WASHINGTON – An auditor said to have led a hurry-up effort to destroy documents in the Enron case was cooperating with congressional investigators a day after his accounting firm fired him, his attorneys said.
David Duncan, who oversaw Enron's audits from the Houston office of Arthur Andersen LLP, was to be interviewed Wednesday by staff from the House Energy and Commerce Committee.
On Tuesday, Andersen said Duncan organized a document destruction effort on Oct. 23 shortly after he learned the Securities and Exchange Commission was asking Enron for accounting information.
The effort ended Nov. 9 when Duncan's assistant e-mailed secretaries to "stop the shredding" -- a day after the firm had received a federal subpoena for documents.
As federal agency and congressional investigations into Enron widened, Sen. Patrick Leahy, D-Vt., chairman of the Senate Judiciary Committee, and Rep. John Conyers of Michigan, the House Judiciary panel's senior Democrat, asked the head of the Justice Department's probe to step aside.
Deputy Attorney General Larry Thompson, who is leading the criminal investigation, was a partner in a law firm, King and Spalding, that has represented Enron. Attorney General John Ashcroft already has recused himself because he received campaign donations from Enron for his 2000 Senate bid.
Along with Duncan's dismissal, Andersen said four partners in its Houston office would be stripped of management responsibilities. Among them, D. Stephen Goddard Jr., an Andersen managing partner, was a major fund-raiser for President Bush's 2000 campaign for the White House and was one of the "Pioneers" who raised at least $100,000. Enron has been Bush's largest campaign contributor over the years, giving more than $300,000 to his two races for governor and more than $100,000 in his run for president.
In New York Wednesday, Wall Street powerhouse J.P. Morgan Chase & Co. reported a big loss for the fourth quarter of last year, in large part because of its loans to bankrupt Enron that went bad. J.P. Morgan's results were far below analysts' estimates. Citigroup Inc., another large Enron creditor, is expected to take a hit when it reports earnings Thursday.
Duncan, like all witnesses, can refuse to talk to investigators unless given a limited grant of immunity from prosecution, meaning that his own statements would not be used against him.
But "Duncan appears willing to cooperate and to the best of my knowledge there's been no discussion of any immunity," committee spokesman Ken Johnson said Tuesday night.
The auditor may have relied on an Oct. 12 e-mail from an Andersen attorney who forwarded a copy of the firm's policy which allows for destruction of some documents.
"Mr. Duncan is cooperating with all investigations. ... He did nothing wrong" and "he followed the instructions of an Andersen in-house lawyer in handling documents," said a statement from the law firm of Sullivan & Cromwell.
Duncan's lawyers disputed Andersen's assessment.
In announcing Duncan's dismissal Tuesday, Andersen said "nothing in an Oct. 12 e-mail" authorized the type of destruction that occurred between Oct. 23 and Nov. 9. It said it had "discovered activities including the deletion of thousands of e-mails and the rushed disposal of large numbers of paper documents."
Chicago-based Andersen said it would fire any other employees found to have participated in the improper destruction of documents, which it disclosed last week.
Enron publicly acknowledged it was the focus of an SEC inquiry Oct. 22. On Oct. 31, the company announced the SEC was conducting a formal investigation.
Enron, formerly the world's largest energy trader, filed for bankruptcy protection on Dec. 2.
The SEC has been investigating Andersen's role in Enron's complex accounting, including questionable partnerships that kept about $500 million in debt off the energy company's books and allowed Enron executives to profit from the arrangements.
The SEC's enforcement director, Stephen M. Cutler, said last week the agency was widening the scope of its investigation to include Andersen's destruction of documents.
The Justice Department is pursuing a criminal investigation of Enron, which became the biggest corporate bankruptcy in U.S. history on Dec. 2.
"If anyone at Enron broke the rules, they will be punished," Treasury Secretary Paul O'Neill said in a speech to a retailers' group.
O'Neill is among the administration officials who received telephone calls last fall from Enron Chairman Kenneth Lay -- Bush's biggest campaign benefactor -- seeking help for Enron as it careened toward collapse. O'Neill has said he dismissed any suggestion of intervening to help the company.
In other developments:
--Another potentially important witness said she gave Enron's chairman a warning in August about the company's accounting practices because "I thought Ken Lay ought to know the facts and look into them." Lay was "concerned" when he listened to her, Sherron Watkins told Houston television station KTRK. In a letter to Lay, Watkins said "we will implode in a wave of accounting scandals" unless the company halted practices that eventually sent it into bankruptcy.
"Has Enron become a risky place to work?," Watkins asked Lay in the seven-page letter. "For those of us who didn't get rich over the last few years, can we afford to stay?"
She said the abrupt resignation in August of chief executive officer Jeffrey Skilling "will raise suspicions of accounting improprieties."
--A law firm representing Enron employees in a lawsuit said the company incorrectly told its employees in September that they would be barred for about a month starting Oct. 19 from selling Enron stock in their 401(k) retirement accounts. The stock price plummeted during that period. The company says the actual period was a week, but the law firm said employees didn't realize that because Enron didn't send out a correction to its initial erroneous e-mail. The law firm released a copy of the Sept. 27 e-mail from Enron to employees saying that the company was changing the retirement plan's trustee and that during a one-month transition starting Oct. 19, participants "are not able to ... request a withdrawal or close an account."