Andersen CEO bolts for Webvan

The man who helped create the world's biggest consulting firm, then single-handedly ignited internal warfare, is leaving Andersen Consulting to join in on the Internet bonanza.

George T. Shaheen stepped down as chief executive and managing partner of Andersen, ending a 30-year career marked by controversy. The 55-year-old executive will become president and CEO of Webvan Group Inc. The Internet startup, based in Foster City, Calif., handles online grocery and drugstore deliveries to consumers.

Shaheen's departure couldn't come at a more difficult time for Andersen Consulting. A protracted attempt to split off from Arthur Andersen, the accounting company, is coming to a head, with final hearings taking place next month.

Shaheen will replace Louis H. Borders, Webvan's founder and current chief, who remains chairman. "My choice would have been to retire sometime next year," Shaheen said in a statement. "However, this new opportunity required that I move up my decision, and, as a result, the timing was not under my control."

Compensation a big factor
Though specifics of Shaheen's compensation couldn't be learned, joining Webvan could bring the executive an oversize grocery cart of stock-option wealth. The potential is so huge that "he just couldn't ignore it," one Andersen insider says.

"We wish him well in what he's doing. Everybody leaves sometime, when the opportunity comes along and the timing is perfect, you've got to go," says John T. Kelly, a 60-year-old Andersen partner who yesterday became its interim managing partner and CEO. The firm said it will name a new CEO by Nov. 10.

The dapper-dressing Shaheen, known for his fiery temperament and impatience with subordinates, has been frustrated in recent years watching clients' executives become millionaires many times over from stock options, acquaintances say.

News of his departure hit consulting rivals like a thunderbolt. "That's a shock," said David Nestor, a spokesman for PricewaterhouseCoopers.

For Shaheen, who didn't return calls, and Webvan, the timing is perfect.

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Earlier this month, Webvan said its initial public offering of 25 million common shares may be priced between $11 and $13 a share, producing net proceeds of about $300 million. The startup is gambling that its ambitious IPO won't be thwarted by the recent shakeout in Internet stocks.

Shaheen will take charge of a truly tiny enterprise. Webvan had revenue of just $395,000 and a net loss of $33.5 million during this year's first half.

Begun in December 1996, the concern began shipping everything from toothpaste to tuna steaks to the public last May.

A rancorous fight
Webvan currently operates only in the San Francisco Bay area, where Shaheen lives. But last month, it signed a $1 billion construction accord with Bechtel Group Corp. to build big, automated warehouses in 26 major U.S. markets.

Webvan uses a fleet of refrigerated delivery trucks to provide same-day or next-day delivery of items ordered online.

Shaheen's mark on Andersen runs deep. In 1989, Big Five accounting and consulting firm Arthur Andersen set up Andersen Consulting as a separate unit at Shaheen's urging. Both are now units of Geneva-based Andersen Worldwide.

Eight years later, Shaheen entered into a bitter, unprecedented breakup battle with Arthur Andersen by filing a divorce request with the International Chamber of Commerce in Paris, an international arbitration panel. Arthur Andersen says Andersen Consulting must pay Arthur Andersen a steep $10 billion breakup fee if it wants to leave, among other things.

It has been a rancorous fight. The companies separated their technology and financial systems, even down to the security cards issued for admission into their respective buildings.

Tried to thwart takeover
Although he initially denied it, Shaheen even tried to thwart Arthur's attempt to acquire the Canadian division of rival KPMG Peat Marwick by writing a letter to KPMG Canada opposing the move.

Colleagues say he worried that an influx of new accounting partners at Arthur would ruin Andersen Consulting's breakup effort. (Arthur later dropped the acquisition attempt.)

Final hearings on the arbitration case are to begin Oct. 25 in a New York hotel. Shaheen is due to testify.

His departure has "changed the dynamics of the whole situation," one Arthur Andersen executive says. "He's been the guy who's been driving this whole thing."

In a statement, Kelly said he feels "very confident about the outlook for the arbitration we are concluding with Andersen Worldwide and Arthur Andersen."

Ironically, Shaheen's exit also comes at a time when he had been seriously mulling an IPO for Andersen Consulting.

Some staffers relieved
Some firm staffers are relieved. They feared his disposition would put off institutional investors.

Under his stewardship, Andersen Consulting achieved record annual revenue growth. Revenue is expected to top $9 billion this year, up from $8.3 billion in 1998.

During Shaheen's reign, the consulting company also revamped the digital plumbing used by more than 5,000 businesses.

In recent years, the firm has focused on electronic commerce, teaching companies how to do business online -- for as much as $700 an hour, per partner.

Shaheen also relaunched the Andersen Consulting brand, which included the first redesign of its logotype since 1989.

Had denied rumors
In recent months, Shaheen repeatedly denied rumors that he was stepping down, saying he was committed to running Andersen Consulting. Yet now he follows in the footsteps of many former associates who left to join Internet startups.

The firm has an annual 17 percent turnover rate -- which Shaheen himself used to bemoan.

"This (departure) speaks volumes about the pull of Internet startups and about the economic rewards potentially associated with those businesses for heavyweight founders," says Scott Hartz, global managing partner of PricewaterhouseCoopers's consulting division.