updated 11/11/2004 3:01:57 PM ET 2004-11-11T20:01:57

Insurance brokerage Marsh & McLennan said Tuesday that it will lay off 3,000 employees, or about 5 percent of its work force, as it struggles with the fallout from a bid-rigging probe by New York’s attorney general.

In a statement accompanying its third-quarter earnings report, the New York-based company said it was cutting jobs “based on the realities of the marketplace and our current situation.”

The value of the company’s shares has fallen more than 40 percent since New York Attorney General Eliot Spitzer announced his civil lawsuit on Oct. 14, accusing Marsh & McLennan Companies Inc. of bid-rigging and price fixing.

Spitzer’s probe prompted the ouster of chairman and chief executive Jeffrey W. Greenberg, and the company announced that it would adopt “significant reforms,” including ethics training and the elimination of incentive fees that Spitzer denounced as kickbacks.

In addition to insurance brokering, Marsh & McLennan is the parent company of Putnam Investments, an investment management and mutual fund firm, and Mercer Inc., a consulting service.

The company said most of the layoffs would come in its risk and insurance businesses, but that others would affect Putnam and Mercer. Marsh & McLennan said it would take restructuring charges of about $325 million over the next six months to cover the costs.

Putnam and Mercer have also run into trouble with regulators. Putnam was a major figure last year in the scandal over improper trading at fund companies. In April, Putnam agreed to pay $110 million to settle federal and state allegations.

Mercer is being investigated by the Securities and Exchange Commission for potential conflicts of interest at its pension-consulting division. That division also settled earlier this year with Spitzer for its role in advising the New York Stock Exchange when its ex-chairman, Richard Grasso, secured a $187 million pay package.

Copyright The Financial Times Ltd. All rights reserved.

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