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Judge Says Preserve Enron Documents

January 25, 2002

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HOUSTON (AP) _ A federal judge has barred Arthur Andersen LLP from shredding any more documents related to Enron Corp. audits and ruled employees who admitted to destroying documents must give depositions as soon as next month.

U.S. District Judge Melinda Harmon’s ruling on Thursday also allows the documents to be inspected by plaintiffs’ lawyers who are suing the officials for more than $1 billion gained by stock sales before Enron crashed in December in the biggest corporate bankruptcy in U.S. history.

``It sends a pretty good signal,″ said Bill Federman, who represents shareholders in a lawsuit against 29 current and former Enron executives and board members. ``This judge is going to take the high road and really ensure that the investors will have a fair opportunity to gather the evidence and find out what happened.″

The judge also said the lawyers can start taking sworn testimony from employees in Arthur Andersen’s Houston office who were fired or suspended for shredding Enron-related documents. Depositions can start in 20 days.

``We’re pleased,″ said William Lerach, who represents Amalgamated Bank in the shareholders’ lawsuit. ``Now we can press forward.″

The plaintiffs are suing for more than $1 billion they gained by selling company stock from 1998 through November of last year. In addition to Amalgamated Bank, the plaintiffs include the University of California and pension funds for Georgia, Ohio and Florida.

Rusty Hardin, who represents Arthur Andersen, had argued the firm has not finished its own investigation into the shredding, and depositions should take a back seat to federal and congressional probes.

Hardin was in court and did not return a call for comment after the judge’s ruling.

Arthur Andersen is already under a Texas judge’s order prohibiting any further shredding of Enron-related documents. Company lawyers have said the files are under guard and shredding has ceased.

The company acknowledged two weeks ago its Houston office shredded a significant number of documents related to Enron audits last fall. The shredding came at about the same time as federal regulators began investigating possible accounting improprieties.

The firm later fired auditor David Duncan from the Houston office for his role in the shredding and placed several others on administrative leave. Plaintiffs’ lawyers want to take depositions from him and five others.

On Thursday, Duncan cited his Fifth Amendment rights, declining to testify before Congress about anything he knows or any part he played in the shredding of documents relevant to the collapse of Enron.

The company filed for Chapter 11 bankruptcy on Dec. 2 after acknowledging it had overstated its profits for four years.

Kenneth L. Lay stepped down as chairman and chief executive late Wednesday, saying the investigations were taking up too much of his time.

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On the Net: http://www.enron.com

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