Tags: Congress | Launches | Enron | Probe

Congress Launches Enron Probe

Thursday, 24 January 2002 12:00 AM

Other Andersen officials at the hearing denied knowing of Duncan's destruction of documents until after the fact.

Lawmakers urged Duncan, Andersen's lead auditor for Enron, not to plead the Fifth Amendment, after having given lengthy closed-door testimony to congressional investigators last week. But he repeated several times "on the advice of counsel, I invoke the rights afforded under the Constitution" before finally being excused. Other Andersen officials offering testimony Thursday laid the blame for destroyed Enron documentation squarely on Duncan.

The hearing by a subcommittee of the House Energy committee was the kickoff of what will be congressional scrutiny by at least 11 committees into the sudden collapse of Enron, formerly the world's largest energy trading company.

The Houston company filed for bankruptcy on Dec. 2, the largest such filing in U.S. history, putting thousands of its own employees out of work and wiping out the retirement savings of employees and outside investors. Much of Enron's collapse was amid questions about the company's accounting practices.

"Today's hearing will explore how one of the world's premier professional organizations could have actually compounded a catastrophic business failure by allowing the systematic destruction of Enron-related audit documents at a time when it was clear to everyone and certainly to Andersen that government investigators and civil litigants would soon be demanding the documents," said Rep. Greenwood, R-Pa., chairman of House Energy's Subcommittee on Oversight and Investigation.

Rep. John D. Dingell, D-Mich., the ranking Democrat on the Energy and Commerce panel, said he looked forward to additional hearings "on the accounting skulduggery that flourished" at Enron, which employed complicated accounting means to move debt off the company books.

Subpoenaed to appear along with Duncan were top officials of Arthur Andersen, including chief executive Joseph F. Berardino (who sent two substitutes) along with attorney Nancy Temple and risk manager Michael Odom.

Rep. Greenwood said he was "disappointed" by Duncan invoking the Fifth Amendment, adding that the lack of testimony "would hamper the important work of this committee in our search for the truth about what transpired at Andersen during the critical period we are examining."

Appearing instead of Andersen CEO Berardino were C.E. Andrews, a global managing partner, and Dorsey L Baskin Jr., a managing director.

Emphasizing that the document destruction had been revealed by Andersen, Baskin added that the company intended to cooperate fully with congressional and other investigators, saying "we are determined to get to the bottom of what happened. And we will take whatever decisive action is necessary to restore public confidence in the firm." Andersen, one of the top five U.S. accounting corporations, has scrambled to combat the devastating publicity of its role in the Enron debacle, including destruction of documents. Among other measures, the company has taken out full-page newspaper advertisements defending its credibility. The stakes are high for the company, as further negative publicity could lead to large-scale defection of clients.

"In our view, Mr. Duncan's actions reflected a failure of judgment that is simply unacceptable in a person who has major responsibility at our firm," said Baskin. "He was the lead engagement partner for a significant client, exercising very substantial responsibility within the firm. Yet our investigation indicated that he directed the purposeful destruction of a very substantial volume of documents."

Baskin said Duncan's destruction of documents "gave every appearance of destroying these materials in anticipation of a government request for documents.

"This is the kind of conduct that Andersen cannot tolerate," said Baskin in testimony echoed by global managing partner Andrews.

Each of the Andersen officials faced sharp questioning from lawmakers on why destruction of documents took place from Oct. 23 until Nov. 10 without company knowledge, with Andrews, Baskin, Temple and Odom all saying that Duncan destroyed documents without consulting any supervisor.

Andersen attorney Temple defended her exchanges with Duncan, saying of an Oct. 12 e-mail to Duncan citing Andersen's "document retention" policy, "I did not instruct Mr. Duncan to shred documents." She said that a Nov. 10 voice mail to Duncan which emphasized that Enron documents should not be destroyed was in response to learning of a Securities and Exchange Commission inquiry into Andersen's role in Enron accounting.

Temple said she was not aware of "any shredding activity," when she left a voice mail for Duncan regarding the preservation of any Andersen documents involving Enron.

Andersen officials said the company has launched its own investigation into the document destruction, vowing to supply congressional lawmakers and other investigators with any findings along with any reconstructed documents and e-mails.

The company has retained former Sen. John Danforth to assist with the investigation, to "ensure that all appropriate steps are taken to deal internally with misconduct by Andersen personnel."

Thursday's hearing before the subcommittee of the House Energy Committee is to be followed by two days of hearings before the full Energy Committee further focusing on Andersen's relationship with Enron, to be held Tuesday and Wednesday.

On the Senate side, the Governmental Affairs Committee, headed by Sen. Joseph Lieberman, D-Conn., held a hearing Thursday to look at whether government agencies could have done more to protect the thousands of Americans and the many U.S. businesses hurt by the largest bankruptcy in American history.

Among others testifying was former SEC chairman Arthur D. Levitt.

It is widely expected that Thursday's hearings are just the start of a congressional investigative effort likely to last several months at least.

They come on the heels of a formal FBI probe into Enron, which began Wednesday with the FBI's arrival at Enron's headquarters in Houston to investigate and stop possible further document shredding at the company.

In addition, the company faces probes from the Justice Department and the SEC.

Copyright 2002 by United Press International.

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Other Andersen officials at the hearing denied knowing of Duncan's destruction of documents until after the fact. Lawmakers urged Duncan, Andersen's lead auditor for Enron, not to plead the Fifth Amendment, after having given lengthy closed-door testimony to congressional...
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Thursday, 24 January 2002 12:00 AM
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