Rising Star BearingPoint's is Fading Fast

It looks as if BearingPoint, the mega-consulting giant, could be disappearing as we once knew it.

The McLean-based company has filed for Chapter 11 bankruptcy protection, as it struggles to pay off its heavy debt. And trading of the company's stock, which is going for pennies these days, has stopped.

BearingPoint is probably best known for its government work, having done roughly $520 million in federal contracts in 2007. It has 15,000 employees worldwide, including 3,600 in the Washington area. But it has had to deal with a list of problems, including an accounting issue that lead to a 2005 SEC investigation. To stay afloat, BearingPoint took on the loans.

The company's name also popped up three years ago in questions about Lurita Doan, the former chief of the General Services Administration. Questions were raised inside the agency about whether Doan intervened in an effort to determine whether five major contractors, including BearingPoint, should be suspended from doing business with the federal government after they had been accused of making fraudulent claims. BearingPoint and the other companies had paid the Justice Department more than $66 million to settle allegations that they kept travel rebates from airlines and hotels that should have gone to the GSA, according to agency officials.

The company has done some mega deals like providing strategic planning and legislative support for a TSA worker ID program for 800,000 workers and has gone up against the likes of Lockheed Martin, Accenture and CSC. And a few years ago, it seemed like it was going to get over its accounting humps by cleaning up its books.

But now its future isn't looking so bright. My colleague Steven Pearlstein once said in a column that BearingPoint was "poised to become one of the brightest stars" of Northern Virginia's business scene. Judging by its past and current troubles, it seems like BearingPoint is trying to regroup and come up with a new strategy. In its current business state, it looks like its star has fallen.

--Dana Hedgpeth

By Sara Goo |  February 19, 2009; 10:29 AM ET GSA , Procurement Debate
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In addition to the accounting issues, BearingPoint has been plagued for years with a very high rate of employee turnover.

Posted by: SM33 | February 19, 2009 5:16 PM

BearingPoint's Chap 11 filing was pre-arranged, creditors were aware and supported this move. I could point out various imprecisions in Mr. Hedgpeth's piece, but I think his hidden agenda and/or lack of understanding of this filing are revealed in one of his last sentences: "it seems like BearingPoint is trying to regroup and come up with a new strategy". As an employee of the company who has been privy to internal communications and strategy on this matter, I can assure you that these recent developments are purely financial - there is no change in strategy. The company is not fixing its business model, it is fixing its balance sheet. The debt was too expensive and had numerous onerous conditions that prevented the company from moving forward. Given the current credit crisis, Chap 11 was the only way to change the financial structure as markets would not provided the required financing. As far as our clients are concerned, it is business as usual. To portray this filing as that of a company in its death throws is patently wrong. 3,500 DC-area Bearingpoint employees would appreaciate it if the WP could limit such unimformed bad-mouthing and negative press.

Posted by: goafreek | February 19, 2009 5:50 PM

Suggestion for a feature article:

Where do these companies have their headquarters?

Do they employ temporary NON-immigrant visa workers?

Do they use sub-contractors who employ such temporary visa workers?

Are there non-citzens anywhere in their chain of command on government projects?

Posted by: EirikThorvaldsson | February 22, 2009 12:18 AM

Isn't Beaing Point the reincarnation of KPMG, a former Federal contractor who ran into problems in the past & changed its name to protect its business deals? In the same way that Accenture is the reincarnation of Arthur-Andersen, another contractor who got caught up in the Enron mess? The company names associated with problematic practices may go away, but the companies themselves just resuface under new names with the same ol' business practices. Some might call it change we CAN'T believe in!

Posted by: NanaX3 | February 24, 2009 1:42 PM

Commenter NanaX3 shows a bit of a fact deficit and is a sad bearer of info you can't believe in.

No, the two companies are not rogue firms resurfacing, although one has had impaired executive leadership for most of its short life. The old accounting firm, KPMG, split, repeat, split, in 2001 One part is the giant accounting firm, KPMG, LLC, a partnership. (It still provides some consulting, termed advisory services, or some such, but that part is tiny.) Most of the consulting was spun off as the oddly, and stupidly, named BearingPoint. Now a prominent moribund brand, BearingPoint has had contracts fall apart and end prematurely in agencies such as Interior and VA. The firm won't explain all that much, and neither will the govt say a lot about the circumstances in several cases. The number of hard-luck engagements can't be ignored, though, and that's just the way it is. The firm still gets federal contract awards, but as another commenter said, the turnover of emps is very high. The corporate carcass is a tad odorous, even if good people indeed work for BearingPoint. Federal contracting officers, stock analysits, customers, and prospective acquirers can't help but see the company as a rather shaky platform. BearingPoint emps will just have to hear that; it can't be hidden. They are in a public business for the most part and are publicly owned, and the federal unit is regualted. Note that good news and strengths also go unhearalded. For example, the firm has booked more than half a billion dollars from Iraq work in the economic and finance sector. And that work is well received, one hears, despite a difficult working environment. But the many CEOs since the 2001 split and the other transients in the executive suite have hashed up the company and its franchise. Too bad they have not changed strategy and rethought the business model. It needs more than a little tuning. And without needed changes, it is not surprising people see the co. in a gripping spiral. You don't get a stock worth a dime and pennies on a technicality of financing and a bad luck.
Commenter Nana may also want to know that Accenture is the part of the old Art. Andersen that split off from the accounting firm to found a powerhouse in consulting, particularly in IT-related mgt. The old Andersen IT consultants were better managed, far more profitable, and faster growing than the accountants. That caused the split. And the accountants took AA down by being the CPAs of companies in well known corporate disasters. A little bit of the consulting biz was left with the accountants--maybe 240 heads in the federal biz. They mostly went to Unisys, lord help them. Many of these are now gone from U.

Posted by: axolotl | February 24, 2009 9:45 PM

NanaX3 - Have you ever heard of Wikipedia??? If you go to www.wikipedia.com and search for "Accenture" and "Bearingpoint", you can be educated on the history of the two companies!

Posted by: ss_london | February 25, 2009 8:37 AM

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