The staffing reduction, about 5% of the firm’s global staff, will contribute to a projected $400 million in annual cost savings, Marsh & McLennan said in a Web site statement . Some of the cuts were already in the works before the company was hit by charges by New York Attorney General Eliot Spitzer that it was improperly accepting contingent commissions and had engaged in bid rigging, according to Marsh & McLennan (See Spitzer Takes On Contingent Commissions ). The company said it had also established a $232 million reserve to be used in connection with any settlement with Spitzer.
Included in the litany of Tuesday announcements was word that Marsh & McLennan had reached a tentative $40 million settlement with the Securities and Exchange Commission (SEC) over allegations involving Putnam’s disclosure of brokerage allocation practices before 2004. The Marsh & McLennan statement said the settlement pact is subject to approval by the commission. Meantime, Putnam continues to lose business, with average assets under management falling by 23% compared to the year-ago quarter (See Fund Firms Touched by Scandal Continue Outflows ). Marsh & McLennan said mutual-fund assets under management fell by a further $8 billion from the second quarter to $140 billion; institutional assets rose by $4 billion to $69 billion.
Finally, the firm has also fired at least seven executives in the past three weeks as a result of an internal probe of bid-rigging charges, the Wall Street Journal reported. Late Monday, the firm announced that two top-ranking executives at insurance-brokering unit Marsh & McLennan Inc. were forced to resign and that the parent company’s general counsel had stepped down. At least two other Marsh & McLennan Inc. employees are currently suspended, while they cooperate with the company’s internal investigation.
“This has been a difficult time for the company. We are determined to address the issues at hand and committed to regaining the trust and confidence of our clients, employees, and shareholders,” said Michael Cherkasky, the recently installed president and chief executive officer, in the Web statement. “We recognize the seriousness of the problems we are facing and are moving quickly to correct them. This will require the effort and dedication of our people throughout the organization. We are fortunate to have the talent, strength, and capabilities to move forward.”
About the workforce cuts, Cherkasky asserted: “This is a difficult but necessary step, and we are committed to carrying out these reductions fairly.”