- NEW YORK (Reuters)
- The growing scandal over the collapse of Enron Corp. deepened on Tuesday,
with accounting firm Andersen saying its lead partner for auditing the
energy trader had ordered documents destroyed after learning federal regulators
wanted to see them.
- Andersen, which has been under fire for its handling
of Enron's books, said it would fire the partner, David B. Duncan. The
company also said it placed three other partners responsible for the Enron
work on leave.
- Andersen said "thousands" of e-mails and "large
numbers" of paper documents relating to Enron were destroyed after
Duncan learned on Oct. 23 of a request by the Securities and Exchange Commission
for information on the Enron audit.
- "Although the firm is still working to collect all
the facts, it has learned that at the direction of the lead partner an
expedited effort to destroy documents in Houston was undertaken,"
Andersen said in a statement.
- An attorney for Duncan, who is due to be questioned by
Congressional investigators on Wednesday, said he had followed the instructions
of an Andersen lawyer when he ordered documents destroyed.
- "He properly followed the instructions of an Andersen
in-house lawyer handling documents. He did nothing wrong," attorney
Robert Giuffra, of the Sullivan & Cromwell law firm in New York, said.
- A spokesman for the House Energy and Commerce Committee
said the committee is already examining six boxes of personal files and
records which Duncan had delivered prior to being fired.
- "Frankly, now that he's been fired, he may be a
little more motivated to be cooperative," the spokesman, Ken Johnson,
- Meanwhile, the Congressional committee made public on
Tuesday the full text of a seven-page letter written by an Enron employee
to Chairman Kenneth Lay last August, warning that employees were worried
about the energy trader's murky finances.
- Whistle-blower Sherron Watkins, an Enron Global Finance
vice president, wrote that she had heard one senior Enron manager say,
"I know it would be devastating to all of us, but I wish we would
- House committee spokesman Johnson said the full text
of Watkins' letter was released to counter criticism from Enron attorney
Robert Bennett that the Congressional inquiry was not objective.
- Excerpts of the letter had been released on Monday, including
a passage where Watkins warned that she was "...incredibly nervous
that we will implode in a wave of accounting scandals."
- Johnson said Watkins has agreed to be interviewed by
the House committee. Watkins declined to comment and referred inquiries
to her attorney, who could not be reached.
- Enron officials also could not be reached immediately.
- In the Senate, lawmakers also stepped up their investigation
of the company's tangled finances, as Enron said its common stock will
trade as an over-the-counter stock, after the New York Stock Exchange moved
to delist its shares. The Houston-based company on Dec. 2 filed the largest
bankruptcy in U.S. history.
- Shares of Enron, which once ranked No. 7 on the Fortune
500 list of large corporations, last traded at 67 cents on Jan. 10, a far
cry from a record $90.56 in August 2000.
- CONGRESSIONAL SCRUTINY
- Maryland Democratic Sen. Paul Sarbanes, chairman of the
powerful Senate Banking Committee, on Tuesday requested investigations
into financial reporting and employee retirement funds in company stock,
matching a White House call for reviews in the same areas.
- Sarbanes asked the investigative arm of Congress, the
General Accounting Office, to examine laws governing employee stock ownership
in retirement funds such as 401(k) plans, as well as how corporations report
their finances to the public.
- A sharp decline in Enron's share price last fall sapped
the savings of thousands of the fallen energy trader's employees whose
401(k) accounts were heavily invested in Enron stock.
- Enron employees have suffered losses topping $1 billion
in their retirement accounts. Enron's 401(k) retirement plan had prevented
workers from touching their shares before age 54, and in the weeks before
the bankruptcy filing all accounts were frozen because Enron changed plan
- "Investment of retirement funds in company stock
can enable employees to share in the fruits of their labor. .... However,
the reported results of Enron's bankruptcy raise significant issues about
the adequacy of our laws and their enforcement," Sarbanes said in
- He also stressed concern on corporate financial reporting.
- "Accurate and honestly presented financial information
is essential to the efficiency of our capital and security markets, yet
in recent years costly accounting irregularities have proliferated,"
- ANDERSEN'S PREDICAMENT
- Questions about Enron's financial reports and their review
by its auditor, Andersen, are at the heart of the SEC probe.
- Enron's use of off-balance-sheet partnerships, which
were set up to help support the company's highly leveraged capital structure,
have drawn close scrutiny after deals involved those entities went sour
and parts of its core business slumped.
- Enron in November restated its results to include the
partnerships, known as special-purpose entities, reducing earnings for
the four years after 1997 by almost $600 million.
- Watkins, the Enron whistle-blower's, in her letter last
August wrote that although various accountants, including Andersen, had
approved the accounting treatment for deals involving one of the scores
of outside partnerships, "None of that will protect Enron if these
transactions are ever disclosed in the bright light of day."
- Andersen as a whole faces ruin over lawsuits attacking
its handling of Enron, with third-party insurance unlikely to cover potential
payouts, according to industry experts.