NEW YORK (CNN/Money) -
The third week of the Arthur Andersen LLP criminal case got off to a rousing start Monday with a firm partner shown on videotape directing employees to destroy documents.
Michael Odom, a senior partner in Andersen's Houston office, appears in an Oct. 10 video of a conference call where he refers to the firm's record-keeping policy as a "housekeeping issue."
Odom, who was discussing the firm's policy on document retention, tells employees that they only need to keep work papers, but warns them that once litigation is filed, staff are not allowed to destroy anything.
"If it's destroyed through the course of normal policy and litigation is filed the next day, that's great," Odom says on the tape. "Whatever there was that might have been of interest to somebody is gone and is irretrievable."
Andersen is accused of obstructing justice for shredding Enron Corp. documents while on notice of a federal investigation. According to the firm's 26-page guideline on retention, staff must keep work papers for six years before they can be destroyed. But client-related files, such as correspondence or other records, are kept only "until not useful."
Odom made the video days before Andersen in-house counsel Nancy Temple sent an e-mail reminding executives of the firm's record retention policy.
David Duncan, the government's star witness against Andersen, has said the Temple e-mail spurred the destruction of Enron documents. Andersen in January fired Duncan for overseeing the destruction of Enron documents late last year.
Duncan wrapped up his testimony last Friday after admitting that he changed his mind in March on whether he did actually commit a crime. The former auditor testified that he at first believed that he hadn't done anything wrong when he directed staff in October to comply with the firm's document retention policy. However, Duncan decided to plead guilty to obstruction after "a lot of soul searching" and discussions with his family, he said.
Andersen's lead defense attorney Rusty Hardin said the Odom video was good for the firm's defense. "We think the video shows a lecture on what their policy is," he said. "We would've introduced it if they hadn't."
Week three of trial
But much of Monday's testimony centered on internal documents and notes from attorney Temple and others that outlined discussions Andersen held last October and early November.
In Oct. 9 notes from a conference call among senior Andersen partners, Temple wrote that an SEC investigation was "highly probable" of several Enron off-balance-sheet partnerships known as Raptors. The Raptor deals ultimately led to a $618 million restatement of Enron's earnings. At the time Temple wrote her notes, Andersen was already debating how to account for the partnerships.
She also wrote that Andersen was running the risk of violating the terms of the probation it agreed to after its audit of trash hauler Waste Management Inc.
Temple has refused to testify at Andersen's criminal trial and invoked her Fifth Amendment right to silence through a letter. Another senior Andersen partner, Thomas Bauer, also refused to testify Monday and asserted his Fifth Amendment right to silence.
Enron allegedly used thousands of off-the-book partnerships to inflate profits and hide nearly $1 billion in debt. The Houston-based energy trader collapsed under its heavy debt load and filed the largest bankruptcy filing in U.S. history on Dec. 2.
Andersen, as Enron's auditor for 16 years, signed off on the company's financial statements. Government attorneys are trying to show that Andersen had a motive to destroy Enron documents because the accountant feared an SEC probe could result in the firm losing its license to conduct audits.
--Staff and Wires
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