.

And he hired an arrogant, chubby, headstrong young business school graduate, Leon Black. Black’s father, the head of United Brands, had been caught in a scandal while Leon was at Harvard Business School and had committed suicide by jumping from his office window. . . .

July 9, 2004

Outrigger selling 2 resorts

By Allison Schaefers, Honolulu Star-Bulletin

Outrigger Enterprises Inc. has agreed to sell its Waikoloa Beach Marriott and Wailea Marriott resorts to affiliates of Blackstone Real Estate Advisors of New York for an undisclosed price.

The Wailea Marriott is a 521-room hotel on 22 beachfront acres in the Wailea Resort on Maui. The Waikoloa Beach Marriott is a 545-room hotel that sits on 16 oceanfront acres on the shore of Anaehoomalu Bay on the Big Island’s Kohala Coast....

Both hotels, which have been operated by Outrigger through a franchise agreement with Marriott International, will continue to be affiliated with Marriott International after Blackstone’s acquisition. The sale is expected to close as early as July 30, said David Carey, chief executive of Outrigger Enterprises....

Under various management contracts and its two hotel brands, Outrigger Hotels & Resorts and Ohana Hotels & Resorts, the company operates or has under development 51 hotels and resorts throughout the Pacific region, Carey said.

Blackstone, a private investment firm, is most recently known in Hawaii for having sold the Hyatt Regency Maui for $321 million in cash last year to Host Marriott Corp.

The company owns the Marriott Grosvenor Square Hotel in London, the Westin St. Francis in San Francisco and the Hyatt Capitol Hill in Washington, D.C.

Outrigger could not comment on what will happen to employees at the two hotels.

For more, GO TO > > > Blackstone Group; Broken Trust; Buzzards of Paradise; The Carlyle Group; Claims By Harmon; A Connecticut Yankee in King Kamehameha’s Court; Dirty Gold in Goldman Sachs; Dirty Money, Dirty Politics & Bishop Estate; The Vampires in Executive Life Insurance Co.; The Game Birds; The Harmon Arbitration; Homeland Security; KKR; Marsh & McLennan: The Marsh Birds; Marsh & McLennan’s Trident Funds; The Nests of CB Richard Ellis; Paradise Paved; Predators in Paradise; RICO in Paradise; The Washington Baseball Club; Yakuza Doodle Dandies

September 10, 2003

Blackstone, Apollo and Goldman Sachs to Acquire Ondeo Nalco from Suez for $4.2 Billion

A consortium of private equity firms comprised of The Blackstone Group, Apollo Management, L.P., and Goldman Sachs Capital Partners (collectively, the “Investor Group”) has signed a definitive agreement to acquire Ondeo Nalco from Suez S.A. in a transaction valued at $4.2 billion.

Nalco is the world leader in providing water treatment and process chemicals and services to companies in the general industrial, pulp and paper, and energy sectors. With over 10,000 employees and operations in 130 countries, the company provides innovative applications and solutions for the water and industrial process needs of over 60,000 customers. Nalco generated revenues of over $2.5 billion in 2002 and is based in Naperville, IL.

The transaction will be funded with approximately $3.2 billion of senior and subordinated debt financing and the remainder in equity provided by the Investor Group, and is expected to close in the fourth quarter of 2003, subject to customary regulatory approvals.

Following the transaction, Nalco will operate as an independent company.

Source: The Blackstone Group

For more, GO TO > > > Blackstone Group; Vampires in Executive Life Insurance Co.

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NOW, HERE ARE A FEW OF THE BIRDS OF A FEATHER, AND THEIR NESTS...

Apollo Advisors - Financial investment managers. 13^th largest campaign contributor to Senator Joseph Lieberman (D-CT), Al Gore’s vice presidential running mate, and a client of lobbying firm Akin, Gump, Strauss, Hauer & Feld.

Another of Akin, Gump’s clients is Miller & Chavalier, a Washington, D.C.-based law firm which, together with PricewaterhouseCoopers, drafted the multi-million dollar IRS settlement agreement for Hawaii’s Kamehameha Schools.

Apollo Advisors has another connection with Kamehameha Schools: Along with National Housing Corp (which was involved in an alleged kick-back scheme with ousted Bishop Estate trustees Henry Peters and Richard Wong), Apollo has financial interests in several estate owned properties involving two alleged Yakuza-connected companies: Azabu Building Company and Mitsui Trust.

