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Andersen Auditors Testify

May 29, 2002

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HOUSTON (AP) _ A former Arthur Andersen LLP auditor testified Wednesday that he directed his team to keep all documents related to audits for Portland General Electric, an Enron Corp. subsidiary, after receiving a reminder of the firm’s document retention policy.

``It seemed to be the conservative thing to do,″ said Shane Philpot, who was a senior auditor on the Portland General Electric account before joining KPMG earlier this month.

Prosecutors in Andersen’s obstruction of justice trial allege that sudden emphasis on the firm’s document retention policy in October and early November was an implicit order to shred Enron-related documents to thwart a fledgling Securities and Exchange Commission investigation.

The indictment, unsealed March 14, alleged that shredding took place at Andersen’s offices in Houston, Portland, Ore., and London as well as its Chicago headquarters.

Andersen says it was cleaning its files under firm policy, which calls for retention of documents that support final audit conclusions and destruction of extraneous papers and e-mails. All Andersen witnesses who have testified, including former top Enron auditor David Duncan _ who appeared under a plea deal with prosecutors _ said they did not think they were doing anything wrong at the time.

But Philpot testified Wednesday that he did the opposite after he inquired about a voice mail message in late October instructing Portland General Electric auditors that ``an effort should be taken to clean up the audit files of PGE.″

Philpot said he regularly followed Andersen’s policy before October. But he asked his boss, Andersen partner Tim McCann, about the message, which he said was from Clint Carlin, a member of the Enron audit team in Houston.

He said McCann consulted with Rich McCune, audit practice director for the Pacific Northwest, and advised Philpot that the policy ``is a document retention policy, not a document destruction policy.″

Philpot was the fifth witness to testify for the defense, which began presenting its case Monday in the fourth week of the trial. He was among 62 potential prosecution witness but prosecutors never called him to testify.

Earlier Wednesday, two Andersen accountants in Houston testified that they didn’t consider an instruction to comply with the policy as a code to shred documents.

John Boudreaux and Jennifer Stevenson, both accountants on Andersen’s Enron audit team, said they heard two partners urge compliance with the policy while informing workers Oct. 23 of an informal SEC inquiry into some of the energy company’s transactions.

Their immediate boss, partner Thomas Bauer, mentioned both issues in a morning meeting, they said. Then Duncan announced the inquiry and instructed his team to comply with the policy at a bigger meeting that afternoon.

Both testified that they didn’t link the two issues as a code to destroy documents to keep them out of the hands of the SEC.

Boudreaux said he spent 90 minutes that day going through files for similar extraneous documents, throwing out old drafts and deleting personal e-mails, like messages pertaining to a fantasy football league.

``I don’t recall any sense of urgency,″ Boudreaux said.

Andersen’s lead lawyer, Rusty Hardin, complained to U.S. District Judge Melinda Harmon out of the jury’s presence Wednesday that prosecutors improperly were asking questions about their own treatment of witnesses during pretrial interviews.

Harmon had sustained previous objections from prosecutors when Hardin asked similar questions.

Hardin accused prosecutors of advertising for the jury ``how wonderful they are.″ Prosecutor Andrew Weissmann responded that Hardin was trying to create the impression ``that the government is so bent on getting a conviction″ prosecutors will ``challenge people until they say what we want.″

Harmon issued no rulings on the issue.

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