CHICAGO, April 8 (UPI) -- Beleaguered accounting giant Arthur Andersen LLP Monday began cutting about 7,000 positions, about a quarter of its U.S. work force, mostly in its audit and administrative services.
Andersen has about 26,000 U.S. employees and is selling off its tax and consulting services operations to rival firms in the wake of the federal obstruction of justice indictment for shredding thousands of documents in the Enron scandal.
"Of all the issues we have confronted recently, none compare to actions we are now forced to take with our employees," said Larry Gorrell, managing partner of Andersen's U.S. division. "This decision is even more painful in light of the loyalty, commitment and hard work that our employees have demonstrated during this difficult time."
Andersen said the layoffs could take months to compete as the firm downsizes hoping to survive as a much smaller audit-only company under the plan of former Federal Reserve Board Chairman Paul Volcker.
Andersen is continuing to lose U.S. clients. About 20 companies dropped Andersen as auditor Friday, bringing the number of clients leaving Andersen to nearly 150. Andersen handled audits for more than 2,300 companies before Enron Corp. collapsed in December.
A flood of clients began withdrawing their business after the Justice Department indicted Andersen for obstruction of justice on March 14.
Andersen lawyers held talks with federal prosecutors in Washington Friday seeking a deal to get the indictment dropped without a guilty plea by Andersen.
Andersen said its U.S. operations would continue offering clients audit and tax services as the workforce is reduced. Andersen is offering outplacement services and severance pay to departing employees based on position and length of service.
"We are committed to assisting all affected individuals in their search for opportunities outside the firm," said Grover Wray, managing partner for people in the United States.
The job cuts are expected to have a major impact on Chicago's regional economy, where Andersen has 5,300 employees.
Crain's Chicago Business reported the Regional Economics Applications Laboratory at the University of Illinois estimates Chicago-area stores, businesses, hotels, restaurants and airlines, could lose up to $700 million in economy activity if half of Andersen's headquarters staff is terminated.
Andersen junior partners, who earned between $50,000 and $160,000 a year, could face a difficult job market as Andersen spins off units.
