Document-Shredding at Enron, Andersen, to Be Probed
Tuesday January 22 8:35 PM ET
By C. Bryson Hull
HOUSTON (Reuters) - Government investigators
descended on Enron Corp.'s headquarters on
Tuesday to collect evidence of document
shredding, while a congressional committee
geared up to probe allegations of wrong-doing at
Andersen, fired last week as auditor of the
bankrupt energy trader.
An Enron spokesman said FBI (news - web sites)
agents and Justice Department (news - web sites)
officials arrived at the bankrupt energy trader's
downtown Houston offices on Tuesday afternoon.
Their visit was at Enron's behest. The embattled
company invited the Justice Department and U.S.
Securities and Exchange Commission (news - web
sites) to investigate allegations of systematic
shredding since the SEC launched its probe in
October.
Enron attorney Kenneth Marks said Enron made the invitation after a
former executive on Monday alleged that Enron workers had
continuously shredded documents since the SEC probe began.
That evening, ABC News aired an interview with former Enron
executive Maureen Castaneda, in which she described shredding that
began in October and lasted through at least Jan. 14. Castaneda,
who spoke with a plaintiff's legal team led by lawyer Bill Lerach
before talking to ABC, said Enron General Counsel James Derrick
sent at least two e-mails during that period directing employees to
retain all documents.
``Until yesterday, we believed that practice was under way,'' Marks
told U.S. District Judge Melinda Harmon, who is overseeing a massive
shareholder lawsuit in Houston against Enron, Andersen and Enron's
top officers and directors.
In Washington, the head of a House of Representatives panel said on
Tuesday he was set to subpoena testimony if necessary from Big Five
accounting firm Andersen.
Making clear Andersen was heading for very rough waters on Capitol
Hill, Rep. Jim Greenwood (news), a Pennsylvania Republican, said:
``Everything that we've seen so far indicates that there was an
unusual and urgent sense of need to destroy documents at Arthur
Anderson,'' independent of any pressure from Enron.
Officials at Enron's headquarters searched the 19th and 20th floors
and discovered a single trash can with shredded paper, which was
bagged and taken into custody, said Marks.
'TROUBLE ON THEIR HANDS'
Harmon set Tuesday's hearing to hear arguments on whether she
should speed up the evidence discovery process in light of the
document shredding by Andersen, and now, Enron.
Lerach said on NBC's ``Today'' show on Tuesday Enron may have
destroyed hundreds of thousands of pieces of evidence. ``I'd say
they've got trouble on their hands.''
Lerach and other lawyers made great theater out of a box of shredded
Enron papers, which Lerach carted into the Houston courtroom after
its appearance in several TV news programs.
``This is a disadvantage,'' plaintiff's lawyer Neil Rothstein said,
fondling the shreds. ``This is criminal behavior.''
The shreds made reference to off-balance sheet partnerships, like
Jedi and Chewco, that figured greatly in Enron's fall and included
contemporaneous accounting documents, he told the court. ``These
were not five-year-old payroll records,'' said Lerach, whose law firm
specializes in bringing shareholder lawsuits against companies.
Harmon gave the plaintiffs until a deadline of 3 p.m. CST Wednesday
to present her with an agreed-upon motion for discovery, which she
said should also be offered to Andersen attorneys for consideration.
Lerach said he would go after stock sale gains by top Enron
executives at a time the company was showing
inflated profits of $600 million as well as
Andersen's profits.
Speaking on ABC's ``Good Morning America''
program, he said it may be necessary to put a U.S.
marshal at Enron's headquarters to ``make sure
these people behave themselves.''
Andersen, for its part, has admitted destroying a ''significant but
undetermined'' number of electronic and paper documents and
correspondence relating to the energy trader's audit. The document
destruction by Andersen, which continued after the SEC
investigation began in late October, is to be the subject of a hearing
by Rep. Greenwood's panel on Thursday.
Andersen last week fired its top manager on the Enron account and
suspended four others over the document shredding.
Also on Tuesday, President Bush (news - web sites) defended the
administration's handling of Enron's dramatic collapse and promised
government action to better protect investors.
'THE EXACT RIGHT THING'
``Our administration has done the exact right thing,'' the president
said of contacts between the White House and Enron, Bush's biggest
political patron before it declared bankruptcy on Dec. 2, the biggest
filing of its kind in U.S. history.
White House officials said they did nothing to help Enron after
concluding its collapse would have little impact on energy markets and the underlying
economy.
Bush expressed ``outrage'' at the treatment of Enron employees and shareholders who were
unaware of the extent of the firm's financial problems, and disclosed for the first time that
the first lady's mother, Jenna Welch, bought stock in the company last summer. ``It's not
worth anything,'' Bush said.
Welch bought 200 shares at $40.90 for an investment of $8,180 on Sept. 21, 1999. She sold
on Dec. 4, at 42 cents a share, for $84, two days after Enron's bankruptcy filing.
``A lot of shareholders didn't know all the facts and that's wrong,'' Bush told reporters in
West Virginia. The government ''must make sure that the accounting practices that have
been going on for quite a while are addressed, make sure there's full disclosure and the
corporate (governance) issues are wide open for everybody to understand.''
Bush's team has close ties to Enron and its chairman, Kenneth Lay. Last autumn, Lay called
Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans, Bush's 2000 campaign
manager, to warn them of Enron's mounting financial problems.
Enron President Lawrence Whalley also called Treasury Undersecretary Peter Fisher in late
October and early November seeking help for the beleaguered energy-trading giant.
Bush said his Cabinet's response to Enron was: ``No help here.'' The president said he spoke
to O'Neill and Evans about their contacts with Enron, but did not say when that occurred.
Congress is planning six hearings over the next month into the Enron collapse, with
Democrats searching for links to the Bush administration. The hearings could lead to
legislation on pension law and regulation of financial markets in several areas as lawmakers
react to the fast-widening scandal.
dailynews.yahoo.com |
