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News
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Temple won't appear at Andersen trial
Auditor's in-house counsel who sent e-mail on retention policies won't appear at criminal trial.
May 10, 2002: 7:00 PM EDT
By Luisa Beltran, Jennifer Rogers and Brett Gering

NEW YORK (CNN/Money) - Nancy Temple, the Arthur Andersen LLP attorney who sent the October e-mail reminding executives about the firm's retention policy, will not appear at Andersen's criminal trial in Houston.

Federal prosecutor Andrew Weissman told Judge Melinda Harmon, who is overseeing the criminal trial against Andersen, that Temple will testify through a letter from her attorney.

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Temple is the Andersen attorney who sent the October e-mail that spurred the shredding of Enron Corp. documents at Andersen. Fired Andersen partner David Duncan has told congressional investigators that the Temple e-mail prompted the shredding.

The Andersen attorney, in congressional hearings in January, denied that she told anyone to destroy documents. But in March, when quizzed by attorneys in the class action lawsuit against Andersen, Temple refused to testify when asked about her role in the shredding of Enron documents.

Temple, called as a prosecution witness, had been expected to remain silent and refuse to testify in the Houston criminal trial. The Andersen attorney will probably invoke her Fifth Amendment right through the letter, a source familiar with the matter told CNN/Money Friday.

Temple, through her attorney Mark Hansen, could not be reached for comment.

Another setback

Meanwhile, Andersen failed in its attempt Friday to force attorneys for Duncan to turn over their notes on the former auditor's talks with congressional investigators.

Judge Harmon quashed the subpoena attempt Friday and ruled that the documents are a product of the attorney-client relationship and thus privileged information.

"We are very pleased because the judge has concurred with our request to keep the notes private. So the documents will not be released," attorney Barry Flynn, who is representing Duncan, said in a press conference Friday.

Now that Harmon has ruled on the subpoena, Duncan is free to testify, but when he will appear is unknown. Duncan is the government's star witness against Andersen, which fired him in January after he directed the shredding.

In April, Duncan agreed to plead guilty to one count of obstruction of justice and admitted to destroying documents in an attempt to thwart the government's investigation.

The fired Andersen partner had been expected to testify this week but Andersen's motion to obtain the notes delayed his appearance, Flynn said. The Justice Department will determine when the fired auditor will appear and has so far not called him.

Duncan could appear on the stand Monday or Tuesday, Flynn said Friday.

"It all depends on how fast prosecutors proceed," Flynn said. "[The DOJ] chooses the order of their witnesses."

Tampering?

Meanwhile, Andersen's lead defense attorney, Rusty Hardin, told CNNfn that he sent a letter to Michael Chertoff, head of the Justice Department's criminal division, asking him to investigate prosecutors for witness tampering.

Government attorneys forced Kate Agnew, a former member of Enron's auditing team, to take the stand Thursday. Agnew, originally a defense witness, declined to testify and invoked her Fifth Amendment right against self-incrimination. Hardin said Thursday that federal prosecutors forced her to appear in court to embarrass her and scare other witnesses.

DOJ spokesman Bryan Sierra confirmed that the agency received Hardin's letter late Thursday. Sierra disputed Hardin's claims and said that witnesses cannot avoid trial by making a written request to invoke their Fifth Amendment right.

"[Hardin's] characterization of our policies on this are just not right," Sierra said.

The criminal trial continues

In Houston, the government Friday called another Andersen partner, Amy Ripepi, who heads the firm's professional standards group. Ripepi admitted that on Oct. 20, Andersen executives discussed the Securities and Exchange Commission's letter to Enron of Oct. 17 that alerted the company to an inquiry.

By late October, Ripepi said she learned that the agency had sent another letter "that indicated the SEC had elevated the inquiry at least one notch."

However, Ripepi did provide another reason to explain why Duncan directed the shredding of Enron documents. Under rules from the American Institute of C.P.A.s, which establishes professional standards for the accounting profession, an audit failure could trigger a panel, the Quality Control Inquiry Committee, to investigate. One result of the failed audit could be that the partner in charge of the failed audit be placed on a "watch list" or the panel could recommend that he be terminated.

Ripepi did mention QCIC on the call in which Duncan was participating. Evidence that Duncan was trying to avoid a QCIC investigation could exculpate Andersen since Duncan would be trying to save himself and not the firm.

Ripepi's comments Friday followed testimony from Carl Bass, an auditor with Andersen. Bass is the auditor who questioned Enron's accounting practices in December 1999. He complained to then-colleague Duncan, lead auditor on the Enron account, that he objected to using one derivative to hedge another. Bass was removed from the Enron account in 2002.

Bass's testimony added to evidence that Andersen intended to destroy documents because of its history of "bad acts."

Andersen already was on probation for its auditing of trash hauler Waste Management Inc. when the Enron debacle unraveled. In 1998, Waste Management had to restate its earnings after it had inflated profit by $1.4 billion, and Andersen had signed off on the company's financial statements.

Andersen last summer agreed to pay the SEC $7 million to settle charges related to Waste Management. Prosecutors earlier this week said Andersen had a motive to obstruct justice because of this past history. The once mighty accounting firm feared losing its license to practice if it got into another skirmish with regulators, prosecutors have said.

Bass, in his testimony, described the tug-of-war between Enron and Andersen. The accounting firm questioned at various times Enron's accounting of partnerships and the dispute was saved in several memos. Hardin, on cross-examination, attempted to show that since the memos were all saved, Andersen was not trying to cover anything up.  Top of page






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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.