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Andersen admits destroyed Enron docs
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January 10, 2002: 3:20 p.m. ET
Attorney General, top aide recused from investigation for Enron relationship.
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WASHINGTON (CNN) - Arthur Andersen, the auditor for Enron Corp., admitted Thursday that its staff destroyed documents related to the probe of the bankrupt energy trader.
The global accounting firm notified the Department of Justice and the Securities and Exchange Commission that individuals in the firm "disposed of a significant but undetermined number of electronic and paper documents and correspondence relating to the Enron engagement."
Andersen said it has notified authorities and suspended its current records management policy effective immediately. Andersen's discarding of documents occurred before it received a subpoena from the SEC, the company said in a statement.
Once it did get the subpoena, the Chicago-based accounting firm instructed staff to preserve documents. Andersen has yet to determine whether employees violated that order.
Federal investigators said the revelation will not deter them and will be included in the investigation.
"Destruction of documents is obviously an extremely serious matter," Stephen Cutler, the SEC's director of enforcement, said in a statement. "Documents are an essential ingredient in our investigations."
The amount of documents destroyed could number in the "thousands," press reports said.
Separately, the U.S. Department of Justice said Thursday Attorney General John Ashcroft will not be involved in any aspect of the investigations of bankrupt energy company Enron Corp.
Ashcroft and his chief of staff withdrew from any connection to the Enron investigation because of "the totality of the circumstances of the relationship between Enron and the attorney general."
Also Thursday the White House revealed Enron's chairman called two Cabinet secretaries in the Bush administration this past fall, expressing his concerns about his company's financial straits.
White House Press Secretary Ari Fleischer said there was nothing unusual about the calls from Enron Chairman Kenneth Lay to Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans in October. He said the calls didn't result in the government taking any action, such as a bailout of the company, whose executives contributed to Bush's presidential campaign last year.
"I think it should surprise no one that people in the administration receive phone calls from people who are either in business or at unions," Fleischer said. "It happens every day."
White House officials said two calls were placed to O'Neill, one in October and one in November.
Fleischer emphasized that the government did not intervene in the case. "What took place here was, they received phone calls and took no action," he said.
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President Bush talks about the Enron case.
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Furthermore, Fleischer said, Bush did not know about the phone calls until Thursday morning.
"I have never discussed with Mr. Lay the financial problems of the company," Bush told reporters, adding that he last saw Lay last spring at a literacy find-raising event in Houston organized by his mother.
Meanwhile, more than a dozen Enron (ENE: down $0.12 to $0.67, Research, Estimates) creditors Wednesday petitioned a bankruptcy court to delay this week's expected sale of the energy company's trading unit.
The move came just one day before the scheduled auction among qualified bidders for 51 percent ownership of Enron's trading operations. An Enron lawyer told CNNfn he expects the auction to go ahead as planned, with the winning bid to be announced Friday.
Major criminal investigation
Wednesday, the Justice Department announced that a "major" criminal investigation had been launched into Enron. Many Enron workers lost their life savings when the company filed for bankruptcy in December.
Fleischer said the government is proceeding on "two tracks" with the Enron probe, citing the Justice Department's task of getting "to the bottom of all the allegations of criminal wrongdoing by Enron" as one.
"The Department of Labor is also reviewing and investigating Enron to see what took place with the workers' pensions at Enron and to see if anything can be done," he added.
The Center for Public Integrity, a watchdog group that tracks money in politics, said 24 executives and board members at Enron contributed almost $800,000 to Bush, the national political parties and members of Congress between 1999 and 2001. During that same period, Enron also gave $1.9 million in soft-money contributions.
Before Ashcroft's announcement, the White House expressed confidence in the attorney general's ability to conduct a thorough probe, even though he -- a former senator from Missouri -- had received campaign contributions from Enron in the past.
The Justice Department issued a statement saying, "After review of the relevant facts and law, the attorney general and his chief of staff, Mr. David Ayres, have recused themselves in all matters arising out of allegations of misconduct by Enron Corporation due to the totality of the circumstances of the relationship between Enron and the Attorney General.
"The attorney general has not been involved in any aspect of initiating or conducting any investigation involving Enron. Any and all responsibilities that would be exercised by the attorney general with regard to any such matters will be handled by the deputy Attorney General.
Justice Department officials, who spoke on condition of anonymity, said Wednesday that the department has formed a task force that includes attorneys from the fraud section of the department's criminal division in Washington and investigators from various U.S. attorney's offices, including those in Houston, San Francisco and New York.
The details on the size and scale of the investigation have not been determined, the Justice officials said.
An attorney for Enron said that while the investigation is not a surprise, the consolidation of the probes may actually be a positive development for the company.
"I'm pleased they're going to consolidate the investigation in Washington," said Enron attorney Bob Bennett. "It makes life a lot easier. I wish Congress would follow the same lead."
A senior Bush administration official said the goal was to determine if there was any criminal activity involved in the company's handling of the matter. The company barred employees from selling plummeting Enron shares from their retirement accounts.
The administration has said it probably will propose new policies to prevent a repeat of the Enron debacle once it has a better sense of what exactly happened to the company.
In addition to the criminal probe, the Treasury Department will lead a review of federal regulations governing 401(k) retirement investment plans and other pension programs to see whether stronger disclosure requirements about a company's financial health are needed for investors.
The Labor Department and Securities and Exchange Commission have already launched investigations, and lawmakers have demanded an investigation of what the Bush administration may have known about Enron's financial problems when White House officials -- including Vice President Dick Cheney -- met with Enron representatives last year.
In a letter to Rep. Henry Waxman, D-Calif., dated Jan. 3, the White House disclosed for the first time that Cheney or members of the White House's energy task force met six times with representatives from Enron.
Enron, which markets electricity and natural gas, delivers energy and other physical commodities, and provides financial and risk management services to customers around the world, filed for bankruptcy protection Dec. 2 with $62.8 billion in assets. It was the largest bankruptcy case in U.S. history, dwarfing Texaco's filing in 1987 when it had $35.9 billion in assets. 
-- from staff and wire reports
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