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From Hoovers On-Line:

Apollo Advisors earned its reputation as a vulture investor by specializing in distressed assets (junk bonds, troubled companies, real estate).

Leon Black, the former Drexel Burnham Lambert mergers and acquisitions chief, and a dozen other Drexel refugees founded the group, which invested in former Drexel clients after that firm's collapse -- notably the $3 billion dollar junk bond portfolio of failed California insurer Executive Life.

Apollo has invested billions from four funds and has launched a fifth fund aimed at raising some $4 billion.

Apollo is linked with the Artemis group of investment holdings controlled by French billionaire François Pinault; the relationship dates back to the downfall of Executive Life.

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From Journal Inquirer, 5/11/99, by Don Michak:

Are Finder's Fees Behind the Silvester Probe?

An FBI investigation of former state Treasurer Paul J. Silvester's actions at the end of his term may force the disclosure of one of the best kept secrets in the public pension business.

Insiders say a far-reaching probe could throw a spotlight on the longstanding but little-known practice of paying "finder's fees" to individuals who put together investment deals with public pension officials in Connecticut and other states.

The FBI last month began investigating Silvester's authorization of $852.5 million in pension fund commitments in the final quarter of 1998....

Past and present treasury officials agree that the fees involved in such transactions can be remarkably lucrative for the "finder"-- in some cases, a percentage of the overall deal and as much as 20% of certain profits produced over the term of an investment.. . . .

Payments Hard to Trace

State Treasurer Denise Nappier responded to a formal request filed under the state's freedom-of -information act by providing a list of nine companies that were paid placement fees in connection with 15 pension fund deals since 1997.

The investments-- including 13 "private investment fund" and two "real estate fund" deals-- involved a total of $1.3 billion in pension plan assets...

Several of the placement agents are associated with well-known securities firms, including Merrill Lynch & Co; DLJ Private Equity Placement Group, a unit of Donaldson, Lufkin & Jenrette; and Solomon Smith Barney.

Merrill Lynch led the pack, collection fees in connection with two deals: a $200 million investment in Triumph Capital Partners III and $75 million in Thayer Equity Investors IV, LP.

DLJ Group followed with fees from four deals worth $225 million: a $75 million investment in Apollo Real Estate Investment Fund III, LP; $75 million in the DLJ Merchant Banking Fund II; $50 million in Kelso Investment Associates VI; and $25 million in Greene Equity Investors III.

Beacon Hill Financial Group ranked third, with fees from $200 million worth of deals, including $130 million in Forstmann Little MBO VII and $70 million in Forstmann Little Equity Fund IV.

The remaining placement agents included Farrall Marsh, which did a $148.9 million deal with Hicks Muse Tate & Furst Equity Fund III; Potomac Investment Services, which marketed a $75 million deal with SCP Private Equity Partners and a $50 million deal with Wellspring Capital Partners II; and three others, Truro Associates, New York Capital Partners, and St. James Associates, which did $100 million deals for Crescendo World Fund; Crescendo III, LP; and Westport Senior Living Fund, LP, respectively. Salomon Smith Barney rounded out the roster, bringing the pension fund into a $50 million deal with Greenwich Street Capital Partners II, LP.

An FBI investigation of former state Treasurer Paul J. Silvester's actions at the end of his term may force the disclosure of one of the best kept secrets in the public pension business.

The FBI last month began investigating Silvester's authorization of $852.5 million in pension fund commitments in the final quarter of 1998....

For more, GO TO > > > A Connecticut Yankee in King Kamehameha’s Court; Vultures in WCI Communities

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From Hoovers Online:

NRT is Not a Realty Trust anymore.

The #1 residential real estate company in the US began life in 1996 as National Realty Trust, established by real estate franchisor HFS (now Cendant) to own the nearly 400 real estate offices that came with the purchase of Coldwell Banker.

Cendant and a subsidiary of Apollo Advisors restructured the trust into NRT to snap up successful independent realtors in hot metropolitan markets and rebrand them under Cendant's franchise names (Century 21, Coldwell Banker, and ERA).

The realtor has more than 700 offices in about 25 markets. After a planned IPO was aborted due to a tumbling market, NRT remains controlled by Cendant and Apollo Advisors....

See also: Cendant

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July 6, 2000

Allied Waste gains 2 board members

Allied Waste Industries, a Scottsdale-based waste services company, has two new directors on its board.

