Enron Says Shredding of Records Was Not Stopped Until Recently
By BARNABY J. FEDER and MICHAEL BRICK
January 30, 2002
The New York Times
Enron (news/quote) acknowledged yesterday that it had contracted until mid-January with commercial shredding companies to destroy company records.
The disclosure outraged a congressman whose subcommittee is investigating document destruction at Enron and its accounting firm, Arthur Andersen, though Enron insisted that the records being destroyed were unrelated to the continuing investigations of the company's collapse.
F.B.I. agents were in the company's Houston headquarters as recently as Monday, government officials said. They have been working there to preserve potential evidence since last week, when an employee came forward to say documents were being shredded earlier in the month.
In Washington, House Republican leaders backed President Bush and Vice President Dick Cheney in their refusal to tell Congress about contacts between Enron and the administration's energy task force. But several Republican senators called on the White House to disclose the information.
Mark Palmer, an Enron spokesman, said the commercial shredding was a routine matter. The materials destroyed by a private company, Shredco, included items like payroll runs, old personnel records, performance reviews, medical records and other items that he called "sensitive employee documents."
Representative James Greenwood, the Pennsylvania Republican who is chairman of the investigative subcommittee of the House Energy and Commerce Committee, said last night that he was dismayed that even routine shredding had continued for so long at Enron.
"It is stunning to me that this company, which is being investigated by the Congress, by the Justice Department, by the S.E.C., would get anywhere near a shredder without at least seeking the permission of the Justice Department and others, so that everyone is clear on what it is that they were shredding," Mr. Greenwood said. "Otherwise they are either incredibly arrogant and out of control, or somebody's incredibly stupid."
As for Andersen, the Energy and Commerce Committee sent the firm a letter demanding details of its internal investigation of document shredding, as well as information about any consulting work it did on a score of Enron's complex partnership deals.
And computer experts said in interviews that the majority — perhaps nearly all — of the destroyed Andersen and Enron materials could be recovered by electronic means.
Brian Sierra, a Justice Department spokesman, declined yesterday to comment on whether agents had secured computer hard drives and other electronic media at Enron. Asked if the F.B.I. had succeeded in preventing any further destruction of potential evidence at the company, he said, "We certainly hope so."
Mr. Palmer said that all shredding at Enron had ceased as of Jan. 14, after the first reports of document destruction at Andersen.
"A lot of things are stacking up that under normal circumstances we would destroy and employees would want us to destroy," he said.
Last week, when Maureen Castaneda, a former Enron executive, disclosed that the company was continuing to shred documents in its accounting department, the company insisted that it had issued several directives stating that "all relevant documents should be preserved in light of pending litigation."
But those directives, issued as e- mail messages beginning on Oct. 25, began by specifying only certain materials related to investigations that had come to light. At the end of October, the company issued a broader message telling employees to preserve just about all documents.
On Jan. 14, another directive was issued by Enron's general counsel, James Derrick Jr., to "remind all employees, that, as earlier instructed, in view of the pending and threatened legal proceedings involving the company, no company records, either in electronic or paper form, should be destroyed."
One Enron employee who insisted on not being identified said that on Friday the company had gathered up the shredders on each floor of its headquarters and put them into sealed-off areas, but that the machines had not been removed from the building.
At Andersen, the focus was on electronic records. The firm has hired ASR Data Acquisition and Analysis, a small computer forensics firm, to recover computer records that may have been deleted or overwritten.
Because nearly all paper documents these days are created on computers, investigators say that recovering the electronic materials is likely to be far more important to sorting out what happened than gathering and reassembling shredded paper documents.
ASR, based in Cedar Park, Tex., declined to describe in any detail its work for Andersen and for Davis, Polk & Wardwell, the law firm that Andersen has hired to investigate its dealings with Enron.
Andrew S. Rosen, president of ASR, said the extent of his inquiry was "still emerging." He added that while it was generally easy to recover deleted data, figuring out who deleted it and when — crucial information for Congressional and criminal investigators — is much harder.
"This is like an onion," Mr. Rosen said. "The first layers come off easily, but it gets harder and makes you cry as you go deeper."
Andersen itself is anxious to complete the investigation because the firm's senior management believes that the inquiry will show that potentially illegal activities were confined to a handful of individuals. The firm is struggling to retain customers amid growing concerns that its reputation has been irreparably damaged.
Andersen, based in Chicago, has promised to issue a complete report on its Enron dealings in a few days. The Energy and Commerce Committee, in its letter yesterday, asked Andersen to disclose by tomorrow who was being interviewed as part of the investigation, anyone identified as taking part in the destruction of records and the details of Andersen's engagement of Davis, Polk.
The continuing pressures come at a crucial time for Andersen as it tries to head off client defections.
The Wall Street Journal reported yesterday that Delta Air Lines (news/quote) would give other firms the opportunity this spring to bid for the auditing job now performed by Andersen. Peggy Estes, a Delta spokeswoman, described the process as a normal one for the company.
Other big Andersen clients, like Utilicorp United (news/quote) of Kansas City, Mo., and International Paper (news/quote) of Stamford, Conn., said they were conducting similar reviews. |
