Evidence grows of Enron cover-up
Memo ordered workers at firm's auditors to destroy files
Julian Borger in Washington
Tuesday January 15, 2002
The Guardian
The inquiry into the Enron collapse, the biggest bankruptcy in
US history, focused yesterday on the energy trading firm's
auditors, Arthur Andersen, and an October 12 memo ordering
the destruction of potentially incriminating documents.
As evidence surfaced of a concerted cover-up of Enron's
problems in the months leading up to the bankruptcy on
December 2, it also emerged that the Texan company, once
worth over $80bn (£55bn), had more intensive contacts with the
Bush administration than the White House had previously
admitted.
Enron executives were in contact with administration officials 14
times last year, mostly to ask for help, it was reported
yesterday. The commerce secretary, Don Evans, said the
company's chief executive, Kenneth Lay, called him five times.
"He was looking for all the possible ways he could stabilise his
company," Mr Evans said, but he insisted that he did nothing to
help the struggling corporation, which was the biggest sponsor
of George Bush's career.
Other administration officials contacted by Enron last autumn as
the scale of its losses emerged included the treasury secretary,
Paul O'Neill, his deputy, Peter Fisher, and the energy secretary,
Spencer Abraham. All deny intervening on the company's behalf.
As at least two criminal inquiries and six congressional
committee hearings began to delve into Enron's complex
business dealings, increasing attention is being paid to the role
of Arthur Andersen, one of the world's biggest accounting firms.
According to congressional investigators quoted in the US
press, an internal memorandum on October 12 from one of the
firm's lawyers ordered Arthur Andersen workers to destroy
documents from Enron files.
Time magazine reported that supervisors at Arthur Andersen
sent repeated reminders to their auditors about the memo in the
weeks leading up to the issue of subpoenas by the federal
regulatory agency, the security and exchange commission.
It is thought thousands of emails and files, paper and electronic,
were destroyed which could have proved significant in the
investigation of Enron's dealings. Destruction of the documents
may also have continued after the issue of the subpoenas, in
which case those involved could face criminal charges.
The accounting firm yesterday conceded that "a significant but
undetermined number" of documents had been destroyed, but it
did not confirm the October 12 memo, arguing it would be
"inappropriate" to discuss it before the firm had completed its
own internal enquiry.
Arthur Andersen only revealed that it had destroyed the
documents early last week, just before the arrival of four
congressional investigators at the company's Houston offices.
Senator Joseph Lieberman, the Democrats' vice presidential
candidate in 2000, who also received some Enron financial
backing for his campaign, expressed concern over Arthur
Andersen's actions, saying that by October 12, executives at
Andersen and at Enron "knew that Enron was in real trouble and
the roof was about to collapse on them".
Enron, which traded oil and gas supplies and other
commodities, disguised its growing losses in shell companies it
set up as partnerships, boosting Enron's apparent profits and its
share price. Between 1999 and 2001, 29 of the company's top
executives sold off $1.1bn in Enron shares. At the same time,
the pensions funds of its rank-and-file employees, over 60% of
which were made up of Enron stock, eroded to near
worthlessness.
At the weekend, John Dingell, the senior Democrat on the
House of Representatives commerce committee, one of the six
congressional panels mounting investigations, said: "There's
pretty strong evidence of insider trading, there's clear evidence of
failure to file honest and correct reports."
guardian.co.uk |
