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Non-Tech : The Enron Scandal - Unmoderated -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (2068)	5/16/2002 2:11:37 PM
From: stockman_scott	Read Replies (1) \| Respond to of 3602

Ex-Andersen Partner Kept Files Critical Of Enron Accounting By: Roy R. Reynolds, Of DOW JONES NEWSWIRES Thursday May 16, 2:01 pm Eastern Time HOUSTON -(Dow Jones)- Notes from a conference call in which Arthur Andersen LLP (X.AAD, X.AND) partners called Enron Corp.'s (ENRNQ) trading operations " intelligent gambling" and a memo in which auditors disagreed with Enron's treatment of special-purpose entities were among the documents kept by former Andersen partner and engagement team leader David Duncan, even after he instructed other employees to destroy documents. Also included in the files was a copy of the "smoking gun" memo authored by Andersen partner James Hecker and sent to many Andersen partners after Enron executive Sherron Watkins expressed concerns to him last year about her company's dealings with then-Chief Financial Officer Andrew Fastow's LJM entity. Hecker called his memo - previously introduced as a government exhibit - a " smoking gun you can't extinguish" on the cover sheet. "You preserved, for all time, documents with criticism of Arthur Andersen accounting in Enron matters," asked lead defense attorney Rusty Hardin. "Well, I know I kept this one," Duncan answered. Defense cross examination of Duncan, the government's key witness in proving that Andersen obstructed justice by shredding documents ahead of an investigation by the Securities and Exchange Commission, entered its second day Thursday, with testimony mainly centered on incidents where Andersen accountants clashed with Enron over the energy company's Raptor entities. Enron wanted to account for the four Raptor units as one whole, while Andersen pushed to keep them separate - a move that would result in impairment charges. "I wanted further deliberation on it," Duncan said. "I did believe it was a judgmental matter for the audit." Members of Andersen's oversight arm, the Professional Services Group, disagreed with aggregation, leading Duncan to write a memo early last year that detailed the discussions from both ends. And despite the destruction of thousands of documents under Andersen's document retention policy - which called for the retention of only final work product from an audit - Duncan kept the memo in his files. "This memo with this discussion was available for anyone to view," Hardin asked Duncan. "Yes, it was," Duncan said. Duncan pled guilty in April to obstruction of justice, and testified earlier this week that he ordered members of the Enron engagement team to follow the document policy, which led to the mass destruction of documents. Also included in Duncan's files were notes on a February, 2001 conference call on which partners debated keeping Enron as a client and talked about Enron partnerships with Fastow-controlled LJM. "We did not think that was a good idea, but felt it was an area for corporate government," Duncan said. The firm felt the need for Duncan to check that Enron's board was receiving competitive bids on business done with LJM. During the same conference call, the notes show that one partner characterized Enron's mark-to-market trading earnings as "intelligent gambling," another factor that led Andersen to consider the energy company as a high-risk client. In his opening statement to the jury in the trial, Hardin asked how Andersen could have tried to block an SEC investigation by shredding documents when so many "embarrassing documents" remained in their files.