Enron Accused of Shredding Records
Jan. 22, 2002
WASHINGTON (AP) _ Lawyers suing Enron Corp. say a massive number of company documents were shredded in the face of a federal investigation and want a court to step in to prevent more tampering.
``It was a major accounting fraud and now they have been caught destroying the evidence,'' attorney William Lerach said Tuesday on NBC's ``Today.'' ``I'd say they've got trouble on their hands.''
Robert Bennett, a Washington lawyer representing Enron, said the company told employees after coming under investigation that they were not to destroy relevant documents. He said the company is looking into charges papers were destroyed despite that directive.
Lerach told The Associated Press the shredding was ``open and notorious and widespread,'' consuming ``hundreds of thousands of documents'' and taking place even on Christmas Day.
Former Enron executive Maureen Castaneda said on morning talk shows Tuesday that the shredding began after Thanksgiving on the 19th floor accounting office of the company's Houston headquarters and continued at least until the middle of this month.
Lerach was bringing some of the shredded documents to federal court Tuesday to seek court custody of relevant Enron papers, as part of a class-action lawsuit against the company by aggrieved investors.
``We're going to ask the court to take extraordinary measures ... to prevent any further tampering or destruction,'' he said on ABC's ``Good Morning America.''
``It may be necessary that we put a U.S. marshal or someone on the premises.''
The reported shredding follows revelations over the past two weeks about document destruction at Arthur Andersen LLP, Enron's auditor.
Another attorney in the lawsuit, G. Paul Howes, said in court papers that some of papers destroyed at Enron headquarters were marked Jedi II and Chewco _ partnerships through which the energy giant concealed hundreds of millions of dollars in debts.
The partnerships, described by lawmakers as slick financial gimmicks, helped drive the company into the largest bankruptcy in U.S. history.
The Securities and Exchange Commission began looking into Enron's accounting practices in mid-October, after the company reported more than $600 million in third-quarter losses, and a congressional committee began asking for documents in mid-December. The SEC opened a formal investigation at the end of October, including demands for financial documents from Enron and Andersen.
Enron said in a statement late Monday that it had issued four e-mails from Oct. 25 to Jan. 14 warning employees against destroying documents, specifically those related to Enron's complex web of partnerships.
``We are investigating the circumstances of the reported destruction of documents,'' Bennett said.
Bennett said anyone who violated directives against destroying documents ``will be dealt with appropriately.''
Castaneda, who was laid off last week, said she did not know who ordered employees to do the shredding. ``I think they were just doing what they were told,'' she said.
She said she brought shredded paper home to use as packing material.
The Justice Department announced on Jan. 9 that it was pursuing a criminal investigation of Enron, which entered the biggest bankruptcy in U.S. history on Dec. 2 following a six-week downward spiral.
Andersen last week fired its lead Enron auditor for destroying Enron-related documents. The auditor, David Duncan, has told congressional investigators he was just following the advice of Andersen's legal department when he directed the shredding.
Lawyers for Duncan have been seeking to delay his public testimony, scheduled for Thursday before the investigative panel of the House Energy and Commerce Committee, saying Duncan needs more time to prepare.
But Rep. Jim Greenwood, R-Pa., the subcommittee's chairman, rejected the request, arguing that Duncan ``doesn't really need to recall every detail of what he did for Enron. We're focused on the destruction of documents. We'll subpoena him if we have to.''
Said Ken Johnson, spokesman for the House Energy and Commerce Committee: ``This whole sorry affair keeps getting uglier by the minute, and we're determined to get to the bottom of it. ... Making bad business decisions is one thing, but trying to cover up bad business decisions is another.''
Associated Press Writer Kristen Hays in Houston contributed to this report.