Enron Says It Is Looking Into Reported Destruction of Documents

Enron shredded boxes of documents at its Houston headquarters after the federal government began investigating the company, an attorney representing Enron investors said Monday night.

"They even shredded on Christmas Day," William Lerach, an attorney who is suing Enron, told The Associated Press. He said he was taking some of the shredded documents to court Tuesday where he will demand court custody of all relevant Enron papers.

Robert Bennett, an attorney representing Enron, issued a statement saying that Enron is investigating the reported destruction of documents that allegedly took place at its Houston headquarters after the federal government began investigating the company.

A former Enron executive, Maureen Castaneda, told ABC News on Monday the shredding of documents began after Thanksgiving on the 19th floor in an accounting office and continued through at least last week.

"From what we have learned, destruction of evidence at Enron was open and notorious and widespread," Lerach said.

The Securities and Exchange Commission began looking into Enron in mid-October.

"We are investigating the circumstances of the reported destruction of documents," Bennett said.

In an on-air interview with ABC, Castaneda displayed one box of the shredded material which "I got ... when I was leaving work to basically use ... for packing material.

"There were ... a lot more than this," she said, standing next to the box. She said some of the shredding may have occurred as recently as this month.

Some of the shredded Enron paper displayed in the ABC story contained the word "Jedi," one of the entities involved in an array of off-the-books partnerships which kept hundreds of millions of dollars in Enron debt off the company's balance sheet for several years. The partnerships were a major factor in sending the company into bankruptcy.

Bennett, the Washington attorney, said that "in October 2001 the company issued several directives to all Enron employees worldwide that all relevant documents should be preserved in light of pending litigation. If anyone violated those directives, they will be dealt with appropriately."

The reported shredding at Enron follows revelations over the past week and a half about document destruction at Arthur Andersen, Enron's accounting firm.

Enron's inquiry into shredding at its headquarters came as congressional investigators pressed for public testimony by an Andersen auditor fired over the destruction at the accounting firm.

"This whole sorry affair keeps getting uglier by the minute, and we're determined to get to the bottom of it," said Ken Johnson, spokesman for the House Energy and Commerce Committee, which has been investigating the destruction of documents at Andersen.

"Making bad business decisions is one thing, but trying to cover up bad business decisions is another," said Johnson when told of the reported shredding at Enron.

Lawyers for fired Andersen auditor David Duncan sought to delay his public testimony, scheduled for Thursday before the House Oversight and Investigations subcommittee, saying that Duncan needs more time to prepare.

But Rep. Jim Greenwood, R-Pa., who chairs the subcommittee, rejected the request, arguing 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."

One of Duncan's attorneys, Robert Giuffra of the law firm Sullivan & Cromwell, said "it's premature to require Mr. Duncan to testify at this hearing at this time."

Appearing Sunday on NBC's Meet the Press, Anderson chief executive Joseph Berardino said Duncan displayed "at the least ... extremely poor judgment" for his part in discarding the documents in October and November.

Berardino defended attorney Nancy Temple, who advised the Houston office by electronic mail on Oct. 12 about the firm's document destruction policy, just four days before Enron announced more than $600 million in third-quarter losses and took the first step in disclosing details of the partnerships.

Berardino said Temple reminded the Houston office of the policy to do away with some documents "because accountants are pack rats ... We save lots of stuff that's not relevant."

But Duncan told investigators "it was unusual" for a company lawyer to emphasize the document-destruction policy. Another Houston employee of Andersen, Mike Odom, backed up Duncan's account about the unusual nature of the emphasis on document destruction, said congressional sources, speaking on condition of anonymity. Temple, the legal department lawyer from Chicago, was interviewed by the investigators on Monday.

Meanwhile, a lawyer for Kenneth L. Lay, Enron's chairman and chief executive, said Lay disposed of millions of dollars in Enron stock before the company's collapse last year because he needed to raise cash to repay loans, not because of concerns about the health of his company.

Attorney Earl J. Silbert said Lay had put up shares of his Enron stock as collateral for other investments. On at least 15 occasions between February and October last year, Lay returned shares to the company to repay $4 million he had received through a credit line.

However, Silbert also said that Lay held onto some stock, detailing one transaction in which Lay exercised options to purchase 68,000 shares of Enron stock on Aug. 21.

"He continues to hold that stock today," Silbert said.