Andersen to lay off 7,000 employees

? Staggered by a rapid loss of business following the Enron scandal, Arthur Andersen LLP announced Monday it is laying off about 7,000 employees, or more than a quarter of its U.S. work force.

The layoffs, which Andersen had warned last month were inevitable, come with the firm’s reputation in tatters, its overseas network disintegrating and dozens of U.S. companies replacing it as their auditor.

In a statement, Andersen said its audit practice and administrative services will bear the brunt of the cuts, which amount to a little more than a quarter of its U.S. work force of 26,000.

The 89-year-old firm employs about 5,300 people at its headquarters in downtown Chicago, where heavy layoffs are expected.

“No one can believe this is happening,” said Mimosa Unno, 22, who works in the audit division in Chicago.

The company said no breakout of planned cuts was yet available. Employees in Chicago were told in an e-mail to check their voice mail Monday night to learn if they should report to work today.

Andersen said cutbacks were “one of the many consequences of the events of the last month” and come despite efforts to avoid them.

“Of all the issues we have confronted recently, none compare to the actions we are now forced to take with our employees,” said Larry Gorrell, managing partner of Andersen’s U.S. operations. “This decision is even more painful in light of the loyalty, commitment, and the hard work that our employees have demonstrated during this difficult time.”

Other unspecified measures also are being taken to reduce expenditures, Gorrell said.

Andersen has been accused in a federal indictment of obstructing justice in destroying documents related to Enron Corp., its audit client, while the Houston energy trader was under federal investigation. Andersen denies the charge.

Since Enron went bankrupt in December, Andersen has been hit by a barrage of lawsuits by Enron shareholders and creditors. It also has lost dozens of blue chip corporations as clients and nearly a dozen overseas affiliates have bolted to rival firms  the latest being its Norwegian partners, who announced Monday they are merging with Ernst & Young.

Auditor Trak, a unit of Atlanta-based Strafford Publications Inc., said Monday that Andersen has lost 145 public audit clients this year.