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Congress grills Enron auditors
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January 24, 2002: 2:56 p.m. ET
Fired Andersen auditor Duncan invokes Fifth Amendment right; attorney Temple testifies.
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NEW YORK (CNN/Money) - Executives from Andersen LLP faced tough questioning at a Congressional hearing Thursday that is probing the accounting firm's role in the destruction of Enron Corp. documents.
Andersen attorney Nancy Temple (pictured above), managing partner C.E. Andrews and Houston-based partner Michael Odom testified Thursday before the House Energy and Commerce Committee. Temple sent the Oct. 12 e-mail that Andersen executives claim spurred them to start shredding documents.
Rep. Billy Tauzin (R-La.), chairman of the House Energy and Commerce Committee, told CNN in an interview before the hearing started it is likely criminal charges will be filed because of indications that both Enron and Andersen shredded financial documents after Enron filed for bankruptcy and as it faced numerous investigations and lawsuits.
"I would not be surprised if some criminal indictments come out of this," Tauzin said.
One congressional aide told CNN the shredding at Andersen was more widespread than the company has acknowledged, involving as many as 80 employees.
Meanwhile, fired Andersen audit partner David Duncan Thursday declined to testify in an earlier appearance at the Congressional hearing probing his accounting firm's destruction of Enron Corp. audit documents.
Duncan invoked his Fifth Amendment right against self-incrimination when asked specifically by Rep. James Greenwood (R-Pa.), chairman of the House Energy and Commerce oversight subcommittee, if he gave the order to destroy the documents.
Duncan then said he would invoke the Fifth Amendment to all questions. Details
In other developments in the Enron case:
Separately Congressional investigators produced another "smoking gun" memo Thursday that implies Andersen LLP executives shredded Enron Corp. documents at a rabid pace.
Rep. James Greenwood (R-Pa.), chairman of the House Energy and Commerce oversight subcommittee, held up the memo after a hearing which featured Andersen executives. Details.
Enron CEO Kenneth Lay resigned late Wednesday, issuing a statement that he made the decision in consultation with the company's board and creditor committee. He said that the various investigations into the company's collapse made it impossible to focus on reorganizing and saving Houston-based Enron.
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Kenneth Lay resigned as CEO of the bankrupt energy company, saying ongoing investigations made it impossible for him to focus on saving the troubled company. | |
The company's collapse has become the focus of congressional, criminal and regulatory agency investigators.
No immediate successor to Lay was named. The company said it is in the process of selecting a restructuring specialist to serve as acting CEO.
Lay will continue to serve as a member of the Enron board. By continuing in that position he will retain the company's legal protections against shareholder lawsuits. Details
Up to 80 people in Arthur Andersen's Houston office were involved in the destruction of Enron documents, according to Rep. Greenwood.
Greenwood said the number of people involved in the shredding casts doubts on the accounting firms' claims that Duncan violated the accounting firm's policy when he ordered the destruction.
Click here for CNN/Money's special report: Enron's collapse
"Do you believe that 80 Andersen employees were directed by Mr. Duncan to violate an express provision of policy by Andersen in the face of yet another investigation and none of them picked up the phone and called their superiors," a New York Times report quoted Greenwood as saying. "The question we need to get to is, 'Were there instructions from above?'"
CNN has obtained two memos that show Duncan warned Enron against putting misleading information in a news release about third-quarter earnings last October.
In an Oct. 15, 2001, memo addressed to other Andersen executives, Duncan wrote that he had "strong concerns" that a draft Enron press release could be "misconstrued or misunderstood by investors" and hide Enron's true losses.
The memo said Duncan raised his concern with Enron Chief Accounting Officer Richard Causey and said Causey acknowledged Duncan's advice that he seek legal advice about the release. But the release went out the next day "with essentially the same presentation," Duncan said.
The second memo, dated Oct. 16, from Andersen's Temple to Duncan, suggested he delete language from the first memo that might suggest he thought Enron's release was misleading.
In a busy day of hearings on Capitol Hill, Federal Reserve Chairman Alan Greenspan, commenting on the collapse of Enron Corp. before the Senate Budget Committee, called the company's apparent efforts to hide its true financial standing were "egregious."
Though he thought the scandal had uncovered flaws in corporate accounting practices, Greenspan noted that Enron's bankruptcy and the associated scandal wouldn't likely have a great impact on the economy. Details
President Bush has for days responded to news about the growing scandal by expressing outrage about Enron's apparent deception. Though he didn't own stock in the company, he has said, his mother-in-law did.
The scandal has put political pressure on Bush and other Republicans, since Enron officials contacted Bush administration officials in the months before the company's bankruptcy filing and donated generously to Republican campaigns. Republicans counter by pointing out that Democrats also benefited from Enron's largesse. Details
Timeline of Enron's collapse.
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