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News
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Duncan was naive
Accounting firm sent out 18-20 trunks to be shredded. Texas moves to revoke Andersen license.
May 23, 2002: 7:36 PM EDT
By Luisa Beltran and Jennifer Rogers

NEW YORK (CNN/Money) - A long-time Arthur Andersen LLP employee, Sharon Thibaut, testified Thursday that the Enron Corp. engagement team sent out 18 to 20 trunks in October to be shredded.

Thibaut, who works in the records department, said the company contracted to destroy the Enron documents had to make an unscheduled trip on Oct. 26 to account for the "unusually high" volume, she said.

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But on cross-examination, Thibaut admitted that up to that point in October the Enron engagement team hadn't had anything shredded. Some of the trucks were also filled with miscellaneous items like jewelry and old lunches. Also, the 18 to 20 trunks represent less than half a box of items for each of the 100 members of the team, she said.

"At first blush it looks like much, but if prorated over the year it doesn't look like much at all?" asked Rusty Hardin, Andersen's lead defense attorney.

"Yes," Stulb said.

But the tense atmosphere in the courtroom continued Thursday. Testimony was often interrupted by objections and sidebars that were at times emotional. At one point, Judge Harmon waved her arms and said loudly to Hardin, "You are so off base it is unbelievable."

Last week, Hardin and Judge Harmon got into a shouting match and the Andersen attorney called Harmon biased against the defense.

Texas seeks to revoke license

The trial continues as more troubles continued to pile up for Andersen. The Texas state accounting board on Thursday filed a motion to revoke Andersen's license in that state because of its role in Enron's collapse. The board is also seeking $1 million in fines.

Andersen, as Enron's auditor for 16 years, signed off on the company's financial statements. Enron filed the largest bankruptcy in U.S. history on Dec. 2.

Chicago-based Andersen is now in the midst of a criminal trial in which it is accused of obstructing justice for shredding Enron documents while on notice of a federal investigation. Government lawyers claim that the firm's sudden promotion of its document retention policy in October was an implicit effort to destroy documents in light of a Securities and Exchange Commission investigation into Enron.

Andersen has admitted destroying Enron documents but claims that it retained all key documents related to the Enron audit. In January, the accounting firm fired David Duncan, the lead audit partner on the Enron account, for overseeing the destruction of Enron documents.

Duncan on Oct. 23 ordered his staff to comply with the firm's document retention policy, a directive that caused employees to shred documents. Last week, the fired audit partner testified that he didn't know he was committing a crime when he directed staff to adhere to the firm's policy. Duncan explained that he had initially thought he was innocent of obstructing justice but then changed his mind in March after talking to his family.

On April 9, the former Andersen executive reached a deal with the Justice Department under which he pleaded guilty to obstruction of justice and admitted that he directed the shredding of Enron documents to thwart the government's investigation.

No mention of shredding

Earlier Thursday, David Stulb, head of Andersen's forensic investigation unit, testified that neither Duncan nor any other senior partner told him that the Enron team was destroying documents.

"It would have been nice to know," Stulb said.

A part of Stulb's duties is helping Andersen limit its litigation risks. If he had known that documents were being destroyed, Stulb said he would have taken a different response.

"I think he was naive," Stulb said of Duncan.

On Wednesday, Stulb described Duncan as having a "deer in headlights" syndrome when he visited him in Houston in late October. Such a reaction is common for partners who are exposed to serious litigation for the first time, Stulb said.

Stulb testified that he had to stop Duncan from destroying a potentially damaging document on Oct. 31. Duncan appeared to be about to throw out a hard copy of an e-mail that described its attachment as containing "smoking guns that you can't extinguish" when Stulb intervened.

"He was reading this and used the words, 'Another smoking gun, we don't need this.' And it appeared he was going to be removing the top page from the overall body of the document," Stulb said.

"I said, 'Dave, I'm not sure if you had any discussions, but you really need to keep all this information because this is -- there's a strong likelihood that we'll be subject to litigation and the [SEC], the Justice Department and other bodies may be interested in this type of information."  Top of page


--from staff and wire reports






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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.