Andersen Partner Says in Video Destroying Documents Before Litigation Is 'Great'

Jurors in Arthur Andersen LLP's obstruction trial watched a video Monday in which audit team managers were told destroying documents before litigation is filed is "great" because "whatever might have been of interest to anybody is gone and irretrievable."

Michael Odom, a practice manager and partner in Andersen's Houston office, made the remarks Oct. 10 while instructing audit team managers to follow the Chicago-based firm's document retention policy, which calls for the destruction of unneeded material.

The accounting firm is charged with obstruction of justice for destroying records related to Enron Corp. audits last year as the Securities and Exchange Commission started probing the energy company's finances.

The video was among evidence presented by prosecutors to demonstrate Odom and Nancy Temple, an in-house Andersen lawyer who has invoked her Fifth Amendment right not to testify, urged compliance with the policy as the Enron scandal loomed.

David B. Duncan, Andersen's former top Enron auditor, heard Odom's presentation. He testified last week he didn't walk away thinking he had to destroy Enron documents.

Odom, who has not testified, told the audit managers group Oct. 10 that Andersen recently had produced documents for pending litigation and "we found a lot of stuff that we shouldn't have retained" because it included drafts and memos not included in final audit papers.

Odom said once litigation is filed, the firm can't destroy anything. But if workers destroy records in compliance with the policy up until the day before litigation is filed, "that's great," he said.

On Oct. 12, Temple sent Odom the reminder of the document retention policy: "It will be helpful to make sure that we have complied with the policy." Odom sent it to Duncan, who told his staff Oct. 23 to comply.

Minutes later on Oct. 12, records introduced Monday showed Temple created a written record of a litigation claim about the Enron account, though the SEC didn't notify Enron of its informal inquiry until five days later.

Prosecutors also introduced several e-mail messages into evidence about the shreddings. Among them was an Oct. 24 e-mail from Peter Kwong in Andersen's Portland, Ore., office saying all items "have been deleted or destroyed" according to instructions.

Shannon Adlong, Duncan's assistant, said in an Oct. 24 e-mail about an unrelated matter, "AARRGGH. Send more shredding bags. Just kidding, we ordered some."

Adlong sent another e-mail to employees on Nov. 9, the day Andersen received an SEC subpoena for documents. "No more shredding," it said.

Andersen attorney Rusty Hardin told reporters Monday that it was ironic prosecutors were building a case about document destruction with documents the firm had saved.

"They've either got to be the world's worst crooks or they were acting in good faith," he said.