Andersen cuts 7,000 workers, some by e-mail

April 9, 2002

Arthur Andersen LLP, its reputation shredded and its prospects bleak, began firing about a quarter of its U.S.-based work force Monday, sometimes using voice mail and e-mail to deliver the news.

Andersen, reeling from its role as former auditor of the bankrupt Enron Corp., said it's cutting 7,000 employees. The company said the firings will occur over several months while it seeks to sell operations and survive as a much smaller firm.

Company spokesmen would not provide a geographic breakdown of the cuts, but it was clear they will fall hard here. With headquarters at 33 W. Monroe and a training center in St. Charles, Andersen has about 5,300 employees locally. One source said 1,500 Chicago workers could lose their jobs.

Some employees said the first word they got about their layoffs was electronic, not face-to-face. A Chicago-based worker in technology services said his notice came in an e-mail, while Vanessa Cruz, who worked in New York, said voice mail provided her first word. ''I never thought anything like this would happen in all my time here; it's very sad,'' said Cruz, who worked for Andersen for four years.

Grover Wray, Andersen's managing partner for people in the United States, said the electronic notices were sent to workers based in St. Charles and in a global technology division, units in which employees are widely dispersed.

"It can sound cold but when you have a large group, sometimes getting a message sooner rather than waiting is what most people want right now,'' he said.

Wray emphasized that personal meetings were scheduled as immediate follow-ups to the electronic firings. He said those laid off can remain on salary for a time, with access to their office and computers to help with their job search.

"You're not going to see boxes carried out of our offices today,'' Wray said. "We are treating our people with maximum respect.''

But outside the Monroe Street offices, people left with moving boxes and personal belongings late Monday afternoon. Security personnel ushered them to a corner, where they caught rides from friends or in a cab. People hugged inside the large lobby.

Barbara Koscielski, who worked in marketing, said she was told of her layoff in person. She is seven months pregnant and said her biggest worry now is insurance for the baby.

"It's been building up for three to four weeks so we have been prepared for it but it's still kind of hard to go through,'' said Koscielski, a three-year employee. "I'll be waiting for the baby to be born and then [will] try to figure something out after that.

"I hold the Department of Justice responsible. I think if they had just gone after the few people who were responsible rather than indicting the whole firm, this would never have happened to people like me.''

Koscielski left the building with her sister, Eva Wilczek, an Andersen employee who works in the Global Travel Group and who was expecting to be told as early as today that she too might lose her job.

Tim Noonan, an employee for 1-1/2 years, was told Monday he had lost his job as a risk consultant.

"We were forewarned on Friday,'' he said "It was kind of frustrating waiting for the other shoe to drop. The other option is to quit and then you weren't going to get anything.''

Two employees said others were told to check their voice mail Monday night for word of firings.

The company's severance deal is one week's salary for each year's seniority. Wray said a small number of the firings would occur within the partnership ranks, the 2,300 U.S.-based executives who own Andersen.

Employees said most supervisors were holding one-on-one sessions to inform the dismissed workers. Andersen said its audit practice and administrative services units would take the deepest cuts.

"If you have something you're doing for a client, you're pretty safe--for now,'' said a worker in a consultancy division who wasn't laid off.

Even though the staff expected the ax to fall, he said the firings have produced a tense atmosphere at the firm. "This was something we had to do. It's just not part of our culture to do it,'' he said. "We like to protect our own around here.''

Andersen critics have said the "protecting our own'' impulse was part of the problem. The company has lost about 145 audit clients among publicly traded companies since admitting workers in its Houston office shredded documents relating to Enron. The shredding took place last fall when word surfaced about a federal investigation of Enron, an energy-trading company.

On March 14, a federal indictment was unsealed accusing Andersen of obstructing justice with the shredding. The probe is continuing and could touch a more critical issue--whether Andersen approved misleading audits to protect a consulting business from Enron worth at least $25 million a year.

Seeing a conflict of interest between auditing and consulting, former Federal Reserve Chairman Paul Volcker has backed a plan to reconstitute Andersen as an audit-only firm with new managers. Andersen partners backed the plan under pressure from Volcker and a steady stream of exiting clients.

Andersen workers have protested the blanket indictment of the firm, saying all 26,000 employees shouldn't suffer for the sins of a few connected to Enron. But to federal prosecutors, the firm is a repeat offender, having paid fines for misleading audits of Waste Management Inc. and Sunbeam Corp.

Steven Marino, a supervisor at the St. Charles operations, said worker protests over the indictment have drawn lots of sympathy, but little else. "Everybody I talk to thinks the Department of Justice is doing something it shouldn't be doing. But nothing's being done about it,'' he said.

One notable supporter is Mayor Daley, who said Monday his faith in Andersen is unshaken. "I am saddened that it has come to this for the thousands of hardworking employees of Andersen who face losing their jobs,'' the mayor said.

Last month, the Daley-chaired Public Building Commission renewed its auditing contract with Andersen as a show of support. The commitment stands and will not be re-evaluated, the mayor said.

The Mayor's Office of Workforce Development will assist Andersen with job training and placement for eligible employees, Daley said.

Contributing: Fran Spielman, Bloomberg News