Sucheta Dalal :Bobby's Revenge? Turmoil At E&Y
Sucheta Dalal

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Bobby's Revenge? Turmoil At E&Y  

July 16, 2004


Well short of a year after Bobby Parikh was unceremoniously out-voted as the CEO of Ernst & Young (E&Y) to make way for Rajiv Memani’s succession, there is fresh trouble at the big audit and consulting firm.


The firm, which hands out prestigious awards to India’s corporate leaders, has been stunned by the sudden resignations of three senior partners who are considered among the firm’s stars. They are understood to have submitted their resignations on Tuesday.


Those leaving are E&Y’s head of taxation Mukesh Butani, head of telecom Sanjay Mehta, and Lalit Ahluwalia who is an assurance expert and had come in from the erstwhile Arthur Andersen, after its collapse.


Predictably, all the three are rumoured to be joining Bobby Parikh to set up a new entity. However, Mr.Parikh is travelling in the US and could not be contacted. Top-level sources in the accounting world also told us that although the three E&Y partners may indeed join Bobby Parikh ‘eventually’, their reasons for leaving right now might be a little different.


Everybody close to the move is being extremely tight lipped and our attempts to contact them were futile.


It would be recalled that Bobby Parikh, CEO of E&Y in India suddenly quit the firm for ‘personal reasons’ in November 2003. Parikh had earlier headed Arthur Andersen, which perished under the Enron debacle. He then joined E&Y with 27 partners and over 700 employees. His resignation from E&Y came after a hush-hush meeting had elected Rajiv Memani, son of KN Memani as CEO and chairman-elect.


Until then, it was universally assumed that Bobby Parikh was set to head E&Y. Incidentally, Mukesh Butani was among the very few partners who had protested at the treatment of Bobby Parikh at the secret meeting and so his exit is not such a surprise.


We now learn that KN Memani has informally called an emergency meeting, to fight this new fire. The firm is also understood to be examining legal action against the exiting partners and is fire fighting to prevent more people from following them. E&Y’s spokesperson told us, “I am confirming that they are leaving, but cannot share anything more”.


She said that the firm was not in a position to give out any more information at this point of time.


It is reliably learnt  that the US head office of E&Y is also concerned at the Indian situation and has sent a team to India to help with the damage control.


The E&Y spokesperson said that no US team ‘was here yet’ and that it was not true that KM Memani had called an emergency meeting already or was planning to call one in the near future. It is not quite clear how all this will affect the audit and consultancy business of S.R.Batliboi and E&Y.


Interestingly, the audit arm, S.R.Batliboi has been in the running for bagging some of the auditing assignments of Lodha & Co. in some Birla Group companies following the succession controversy involving RS Lodha at the M.P.Birla group.


E&Y, a professional services firm, employs over 1500 people in India and has offices at New Delhi, Mumbai, Calcutta, Bangalore, Chennai, Hyderabad and Pune. However, it was clear that many senior partners in E&Y were seriously upset at how the firm dealt with Mr.Parikh. At that time too, E&Y had issued repeated denials, but the succession of KN Memani’s son Rajiv Memani came about as charted out at the secret meeting, after Parikh was out of the race. Ever since, it ha been clear that it was only a matter of time before the high-profile Bobby Parikh would put together another outfit and some of E&Y’s partners would join him. The next few days will reveal how E&Y deals with this situation and what happens to the exiting partners.



-- Sucheta Dalal