Robert Agate, was senior executive vice president and chief financial officer of Colgate-Palmolive Co., before retiring in 1996.

Leon Black is a founding principal of Apollo Advisors, which manages private securities investment funds.

Akin, Gump, Strauss, Hauer & Feld - One of the largest nests of Lobbyists in the world.

In 1998, this firm declared total lobbying income of $11,800,000. Among their clients are the likes of Alliance of American Insurers; America Online; American Express; American Financial Group; Apollo Advisors; AT&T; Biotechnology Industry Organization; Boeing Co.; Capital Gaming International; CBS Corp; Citigroup; Korean International Trade Assn; Miller & Chevalier; National Hockey League; Pfizer; PG&E Corp; Pharmaceutical Rsrch & Mfrs of America; Philip Morris; Pohang Iron & Steel; Samsung Electronics; Sri Lanka Apparel Exporters Assn; AOLTime Warner; and Warner-Lambert, just to mention a few.

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December 11, 2001

The White House connection: Saudi 'agents' close Bush friends

by Maggie Mulvihill, Jonathan Wells and Jack Meyers, Boston Globe

A powerful Washington, D.C., law firm with unusually close ties to the White House has earned hefty fees representing controversial Saudi billionaires as well as a Texas-based Islamic charity fingered last week as a terrorist front.

The influential law firm of Akin, Gump, Strauss, Hauer & Feld has represented three wealthy Saudi businessmen - Khalid bin Mahfouz, Mohammed Hussein Al-Amoudi and Salah Idris - who have been scrutinized by U.S. authorities for possible involvement in financing Osama bin Laden and his terrorist network.

In addition, Akin, Gump currently represents the largest Islamic charity in the United States, Holy Land Foundation for Relief and Development in Richmond, Texas.

Holy Land's assets were frozen by the Treasury Department last week as government investigators probe its ties to Hamas, the militant Palestinian group blamed for suicide attacks against Israelis.

Partners at Akin, Gump include one of President Bush's closest Texas friends, James C. Langdon, and George R. Salem, a Bush fund-raiser who chaired his 2000 campaign's outreach to Arab-Americans.

Another longtime partner is Barnett A. "Sandy" Kress, the former Dallas School Board president who Bush appointed in January to work for the White House as an "unpaid consultant" on education reform. . . .

For more, GO TO > > > Thorns in the Rose Garden

Allied Waste Industries - Scottsdale, Arizona-based waste management corporation.

April 13, 2000

Horizon Waste buys Hawaii units of BFI

The buyer says the 140 employees won't be affected by the change

Honolulu Star-Bulletin staff

Horizon Waste Services Inc., a company formed a year ago by former executives of waste management company Browning-Ferris Industries Inc., has acquired the Hawaii operations of BFI.

The seller of Browning-Ferris Industries of Hawaii Inc. is BFI-parent Allied Waste Industries Inc.

Southern California-based Horizon also said today that the purchase includes BFI unit Maui Disposal Co.

Purchase prices for both deals were not disclosed.

Horizon said the 140 Hawaii employees -- 88 on Oahu and 52 on Maui -- will not be affected by the ownership change.

The name of the Oahu operations will change to Horizon Waste Services of Hawaii Inc., but Maui Disposal will keep its name.

Michael O'Brien, Northwest Florida division president of BFI subsidiary Waste Management Inc., was named to run the Oahu business as Horizon district vice president. Kika Bukoski, vice president of Maui Disposal, will run the Maui operations.

The Hawaii operations include the former BFI facility of 3.9 acres at Barbers Point and the 1.3-acre Maui Disposal site in Wailuku.

BFI became Oahu's biggest commercial trash hauler with the February 1998 acquisition of the Hawaii operations of rival Waste Management.

Horizon Waste was started by Mike Koep, Gary Koontz and Gerry Perissi who left BFI after it was taken over by Scottsdale, Ariz.-based Allied Waste in March 1999.

Horizon also has operations in Arizona and California.

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July 6, 2000

Allied Waste gains 2 board members

Allied Waste Industries, a Scottsdale-based waste services company, has two new directors on its board. Robert Agate, was senior executive vice president and chief financial officer of Colgate-Palmolive Co., before retiring in 1996.

Leon Black is a founding principal of Apollo Advisors, which manages private securities investment funds.

