Fired accountant pleads Fifth
Panel members decry 'voodoo accounting'
By BARRIE MCKENNA
With files from Associated Press
Friday, January 25, 2002 – Print Edition, Page B1
WASHINGTON -- Fired Arthur Andersen accountant David
Duncan raised his right hand, vowed to tell the truth and
then politely declined to say anything more yesterday as the first of 10 U.S.
congressional committees opened hearings into the Enron Corp. collapse.
Flanked by two lawyers, a stoic-looking Mr. Duncan, who is accused of trashing
Enron audit documents, invoked his Fifth Amendment U.S. constitutional right not
to incriminate himself.
He had warned the committee that he wouldn't speak unless it granted him
immunity from prosecution. Still, his obstinacy provided a stage for members of the
U.S. Congress to denounce Enron and the "voodoo accounting" and "skullduggery"
they say brought down the Houston-based energy giant.
"Mr. Duncan, Enron robbed the bank. Arthur Andersen provided the getaway car,
and they say you were at the wheel," said James Greenwood, chairman of the
investigations subcommittee of the House of Representatives energy and commerce
committee.
The three-minute scripted scene where Mr. Duncan pleaded the Fifth was
reminiscent of the U.S. Iran-Contra and Watergate probes, and added to the drama
that has surrounded the bizarre demise of the seventh-largest and arguably the best
politically connected company in the United States.
Although Mr. Duncan pleaded the Fifth, three other Arthur Andersen LLP
employees wasted little time in casting him as the ringleader of an unauthorized
scheme to get rid of thousands of Enron-related documents. Andersen fired Mr.
Duncan last week and disciplined eight other employees.
However, the five-hour hearing provided little new information about alleged
wrongdoing at Enron or Andersen, the company's long-time auditor and adviser.
The hearing began as the fallout from the Enron collapse continued to reverberate
across the United States. Late Wednesday, Enron's embattled founder and chief
executive officer, Kenneth Lay, abruptly resigned under pressure from the creditors
that now control the company's fate. Mr. Lay said he couldn't guide it through
bankruptcy and deal with the various investigations.
Enron's collapse has meant the loss of thousands of jobs, wiped out workers'
pensions and saddled investors with huge losses.
Mr. Lay, a friend and key financial backer of U.S. President George W. Bush, is
slated to testify before another congressional committee on Feb. 4.
But he, like Mr. Duncan and everyone else tied to Enron, is on increasingly shaky
legal ground. In addition to the congressional questions, all face a criminal
investigation by the Justice Department, as well as a probe by the Securities and
Exchange Commission.
Andersen CEO Joseph Berardino refused to appear yesterday, although he has
agreed to testify at a later date. Instead, the Chicago-based Big Five accounting firm
dispatched four other Andersen employees to face the members of Congress. They
spoke cautiously and often with the help of notes, putting the blame for destroying
documents squarely on Mr. Duncan.
"We did the right thing," insisted Dorsey Baskin Jr., managing director of
Andersen's assurance professional standards group. "We certainly are not proud of
the document destruction, but we are proud of our decision to step forward and
accept responsibility."
He added that Mr. Duncan had acted on his own, and without the advice of
Andersen lawyers.
Mr. Duncan, who has spoken to congressional investigators behind closed doors,
has said he believed he was following company directives -- most notably an Oct. 12
memo from in-house lawyer Nancy Temple.
However, Ms. Temple testified that her memo, reminding staff of the company's
"document retention" policy, was routine and proper. "I never counselled any
shredding or destruction of documents," she said, adding that the memo was aimed
at rooting out "pack rats."
Several members of the committee found that explanation hard to swallow,
particularly because Ms. Temple had sent the memo amid growing concerns about
dubious accounting at Enron.
"The document retention policy, which we have a copy of, vague in its language, can
properly be described as a document retention and destruction policy," said
Republican Billy Tauzin, chairman of the House energy and commerce committee.
Speaking earlier on ABC's Good Morning America show, Mr. Tauzin said top Enron
officials knew about the problems and "began this process of invoking the so-called
retention and destruction policy to clean out files and to alter and delete files."
At its height, 80 Andersen employees were working overtime last October to clean
out the files, Mr. Tauzin said. Andersen didn't issue an order to save documents
until Nov. 9.
The firm, already stinging from allegations that it failed to uncover accounting
irregularities at other major clients, has come under intense scrutiny since October,
when Enron stunned investors by restating hundreds of millions of dollars in profit
as a loss.
U.S. Federal Reserve Board chairman Alan Greenspan, also testifying on Capitol Hill
yesterday, waded into the Enron situation, suggesting that it's part of a new breed of
inherently fragile companies built on ideas and reputation, rather than on hard
assets.
"Enron, without a considerable amount of physical assets, created a very large
market value on its reputation and its conceptual skills," he said. "Reputation is
something which, unlike a petrochemical feedstock plant, [can] disappear overnight.
. . . We are increasingly getting firms which are conceptual, and Enron being a
classic case whose value depends on reputation and trust. And if you breach that,
that value goes away very rapidly."
At another hearing, Joseph Lieberman, chairman of the U.S. Senate governmental
affairs committee, described Enron as "a house of cards built on outrageous greed
and deceit."
Enron said yesterday that it will search for a restructuring specialist to serve as
interim CEO.
Mr. Lay, 59, will remain on Enron's board. Company spokesman Vance Meyer said
Mr. Lay will not receive a severance package.
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