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To: stockman_scott who wrote (51570)	5/16/2002 7:13:51 PM
From: Sully-	Respond to of 65232

Reuters Company News Andersen partner says he kept key Enron records By C. Bryson Hull HOUSTON, May 16 (Reuters) - The Andersen partner who oversaw Enron Corp.'s audits testified on Thursday that he spared crucial Enron documents from destruction, appearing to undercut the government's obstruction of justice case against the Big Five accounting firm. David Duncan, former lead Enron accountant for Andersen and the prosecution's star witness, made the statement under cross-examination by an Andersen attorney trying to show that the accounting firm should not be convicted of obstructing justice. The government has charged that Andersen orchestrated a massive document shredding campaign to cover up its role in Enron's collapse into bankruptcy last December, but Andersen said it was only getting rid of extraneous papers and e-mails. Lead defense attorney Rusty Hardin asked Duncan, who pleaded guilty on April 9 and agreed to cooperate with federal prosecutors, what memos he kept regarding warnings by Enron executive Sherron Watkins. "I believe I retained everything relevant to the Watkins memo in a separate folder," Duncan said. A former Andersen accountant, Watkins sounded her now-famous warning -- that off-balance sheet partnerships could "implode in a wave of accounting scandals" -- to former Enron Chairman Ken Lay and Andersen partner James Hecker. In court, Duncan testified that Hecker sarcastically referred to his memo about a talk with Watkins as "the smoking gun." "You actually retained what you might call the 'smoking gun' memo?" Hardin asked. "You never tried to get rid of it in October and November of 2001?" "I did retain that memo," Duncan answered. He also kept Watkins' written allegations. "You must not have been worried about the SEC, then, huh?" Hardin replied. Duncan said he entertained the possibility that the SEC might come looking for some Enron audit records in late September, about three weeks before he was notified of the Enron inquiry. Internal discussions to that effect never made mention of destroying records, he said. SHOUTING MATCH After days of simmering tension between Hardin and U.S. District Judge Melinda Harmon, they finally broke out into a full-blown shouting match after testimony ended on Thursday. Arguing over the admission of a piece of evidence which Andersen said it discovered late Wednesday and had not yet provided to prosecutors, Harmon told the defense lawyer it was "the most underhanded thing" she had ever seen. "You are biased against us. It is clearly reflected in this outburst. I resent it deeply," Hardin said. "Well, resent away!" Harmon shouted down from the bench. "Keep the truth from them (the jury) all you want, Hardin retorted. In opening arguments last week, prosecutors charged that Andersen gave a thinly-veiled order to destroy Enron documents as the energy trading giant's finances began unraveling. Disclosures that it was cooking the books through the use of off-balance sheet partnerships approved by Andersen accelerated the spiral. They said Andersen was worried that it could face severe sanctions, like the loss of its license to practice, because of prior involvement in accounting scandals at Waste Management Inc. (NYSE:WMI - News) and Sunbeam Corp. When Andersen's voluminous shredding of Enron records became public in January, it led to congressional hearings and dozens of federal investigations. Andersen fired Duncan on Jan. 15 for giving the Enron team the order to shred. On Wednesday, Duncan said he did not believe he had committed a crime and but the fear of prosecution on fraud charges and his changing interpretation of the law as presented by prosecutors caused him to decide later that he had. Andersen has lost hundreds of clients since the Enron debacle began and faces numerous civil lawsuits that have put the survival of the Chicago-based accounting firm in serious question. biz.yahoo.com