America's No. 1 financial conglomerate

Chapter 589 The Persuader

In the cigar room, Ernst sat in a custom-made leather armchair, a freshly lit cigar between his fingers, its dark brown wrapper gleaming with an oily sheen.

He raised his glass, brought the wine to his lips, and took a small sip.

The wine spreads across the tongue, with rich fruity aromas intertwined with aged cellar fragrances, leaving a long and lingering finish.

To be honest, he can tell the price level of a wine, whether it is cheap or expensive, just by its taste and body.

But when it comes to the subtle differences between top-tier wines, such as the minerality and earthiness that wine critics talk about, he can't taste any of it.

It even feels like playing the erhu from under your pants, pure nonsense.

The same goes for cigars; for him, he only smokes the one that tastes best and never cares about the price.

"I don't think you came to New York just to tell me these things, did you?"

Ernst didn't look up; his gaze remained fixed on the wine glass he was swirling in his hand, the wine tracing graceful arcs on the glass's surface, leaving behind fine streaks of wine tears.

"That's right." Skillin, sitting opposite, straightened up slightly, a frank smile on his face. "I'm here on someone's behalf."

"Andersen?" Ernst answered almost without hesitation. There was no doubt in his tone, only certainty.

The relationship between Enron and Arthur Andersen has long since transcended the boundaries of a typical customer and service provider relationship. It has reached a level of deep integration and shared fate, which can be described as collusion.

He couldn't think of anyone other than Arthur Andersen who could persuade the CEO of Enron to travel all the way to New York to act as a lobbyist.

These industry giants have a truly keen sense of smell, like hyenas on the savanna, always able to accurately pinpoint the weaknesses of their prey.

PwC had offended him over the issue of Leap Games, and Arthur Andersen seized this golden opportunity, sending Skilling, their lobbyist, to his door.

"Mr. Robert Grafton, Global CE of Arthur Andersen, hopes to have the opportunity to meet with you."

Robert Grafton, who took office as Arthur Andersen's global CE last year.

However, this fellow is not having a good time right now, as Andersen is currently mired in a predicament of internal and external troubles.

The internal turmoil over separating consulting and auditing businesses has escalated to the point of internal rebellion.

Externally, the industry competition that Arthur Andersen faces has made this auditing empire feel shaky and precarious.

Ten years ago, Arthur Andersen was the undisputed leader among the world's top five accounting firms, leaving PwC, the second-ranked firm, far behind with its professional audit services, strong brand influence, and extensive client resources.

At the time, Arthur Andersen was the preferred auditing firm for almost all large enterprises, and its audit reports were seen as a reassurance for the capital market. Three years ago, a death cross occurred, and Arthur Andersen fell from its throne, which it had held for over forty years.

In just three years, Arthur Andersen's market share has been continuously eroded by its competitors, and its revenue has continued to shrink. It has now become the bottom of the Big Five accounting firms and one of only two companies in the Big Five whose revenue has not exceeded $10 billion.

Even Deloitte Touche Tohmatsu, another firm with revenue of less than $10 billion, has a much stronger growth momentum than Andersen.

Ernst understood the other party's purpose: to revitalize Arthur Andersen's audit business by taking over Ernst Enterprises' business.

If Arthur Andersen could become Google's auditing firm, the impact on them would be immeasurable.

This is not just a problem for Google alone; the entire Silicon Valley may defect and join Arthur Andersen.

In particular, companies that have business dealings with Google or want to establish a partnership with Google are likely to choose Arthur Andersen as their auditing firm. This will significantly improve efficiency and reduce communication costs in subsequent business coordination, data sharing, and compliance audits.

This industry cluster effect is exactly what Andersen is currently most eager to achieve.

A brief silence fell over the cigar room. Ernst continued to swirl his wine glass with his head down, his expression calm, making it impossible to discern his true thoughts.

Seeing this, Skilling leaned forward slightly and his tone became exceptionally serious.

If you didn't know better, you'd think he was a CE at Arthur Andersen, not Enron.

"In fact, Enron had previously had in-depth cooperation with PwC, but our experience was not ideal." He paused, as if organizing his thoughts, "PwC's bureaucracy was too severe, and there was a clear gap in their audit team."

"Young auditors lack practical project experience and often feel helpless when faced with complex business scenarios. Meanwhile, senior partners focus most of their energy on developing new business and simply do not have enough time and energy to carefully review the details of each project."

