Accenture Sells Portfolio as Questions Swirl About Tax Haven Status
NYSSCPA.org E-zine Staff

NEW YORK -- In a week in which it sold its venture and investment portfolio, Accenture also faced tough questions about its tax exempt status as Congress considers barring federal contracts to companies that acquired an offshore address simply to cut their American taxes.

On Tuesday, Accenture, the consulting firm that in 2001 formally split off from Andersen, announced that it had reached an agreement to sell its venture and investment portfolio to CIBC World Markets, the investment and merchant banking arm of Toronto-based Canadian Imperial Bank of Commerce.

The terms of the transaction were not disclosed.

According to a company press release, Accenture will retain a 5 percent stake in the portfolio, which is comprised of approximately 80 early- and mid-stage technology companies, primarily in the software area. Accenture will continue its existing alliances and client relationships with companies in the portfolio.

"The transaction is an attractive investment opportunity for CIBC World Markets' Merchant Banking Group," said Ken Kilgour, executive vice president of portfolio management and chairman, CIBC Capital Partners, according to Reuters.

Accenture said it decided to sell substantially all of its investment portfolio to reduce volatility in future earnings and will discontinue direct venture capital investing. The company said it will no longer accept illiquid securities from clients or alliance partners.

Accenture also confirmed on Tuesday that pay cuts were in the future, the Financial Times reported. An internal memo had earlier outlined cuts in partner salaries of 7-8 percent for the year starting in September. In addition, the New York Post reported Tuesday that Accenture will also feeze the pay of most of its U.S. employees.

Last month after the consulting firm reported flat revenue growth, Accenture said it would fire 1,000 employees and cut stock options tied to employees performance. The Post also reported Tuesday that in an effort to cut additional costs last month, the company put six floors of its Manhattan office on Sixth Avenue up for sublease. Accenture had just rented the office in November.

Accenture is also at risk of losing hundreds of millions of dollars in revenue unless it can persuade lawmakers that it is different from other companies that recently established official headquarters in Bermuda and other tax havens, The New York Times reported Tuesday. Accenture counted on the federal, state and local governments in the United States for $684 million of its $11.4 billion of revenue in the year ended last Aug. 31.

Last week, the Senate voted to bar companies that move to countries considered offshore tax havens from winning military contracts, The Times reported. Accenture has so far received $144 million in military and homeland security-related contracts

"If a U.S. company wants to bid for a contract for U.S. defense work, it should not renounce its corporate citizenship for a tax break," said Sen. Paul Wellstone, D- Minn, who sponsored the military spending bill amendment that would prohibit any company that reincorporated after Dec. 31, 2001, in designated tax havens from receiving Pentagon contracts.

Accenture maintains that it has been unfairly caught up in criticism of companies that moved offshore to reduce or eliminate taxes to the United States on profits earned in America.

"Accenture never was an American company," said Roxanne Taylor, its director of corporate communications. Taylor added that Andersen Consulting, as Accenture was known before the breakup, was a network of partnerships, corporations and other business structures, all of which were folded into Accenture when it was born in Bermuda 18 months ago.

Taylor said that not only was Accenture never "reincorporated" in Bermuda but that it essentially has no real headquarters at all. Instead, it is akin to a "virtual corporation," with more than 2,500 stock-owning partners in 47 countries. In Bermuda it has just three employees.

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