Andersen exec: shredding began after e-mail
Executive of audit firm gives testimony that bolsters account given by Duncan last week.
NEW YORK (CNN/Money) - An executive of Andersen LLP testified Friday that the firm's Houston office began destroying Enron audit documents after receiving an e-mail from Andersen's head office, sources with knowledge of the investigation told CNN/Money.|
Michael Odom, the risk management partner responsible for the Houston office, gave testimony Friday that supported the account given by lead partner David Duncan last Wednesday, sources said.
Odom's testimony amplifies the finger-pointing between Duncan and Andersen over who initiated the destruction of auditing documents considered vital to the investigation of Enron's bankruptcy.
Andersen last week fired Duncan and placed three other partners on leave. The accounting firm said Duncan called a meeting on Oct. 23 to organize the "expedited effort to dispose of Enron-related documents," after Duncan learned of a request from the Securities and Exchange Commission for information about Andersen's auditing of Enron.
Odom, who did not report to Duncan, was relieved of management responsibilities but not placed on leave, the firm said.
Andersen CEO Joseph Berardino told NBC's "Meet the Press" Sunday that Duncan displayed poor judgment. The Chicago-based accounting firm has tried to portray the document destruction as an isolated case divorced from activities at the company's headquarters.
But Duncan told congressional investigators last week that he ordered staff to destroy documents after receiving an Oct. 12 e-mail from Nancy Temple, a staff lawyer at Andersen, sources said.
The Oct. 12 e-mail initially sent to Odom and then forwarded to Duncan, said:
"It might be useful to consider reminding the engagement team of our documentation and retention policy. It would be helpful to make sure that we have complied with the policy. Let me know if have you any questions. Nancy"
Andersen, which publicly disclosed the e-mail last week, added that Temple also sent a copy of company policy on document retention in the e-mail.
According to the firm's 26-page guideline on retention, staff must keep work papers for six years before they can destroy them. But client-related files, such as correspondence or other records, are only kept "until not useful." Managers and individual partners keeping such material in client folders or other files, should "purge" the documents, the policy states.
But in cases of threatened litigation, Andersen staff must not destroy "related information."
Both Odom and Duncan told congressional investigators that the Oct. 12 memo on document retention sent to them by Temple was unusual, sources said. Duncan told investigators he believed the memo was a signal to destroy all but the most basic "work papers" relating to their auditing of Enron, a source said.
Duncan did not think anything was wrong with destroying documents because he was relying on advice from counsel, a source said.
Andersen countered Monday that it doesn't believe Temple directed Duncan or anyone to shred documents, the Andersen spokesman said.
"This is a man who knows what his responsibilities are under the law," firm spokesman Charlie Leonard told CNN/Money. "He knew that there was a government investigation and he began shredding docs."
Attempts to reach Temple were unsuccessful.
News of an SEC investigation was made public on Oct. 22 when regulators asked the energy trading firm to provide information on certain transactions. On Oct. 23, Duncan organized a meeting to destroy documents, Andersen said. Enron disclosed on Oct. 31 it was under formal investigation by the SEC.
Duncan and his staff's actions from Oct. 12 to Oct. 22 are unclear. But Duncan did spend time working on Enron's third quarter earnings statement of Oct. 16, a person familiar with the investigation said.
Activities at Andersen's Houston office during the time period are all the subject of a congressional investigation, Leonard said.
Temple never rescinded the Oct. 12 e-mail but there was no reason to rescind the memo since it was just a friendly reminder, Leonard said.
The shredding did not stop until Andersen's Chicago office sent another e-mail on Nov. 9 directing staff to stop destroying documents, the accounting firm confirmed.
After the SEC investigation came to light on Oct. 22, Duncan began destroying documents at "an aggressive and explicable pace and scale," Leonard said.
"That is why [Duncan] was dismissed from this firm," Leonard said. "The activities he engaged in at a minimum display extraordinary bad judgment."
Duncan told investigators that Temple was in on conference calls with him and senior executives, at least three times a week, where they discussed what to do with Enron auditing documents, a person with knowledge of the situation said.
Both Duncan and Odom could not be reached for comment.