Daily News from New York, New York • 63

1 INTEL DELL GENERAL ELECTR3C commx ASSOCUTES QUALCOMSI GEKBUL MOTORS cfc: 3ty to rcbc cash quickly $1.65 $31.34 $1.16 $26.84 $1.10 $40 $1.23 $1830 $40.97 $59.90 Mdr(S OMITS WW (DIM Ernst Young, Deloitte scared off by legal woes By ERIC HERMAN DAIUT NEWS BUSINESS WRITER Two accounting giants broke off their discussions to acquire beleaguered Arthur Andersen, citing threats of lawsuits as a possible criminal indictment loomed against the former auditor of bankrupt AC tits, I 1- AJ sume the worst," said professor Eli Bartov of New York University's Stern School of Business. "So, I think right now they will have a hard time convincing anybody to acquire them." Andersen still has about 2,300 public companies it audits. Yesterday, one of them Abbott Labs said it would stay with Andersen. The firm also has valuable worldwide businesses. Some of them could merge with other companies separately.

Lawyers suggested a buyer could avoid Andersen's liabilities by pickup up selected assets, rather than the firm itself. Or, a rival could simply hire some accounting partners and avoid the liability of the whole firm. An indictment or looming criminal prosecution of Andersen could complicate even limited merger plans. I Arthur Andersen chief exec Joseph Berardlno testifies at House hearing last month. Under threat of lawsuits, accounting Arm is having trouble finding a merger partner.

Tdgudgs office space fiuatteirestts ofttoeirs Ernst Young and Deloitte louche Tohmatsu backed away yesterday from any deal with the accounting firm. Rocked by legal threats and federal investigations stemming from its role as Enron's auditor, Andersen has been seeking to save itself by merging part or all of its business with a rival Big accounting firm. "Ernst Young has concluded that as long as Enron and other Andersen litigation matters are unresolved, it is not in the best interests of our people, clients, and our firm to pursue such a combination," Ernst Young said in a statement yesterday. A Deloitte statement echoed Ernst Young, saying it "has decided not to pursue a business combination with Andersen." A spokesman for Andersen didn't return calls seeking com-f ment, A spokesman for KPMG, another possible merger partner, declined to comment. The Ernst Young announcement 'underscores the problems Andersen faces in its talks with firm's massive client list is shrinking.

Yesterday, Household International, the No. .2 consumer finance company, joined such companies as Delta Air Lines, Merck and FedEx in firing Andersen. Meanwhile, Andersen faces a Securities and Exchange Commission probe and criminal in-; yestigation by the Justice Arthur JJowman of Bowman's Accounting Report said Andersen's total liability from investor lawsuits and other claims could reach $40 billion according to some estimates. "If someone were to acquire Andersen and be stuck with that potential liability, that firm could also be brought down," Bowman said. Andersen could surviveif it seeks bankruptcy protection.

Bloomberg News reported yesterday that Andersen told lawyers suing the firm it was considering bankruptcy. But the lingering uncertainty around the firm presents problems for potential buyers. "If you want a merger with somebody, people always as an asset in a bankruptcy proceeding if Andersen accepts responsibility for it, lawyers said. Andersen is not required to occupy the building until early 2004. "Arthur Andersen can agree to assume infos' -2 $f-S By ERIC HERMAN DAJiy NEWS BUSINESS WRITER While uncertainties cloud the future of Arthur Andersen, real estate analysts and brokers say a variety of other firms could find a home in a brand new Times Square office building, where the firm is committed to becoming the lead tenant.

Andersen signed a lease nearly two years ago to occupy half of Boston Properties' new 47-story building now being built on the southern side of Times Square. (Boston Properties chairman Mortimer B. Zucker-man also is chairman and co-publisher of the Daily News.) The building is scheduled to be completed in late 2003. But the Enron crisis has driven Andersen to the brink of criminal indictment and possible bankruptcy. "The lease could get rejected in some kind of bankruptcy proceeding," said David Shul-man, a Lehman Brothers real estate analyst.

If Andersen rejects the lease, as bankruptcy law allows, Boston Properties would become a creditor, probably entitled to one year's rent, according to Lawrence Lipson, a real estate lawyer at Proskauer Rose. Boston Properties would then have to find another tenant a challenge at a time when large corporate tenants are trying to unload large blocks of space, not lease them. Alternatively, the lease could also become tne ODiigation, ana men an asset 01 tne estate," Lipson said. "They can continue to use the space or assign the lease or sublet the premises." A report from Lee Schalop of Banc of America Securities quoted Robert Selsam, a Boston Properties senior vice president, as saying that five companies including firms in law, financial services, accounting and media had approached Boston Properties about leasing the Andersen space. A Boston Properties spokeswoman later denied the Andersen space was under discussion.

Selsam told the Daily News that "we are having discussions with a number of firms about space in the building." He declined to elaborate. Some brokers and analysts said that Boston Properties should be able to find takers by the time the building is ready. "There's a unique quality to it, and I don't think they're going to have a problem leasing it," said Bruce Mosler, head of U.S. oper B. i ations for Cushman Wakefield.

For one thing, Times Square is a strong selling point, Mosler said, adding "if you look at those who relocated there, it is a who's-who of corporate America." Boston Properties' Times Square tower, now under construction, would be able to draw other firms if Arthur Andersen backs out of deal as lead tenant. f. -r I' f' -t 4 1 1 1 4 i i.