Andersen Says Enron Lead
Partner Ordered Files Destroyed


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, told Reuters.
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 get caught."
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.
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 administrators.
"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 a statement.
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," Sarbanes said.
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.

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