Andersen Quits as TheStreet.com Auditor After Ultimatum Is Refused

Arthur Andersen said it no longer will serve as TheStreet.com's (TSCM Quote) auditor after the media company's CEO refused to disavow negative remarks made by co-founder James Cramer about the embattled accounting firm on television.

In a March 5 meeting, Tom Duffy, a partner managing Andersen's account with TheStreet.com, asked CEO Tom Clarke to repudiate publicly comments made by Cramer on CNBC's "America Now" program, according to Clarke.

When Clarke refused, Andersen notified TheStreet.com of its intent to resign as the firm's auditor. In a letter dated March 5, Duffy wrote that Andersen's resignation stems from "the inability of our firm to continue to work with TheStreet.com in a cooperative manner."

"This has been directly caused by what we believe to be inappropriate public comments about our chief executive officer and our firm made by a member of your board of directors," Duffy wrote.

The letter, along with Clarke's response, was contained in a filing made Tuesday by TheStreet.com with the Securities and Exchange Commission. Duffy declined to comment further for this article.

Cramer, who co-founded TheStreet.com and sits on its board, has generally been critical on the CNBC show of Andersen's role in the collapse of energy trader Enron and its employees' subsequent destruction of documents related to the case. Asked if he was aware Andersen was offended before the letter was given to Clarke, Cramer said he was not. Cramer also said the program repeatedly offered Andersen representatives the chance to appear, but they declined.

Clarke sent a response to Duffy the following day noting that TheStreet.com is "an independent source of unbiased financial journalism" and that "our writers are free to express their opinions."

"This is the premise our business has been built on, and even when the result of their statements may cause us discomfort, we stand committed to this mission," Clarke wrote.

TheStreet.com had put its auditing account up for competitive review on Feb. 12 and invited Andersen to participate along with three other accounting firms. Andersen's resignation came three days before the company was scheduled to make its presentation.

Andersen, which audited the books of Enron, has lost a string of clients in recent months, including Federal Express(FDX Quote), Delta Air Lines(DAL Quote), Freddie Mac (FRE Quote) Merck(MRK Quote), and SunTrust Banks(STI Quote).

International Paper(IP Quote) and Georgia Pacific (GP Quote) are reviewing their relationships with Andersen.

Smaller companies such as MDU Resources Group (MDU Quote) and education company Corinthian Colleges(COCO Quote) also have dropped Andersen as their auditor in the wake of Enron's meltdown.

TheStreet.com has hired Ernst & Young to serve as its independent public accountant for 2002.

According to news reports, Andersen is facing steep fines to settle obstruction of justice charges related to the destruction of Enron documents and may be in talks with rival Deloitte Touche Tohmatsu to merge or sell all or part of its business. Andersen recently agreed to pay $217 million to a bankrupt fundraising group to settle accounting malpractice charges.