Andersen Cuts 7,000 Jobs in U.S.

Embattled accounting firm

Arthur Andersen

said Monday that it will slash its U.S. workforce by 27% as it struggles to survive while facing

obstruction of justice charges and mass client defections.

Andersen said it would cut 7,000 jobs in the U.S., mostly from the audit practice and administrative services. The workforce reductions, which were widely expected, are coupled with other measures aimed at reducing expenditures, according to the firm. Andersen has about 26,000 employees in the U.S.

"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 the U.S. "This decision is even more painful in light of the loyalty, commitment, and hard work that our employees have demonstrated during this difficult time."

Roughly 150 clients have defected to rivals after the government brought charges against Andersen for shredding documents related to its audit work on the now bankrupt energy trader

Enron

. Lawyers for the Chicago-based accounting firm met with the Justice Department Friday to discuss a possible settlement of the charges and stave off a criminal trial slated to start on May 6.

The government wants Andersen to admit wrongdoing, but the firm could be barred from auditing some publicly traded companies if it pleads guilty.

Former Federal Reserve Chairman Paul Volcker, who heads a special oversight board appointed by Andersen in February, is attempting to reform Andersen by splitting its audit and consulting business. Last week, the company reached a preliminary agreement to sell some regional offices and transfer certain partners to competitors

Deloitte & Touche

and

KPMG

.