Andersen Lawyer Challenges Evidence

An Arthur Andersen LLP accountant testified Tuesday her boss stressed he wasn't telling employees to "shred a bunch of documents" when he reminded them of the firm's records retention policy during a hastily called meeting last fall.

Patricia Grutzmacher said her superior on the Enron Corp. audit team, David B. Duncan, stressed to workers on Oct. 23 they should follow the policy, which calls for the destruction of extraneous or redundant material.

"I'm not telling you to go shred a bunch of documents or anything, but you need to make sure you're in compliance with the policy," Grutzmacher recalled Duncan saying. He also told workers the Securities and Exchange Commission recently had started an inquiry into Enron.

Grutzmacher said she didn't decide to sift through her files until after talking to her immediate supervisor, partner Thomas Bauer. Bauer is among three people so far to refuse to testify in Andersen's obstruction of justice trial by invoking their Fifth Amendment right against self-incrimination.

"I remember [coming away] feeling like I needed to get in compliance with the retention policy, that that was important," she said.

Grutzmacher testified she had sorted through about half her files, removing papers to be shredded, before employees were ordered to stop document destruction when the firm received a subpoena Nov. 9.

Among the e-mails Grutzmacher deleted was one related to a fantasy football league, which lead Andersen counsel Rusty Hardin said illustrated the extraneous nature of the destroyed documents.

"I didn't have anything troubling to hide," she said.

Last week, Duncan said he did not think he was doing anything wrong when he issued the order to follow the policy. But he pleaded guilty to obstruction of justice last month after several meetings with prosecutors.

Prosecutors contend the sudden promotion of the policy was an implicit effort to destroy documents before the SEC asked for them. Chicago-based Andersen says it was only trying to organize files.

Hardin spent the first half of Tuesday trying to show that evidence prosecutors introduced a day earlier doesn't prove the accounting firm obstructed the government's investigation of Enron.

With FBI special agent Barbara Sullivan on the stand a second day to review evidence, Hardin revisited an Oct. 10 training video and a key Andersen e-mail sent two days later that dealt with the firm's document retention policy.

The e-mail, sent by in-house lawyer Nancy Temple to Andersen partner Michael Odom in the Houston office, asked him to pass along a reminder about the policy to the Enron audit team.

Hardin read a segment of Temple's e-mail that told Odom "it might be useful to consider reminding the [Enron audit] team" of the policy and that "it would be helpful to make sure that we have complied with the policy."

Hardin asked Sullivan if she saw the words "order," "destroy," "get rid of" or "discard" in Temple's e-mail. Each time, Sullivan said she did not.

Temple has declined to testify.

The trial is in its third week. If convicted, Andersen could face probation for five years and a fine of up to $500,000. It also could be fined up to twice any gains or damages the court determines were caused by the firm's action and would be barred from auditing publicly traded companies — likely putting the firm out of business.