Andersen officials testify that Duncan was responsible for shredding

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WASHINGTON (AP) -- Fired auditor David Duncan was solely responsible for the massive destruction of Enron documents, officials of the energy company's accounting firm told skeptical lawmakers Thursday. Duncan refused to answer questions, invoking the Fifth Amendment.

Lawmaker after lawmaker denounced the rushed paper shredding at Arthur Andersen and the complex business practices at Enron as Congress delved into the biggest bankruptcy in U.S. history. The company's collapse cost investors billions of dollars, wiped out the retirement savings of thousands of employees and raised questions about the company's extensive political connections.

Nancy Temple, a lawyer for Andersen, said she reminded auditors about the firm's policy for retaining documents but didn't order their preservation or destruction after learning of a federal investigation of Enron.

"I was unaware of any shredding activity," she insisted under intense questioning by members of the House Energy and Commerce Committee's investigative panel.

Lawmakers demanded to know why it took Temple so long -- from the Securities and Exchange Commission's first informal inquiry into Enron on Oct. 17 until the day after the SEC's subpoena to Andersen for documents on Nov. 8 -- to direct auditors to keep the documents.

"This guidance never went out when it should have gone out," declared Rep. Billy Tauzin, R-La., chairman of the full committee.

And why, Tauzin wanted to know, did "scores and scores" of Andersen employees work overtime to destroy records if the firm's policy favored preservation, as its officials have said? Preserving the documents would only have taken a few hours of locking them up, he suggested.

Lawmakers disclosed that the Andersen attorneys had hired an outside law firm on Oct. 9, in large part in anticipation of possibly being sued over Enron accounting. That showed that Temple and other Andersen officials had an early indication of trouble and should have ordered all Enron-related documents to be saved, the House members said.

"I knew there was a possibility of litigation but we did not discuss it," Temple testified.

As Congress' sprawling inquiry into Enron's collapse stepped up, Senate Governmental Affairs Committee Chairman Joseph Lieberman said he will ask that panel to issue subpoenas for Enron's and Andersen's documents regarding their contacts with the White House and several federal agencies on regulations affecting the energy-trading company.

The financial debacle has touched more than half of the members of Congress who accepted campaign contributions from the energy trading company, as well as top members of the Bush administration who were contacted by Enron as it teetered toward bankruptcy.

In opening statements at the House hearing, lawmakers denounced the rushed paper shredding at Andersen as well as the business practices that led to Enron's failure.

Andersen senior officials Dorsey Baskin and C.E. Andrews, appearing as subpoenaed witnesses with Temple, repeatedly pinned the blame on Duncan, whom Andersen fired last week. Andersen itself has been fired by Enron as its accounting firm.

"This effort was undertaken without any consultation with others in the firm or, so far as we are aware, with legal counsel," Baskin said of the shredding.

Andrews insisted that Duncan, as Andersen's lead auditor for Enron, was solely responsible for preserving documents.

Duncan was the first witness but did not speak at the hearing, other than to assert his Fifth Amendment right against potentially incriminating himself.

"Enron robbed the bank, Arthur Andersen provided the getaway car and they say you were at the wheel," Rep. Jim Greenwood, R-Pa., told him.

When Greenwood began to question Duncan, asking him if he had given an order to destroy documents to "subvert governmental investigations," Duncan cited his constitutional right to silence.

Duncan invoked it twice amid the banks of camera lights. "Respectfully, that will be my response to all your questions," he told the panel. He was not questioned further and was excused.

Afterward, Greenwood said, "I still haven't made up my mind on whether Mr. Duncan was a rogue employee or whether Mr. Duncan was set up as a scapegoat."

Senate Majority Leader Tom Daschle said Duncan should be compelled to testify. "Those who had any role or part to play ought to be brought before the Congress and we'll make sure that happens on the Senate side," he told a news conference.

Duncan previously told committee investigators that he was following company guidance on document destruction laid out in an Oct. 12 e-mail from Temple, who is based at Andersen's Chicago headquarters.

It wasn't until nearly a month later that Temple sent an e-mail to Duncan saying that "one of the first things we must do ... is to take all necessary steps to preserve ... documents."

Also Thursday:

--Former SEC Chairman Arthur Levitt, testifying before the Senate Governmental Affairs Committee, called on auditing firms and Wall Street analysts to be more independent from the corporations they cover. "It's well past time to recognize that the accounting profession's independence has been compromised," he said.

--Rep. John Conyers, D-Mich., asked the Justice Department to appoint a special counsel to investigate ties between Enron, Andersen and the Bush administration in light of "massive campaign contributions."

--White House spokesman Ari Fleischer said regardless of the administration's ties to the energy company, "nothing is going to stop the president and this administration from pursuing justice."

Greenwood said Duncan's decision to take the Fifth Amendment, while a constitutional right, "will hamper the important work of this committee."

The SEC started looking into Enron's accounting after the company reported a third-quarter loss of more than $600 million. The agency's inquiry eventually included demands for financial documents from Enron and Andersen.

Enron's slide toward bankruptcy cost thousands of employees their jobs and retirement savings from their investment accounts, which were heavy with Enron stock that the company barred them from selling as it plunged last fall. Other investors large and small around the country also have lost hundreds of millions of dollars.


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