Fired Enron Auditor Cooperating
Wednesday January 16 12:40 PM ET
By PETE YOST, Associated Press Writer
WASHINGTON (AP) - An auditor
said to have led a hurry-up effort to
destroy documents in the Enron
case was cooperating with
congressional investigators a day
after his accounting firm fired him,
his attorneys said.
David Duncan, who oversaw
Enron's audits from the Houston
office of Arthur Andersen LLP, was
to be interviewed Wednesday by
staff from the House Energy and
Commerce Committee.
On Tuesday, Andersen said
Duncan organized a document
destruction effort on Oct. 23
shortly after he learned the
Securities and Exchange
Commission (news - web sites) was
asking Enron for accounting
information.
The effort ended Nov. 9 when Duncan's assistant
e-mailed secretaries to ``stop the shredding'' - a day
after the firm had received a federal subpoena for
documents.
Along with Duncan's dismissal, Andersen said four
partners in its Houston office would be stripped of
management responsibilities. Among them, D.
Stephen Goddard Jr., an Andersen managing partner,
was a major fund-raiser for President Bush (news -
web sites)'s 2000 campaign for the White House and
was one of the ``Pioneers'' who raised at least
$100,000. Enron was Bush's largest corporate
contributor during the campaign.
In New York Wednesday, Wall Street powerhouse J.P.
Morgan Chase & Co. reported a big loss for the fourth
quarter of last year, in large part because of its loans
to bankrupt Enron that went bad. J.P. Morgan's
results were far below analysts' estimates. Citigroup
Inc., another large Enron creditor, is expected to take
a hit when it reports earnings Thursday.
Duncan, like all witnesses, can refuse to talk to
investigators unless given a limited grant of immunity
from prosecution, meaning that his own statements
would not be used against him.
But ``Duncan appears willing to cooperate and to the
best of my knowledge there's been no discussion of
any immunity,'' committee spokesman Ken Johnson
said Tuesday night.
The auditor may have relied on an Oct. 12 e-mail from
an Andersen attorney who forwarded a copy of the
firm's policy which allows for destruction of some
documents.
``Mr. Duncan is cooperating with all investigations. ...
He did nothing wrong'' and ``he followed the
instructions of an Andersen in-house lawyer in
handling documents,'' said a statement from the law
firm of Sullivan & Cromwell.
Duncan's lawyers disputed Andersen's assessment.
In announcing Duncan's dismissal Tuesday, Andersen
said ``nothing in an Oct. 12 e-mail'' authorized the
type of destruction that occurred between Oct. 23 and
Nov. 9. It said it had ``discovered activities including
the deletion of thousands of e-mails and the rushed
disposal of large numbers of paper documents.''
Chicago-based Andersen said it would fire any other
employees found to have participated in the improper
destruction of documents, which it disclosed last week.
Enron publicly acknowledged it was the focus of an
SEC inquiry Oct. 22. On Oct. 31, the company
announced the SEC was conducting a formal
investigation.
Enron, formerly the world's largest energy trader, filed
for bankruptcy protection on Dec. 2.
The SEC has been investigating Andersen's role in
Enron's complex accounting, including questionable
partnerships that kept about $500 million in debt off
the energy company's books and allowed Enron
executives to profit from the arrangements.
The SEC's enforcement director, Stephen M. Cutler,
said last week the agency was widening the scope of
its investigation to include Andersen's destruction of
documents.
The Justice Department (news - web sites) is pursuing
a criminal investigation of Enron, which became the
biggest corporate bankruptcy in U.S. history on Dec.
2.
``If anyone at Enron broke the rules, they will be
punished,'' Treasury Secretary Paul O'Neill said in a
speech to a retailers' group.
O'Neill is among the administration officials who
received telephone calls last fall from Enron Chairman
Kenneth Lay - Bush's biggest campaign benefactor -
seeking help for Enron as it careened toward collapse.
O'Neill has said he dismissed any suggestion of
intervening to help the company.
In other developments:
-Another potentially important witness said she gave
Enron's chairman a warning in August about the company's accounting
practices because ``I thought Ken Lay ought to know the facts and look into
them.'' Lay was ``concerned'' when he listened to her, Sherron Watkins told
Houston television station KTRK. In a letter to Lay, Watkins said ``we will
implode in a wave of accounting scandals'' unless the company halted
practices that eventually sent it into bankruptcy.
``Has Enron become a risky place to work?,'' Watkins asked Lay in the
seven-page letter. ``For those of us who didn't get rich over the last few years,
can we afford to stay?''
She said the abrupt resignation in August of chief executive officer Jeffrey
Skilling ``will raise suspicions of accounting improprieties.''
-A law firm representing Enron employees in a lawsuit said the company
incorrectly told its employees in September that they would be barred for
about a month starting Oct. 19 from selling Enron stock in their 401(k)
retirement accounts. The stock price plummeted during that period. The
company says the actual period was a week, but the law firm said employees
didn't realize that because Enron didn't send out a correction to its initial
erroneous e-mail. The law firm released a copy of the Sept. 27 e-mail from
Enron to employees saying that the company was changing the retirement
plan's trustee and that during a one-month transition starting Oct. 19,
participants ``are not able to ... request a withdrawal or close an account.''
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