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News > Companies
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Andersen trial heats up
Defense attorney Hardin accuses prosecutors of witness tampering; No ruling yet on Duncan notes.
May 9, 2002: 7:15 PM EDT

NEW YORK (CNN/Money) - A witness who didn't even take the stand caused the biggest ripple in the criminal trial of Arthur Andersen LLP Thursday, leading Andersen's defense team to accuse prosecutors of witness tampering.

Kate Agnew, a former member of Enron Corp.'s auditing team, was called by prosecutors but did not take the stand because she intended to invoke her Fifth Amendment privilege against self-incrimination.

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Once-powerful auditor Andersen is accused by the Justice Department of obstructing justice when it shredded Enron-related documents last year.

Andersen's lead defense attorney Rusty Hardin strenuously objected to Agnew's appearance and later accused prosecutors of "an outrageous act of intimidation."

Hardin told reporters Agnew was supposed to be a defense witness, but prosecutors had intimidated her into invoking the Fifth Amendment and brought her into court to embarrass her and to scare other witnesses.

"It's a gambit to deprive us of a witness ... and she would have been a dynamite witness," Hardin said. "It's the most outrageous thing I've ever seen."

He said Agnew is the third potential defense witness prosecutors had intimidated and said he plans to send a letter Thursday night to Michael Chertoff, head of the Justice Dept.'s criminal division, asking him to investigate the prosecutors for witness tampering.

The prosecution had no comment on Hardin's allegations.

Also on Thursday, a partner in Arthur Andersen's watchdog group testified that he deleted most of his e-mails related to bankrupt Enron, but he also said he was simply cleaning up.

Benjamin Neuhausen, a member of the firm's Professional Standards Group in its Chicago headquarters, testified he deleted Enron-related e-mails in October after an e-mail was sent out reminding employees of the firm's document retention policy, which included destroying unnecessary documents.

But Neuhausen said it was "normal clean-up," and he was "not trying to hide the documents from anyone."

Neuhausen, who was called by the prosecution, testified about the disagreements that sometimes occurred between the firm's Houston office, which was assigned to Enron, and the Chicago Professional Standards Group. He said the Houston-based Enron audit team, led by government star witness David Duncan, ignored advice on accounting maneuvers from his group.

"They were usually pushing the limits on accounting issues...always probing the limits of any given transaction," Neuhausen said.

Duncan, who oversaw the destruction of Enron documents in Andersen's Houston offices and was fired by Andersen earlier this year, has agreed to cooperate with the Justice Department and testify against the firm.

Separately, Federal District Court Judge Melinda Harmon, who is trying the case, did not rule on whether attorneys for Andersen can have access to the personal notes of lawyers for Duncan. Andersen's attorneys want to obtain the notes Duncan's lawyers took during his negotiation of a plea deal with the Justice Department.

Judge Harmon's ruling on the Duncan notes will determine whether Duncan can take the stand this week. But Duncan did make an appearance in court late Thursday which led to speculation that he could appear as early as Friday.

Carl Bass, another partner from the Professional Standards Group, also testified Thursday.

When Andersen knew

Federal prosecutors have used two days of testimony by Securities and Exchange Commission officials and Andersen partners to try to establish that the accounting firm knew something was wrong with Enron's books well before it began shredding documents last fall.

Before the criminal case got under way Thursday morning, Harmon heard a motion in a civil case brought by Andersen retirees who are trying to block the sale of some of the firm's assets for what they argue is less than fair market value. Harmon said she would try to rule on their request for a restraining order as soon as Thursday afternoon, but added that with the demands of the criminal case, a ruling might not come until early next week.

On Wednesday, SEC associate district administrator Spencer Barasch told the court his agency first began looking at Enron's accounting practices in late August after a Wall Street Journal article raised some issues.

Separately, Andersen partner James Hecker testified that he was contacted by Enron executive Sherron Watkins last August and Watkins related to him her concerns about Enron's balance sheet. Watkins became known as the Enron whistle blower due to a memo she wrote in August to then-CEO Kenneth Lay, voicing her concerns about accounting improprieties at the now bankrupt energy trading firm.

Hecker also testified that he himself was so concerned with the growing Enron account at Andersen, that he vented his frustrations in a song. The lyrics of his song, a parody of the Eagles' "Hotel California," were produced as evidence in court Wednesday.  Top of page


-- from staff and wire reports, with contributions from CNNfn's Jennifer Rogers.






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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.