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February 25, 1999

Allied Waste sells assets

The Business Journal - Phoenix

Allied Waste Industries Inc., Scottsdale, and Waste Connections Inc., Roseville, Calif., have plans to buy and sell simultaneously $7 million worth of certain solid-waste services assets.

Allied Waste has agreed to sell its waste assets in Nebraska, including its operations in Norfolk and Fremont, and its landfill operation in Columbus, Ohio.

In turn, Waste Connections will sell certain waste operations in the state of Washington.

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February 23, 1999

Allied Waste inks deal with Houston firm

The Business Journal - Phoenix

Allied Waste Industries Inc., Scottsdale, and Browning Ferris Industries Inc., Houston, have agreed to purchase and sell to each other about $120 million worth of assets across the country.

The transactions include customer contracts, equipment and facilities and represent about $120 million in revenue for each party. The deal is subject to approval from the Department of Justice.

Arthur Andersen LLC - One of the “Big Five” accounting firms.

January 20, 2002

Andersen ties to state run deep

Firms brace for fallout

By Dawn Gilbertson, The Arizona Republic

If Andersen's deepening Enron troubles sink or shrink the Big 5 accounting firm, or force a merger, the repercussions will be deep in Arizona.

Although the former Arthur Andersen is the smallest of the big-name firms nationally, it's No. 1 in Phoenix, with nearly 600 professional staffers, more than double the size of No. 2 PricewaterhouseCoopers.

The firm's client roster is crowned with the state's two largest public companies, Avnet Inc. and Allied Waste Industries, as well as several high-profile private firms, including Shamrock Foods and the Arizona Diamondbacks and Phoenix Suns.

It has a big outsourcing division, which takes over a client's back-office functions, and is well-known for its annual ranking of the state's largest private companies.

No one is predicting the giant firm's imminent demise, of course, as much of Enron's story, including Andersen's role, is still unfolding.

And many of Andersen's corporate clients here say they have a good relationship with the firm and plan to stick by it.

"The bottom line is: They perform as required for us. There are no issues," said John Hovis, vice president of investor relations for Avnet, a Fortune 500 electronics distributor based in Phoenix.

But there is speculation of fallout, given Andersen's links to other corporate financial meltdowns, including the failed Baptist Foundation of Arizona and others here.

"After a while people go, 'We've got Sunbeam, Waste Management and the Baptist Foundation in Arizona,' " said Jonathan Hamilton, an editor with Public Accounting Report, an industry trade magazine in Atlanta.

"Maybe you're not totally at fault in all those situations, but those situations are troubling in the fact that there begins to be a totality of them."

Lynn Turner, former chief accountant at the Securities and Exchange Commission and now director of the Center for Quality Financial Reporting at Colorado State University, is more blunt.

"Their credibility is just totally out the door with everyone," he said. "Quite frankly, I think a lot of people are going to be reluctant to go hire as their auditors a firm that is the subject of a criminal investigation."

David Scullin, Andersen's managing partner in Phoenix, declined repeated requests for an interview. He said in a statement that he's been out talking to clients and they've been very supportive.

"We remain confident about our firm and its prospects for the future," the statement said. "We are determined to face these issues, address them appropriately and emerge stronger as a result."

A scarlet letter

The fallout may be more severe in Arizona, in terms of clients' dismissing or shunning the firm, given Andersen's history of problems in the state. The local cases have gotten more national publicity in the wake of the Enron troubles.

The local cases include the high-profile collapse of BFA, which cost 12,000 investors about $600 million.

Andersen, which audited the non-profit's books, has been sued by the state Board of Accountancy, the Arizona Corporation Commission and investors for accounting fraud.

The state attorney general also is investigating. Andersen had denied any wrongdoing.

Andersen's services also drew a state probe in the collapse of Charles Keating's Lincoln Savings & Loan in 1990, which cost taxpayers more than $2 billion.

More recently, bondholders of a small Scottsdale beauty products company, Styling Technology Corp., which went bankrupt in 2000, have sued Andersen alleging "bogus sales and accounting gimmicks" that resulted in false and misleading financial statements approved by Andersen.

Richard Ross, who had left Andersen to become the company's chief financial officer, also was named. Andersen in court filings called the allegations "irresponsible."

The accounting firm has survived those incidents largely intact, though Jay Ozer, a partner who worked on the BFA and Lincoln accounts, and