"You know what? I deserve some credit for Enron's success today, but what truly enabled Enron to achieve leapfrog development was our complete switch of audit and consulting services to Arthur Andersen."

Ernst looked up and glanced calmly at Skilling.

Most people would probably be tempted by these words.

But all he felt was fear.

Is Arthur Andersen the biggest contributor?

So, you mean Arthur Andersen devised this whole scheme to make you falsify your accounts, right?

"Andersen?" Ernst kept his head down, tapping his fingers lightly on the table, but a barely perceptible glint flashed in his eyes.

Skilling mistakenly thought that Ernst had begun to hesitate, and a glimmer of hope ignited in his heart.

He quickly pressed his advantage, continuing to persuade, "I know that changing accounting firms is a very troublesome matter, involving a series of complicated procedures such as the transfer of historical data, the alignment of audit processes, and compliance reviews, which consumes a lot of time and energy."

"But I can assure you that these troubles are only temporary. Arthur Andersen has extensive industry experience and a professional service team that can resolve these issues as quickly as possible." Skilling's tone was full of confidence. "During the transition, Arthur Andersen will send a dedicated transition team led by a senior partner to seamlessly connect with your original accounting firm, taking full responsibility for the sorting, transfer, and verification of historical financial data to ensure that every step is accurate."

"As Enron's CEO, I assure you that the entire replacement process will not exceed two months, and during this period, I will ensure that it will not have any impact on the normal operation of your company."

"As you know, Arthur Andersen's audit team is widely recognized as the most professional in the industry," Skilling continued his offensive. "Compared to PwC, Arthur Andersen has a much deeper understanding of new industries and new business models."

Ernst did not deny this point.

Since its inception, Arthur Andersen has been known for its proactive approach to emerging markets and its deep involvement in new industries.

Later, as the semiconductor industry gradually became the core of the technology field, Arthur Andersen quickly assembled a professional team to conduct in-depth research on the business models and financial characteristics of semiconductor companies, becoming the preferred auditing firm for many semiconductor companies.

It can be said that when many new industries first emerged, they grew alongside Arthur Andersen.

They have extensive experience in identifying risk points and key data points for emerging industries.

Nevertheless, Ernst remained silent, as if he were carefully considering Skilling's every word, or weighing the pros and cons.

Seeing this, Skilling continued, "Moreover, Arthur Andersen's services are very flexible. Unlike PwC, they don't just follow fixed procedures. Instead, they provide personalized solutions based on the client's actual needs."

"For example, they will set up a dedicated audit team for us. The team members are all experts who have been engaged in auditing related industries for a long time and can respond to our needs at any time." Ernst's lips curled up, as if he had made up his mind.

Anyone who knows him well will know that he's up to no good again.

If Jennifer Connelly were here, she would understand.

Whenever he made that expression when they were together, Connery knew that he must have thought of something that made her feel shy and helpless.

"What about the fees?" Ernst finally spoke, posing the first substantive question about the partnership with Arthur Andersen, his tone still calm and even. "I know that Arthur Andersen's fees are a bit higher than the industry average."

Upon hearing this question, Skilling's smile widened even further.

He waved his hand and replied in a relaxed tone, "Ernst, you're right, Arthur Andersen's fees are indeed higher than those of the other Big Four accounting firms like PwC and KPMG. But as you know, in the professional services field, you always get what you pay for."

"Arthur Andersen's audit reports not only have absolute assurance of data accuracy, but also have a much higher degree of recognition and persuasiveness in the capital market than their peers."

"More importantly, Arthur Andersen's audit services include professional consulting services, which is an added-value service that the other Big Four accounting firms simply cannot provide. They will provide you with professional advice on financial optimization, risk management, strategic planning, and other aspects based on your company's actual situation, helping your company achieve better development."

"Moreover, for a major client like you, I believe Robert Grafton will certainly offer a very competitive price quote."

Skilling’s tone was enticing: “Overall, although the fees are slightly higher, considering the high-quality service, personalized solutions, and additional consulting value provided by Arthur Andersen, it is actually more cost-effective than choosing PwC.”

For a full ten minutes or so, Skilling did almost all the talking, while Ernst listened. It must be said, his position as Enron's CE was a waste of his talent; he was an excellent salesman.

It's a pity, we took the wrong path.

"It's not that we can't talk about it," Ernst finally said, much to Skilling's delight.

But the next sentence startled him so much that he almost stood up.