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Andersen fires lead auditor, is disciplining several others

Wednesday, January 16, 2002

WASHINGTON -- Arthur Andersen LLP said Tuesday that auditors destroyed Enron Corp. documents after federal securities regulators requested information on the collapsed energy company. The lead auditor is being fired and disciplinary action is being taken against others.

Andersen said it also is replacing the management of its office in Houston, where Enron is based. Four Andersen partners in the Houston office "have been relieved of their management responsibilities," the accounting firm said.

It cited the deletion of thousands of e-mail messages and the "rushed disposal" of many paper documents. The lead auditor directed an expedited effort to destroy documents in Houston, Andersen said.

In a desperate Nov. 9 e-mail to other secretaries, the lead auditor's assistant said, "Stop the shredding." A day earlier, Andersen had received a federal government subpoena for the documents.

The firm said it will fire any other employees found to have participated in the improper destruction of documents, which it disclosed Thursday.

SEC investigating

The Securities and Exchange Commission 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 Big Five accounting firm said it was firing the lead Enron auditing partner, David B. Duncan, and placing Enron auditors Thomas H. Bauer, Debra A. Cash and Roger D. Willard on administrative leave.

Urgent meeting called

Duncan called an urgent meeting on Oct. 23 to organize an "expedited effort" to destroy documents, Andersen said, a few days after he learned that the SEC had requested information. The SEC sent a letter to Enron on Oct. 17 asking for information after the company reported hundreds of millions of dollars in third-quarter losses.

Duncan is scheduled to meet Wednesday with investigators from the House Energy and Commerce Committee. He already has provided them with six boxes of personal files and records.

"Now that he's been fired, he may have a little more motivation to be cooperative," said Ken Johnson, a spokesman for Committee Chairman Rep. Billy Tauzin, R-La.

A telephone message left at the home of a David B. Duncan in Houston was not immediately returned.

Partners removed from the Houston office are D. Stephen Goddard Jr., Michael M. Lowther, Gary B. Goolsby and Michael C. Odom.

"This was a painful decision but it was absolutely the right thing to do," Joseph Berardino, Andersen chief executive officer, said. "We are prepared to take all appropriate steps necessary to maintain confidence in the integrity of our firm."

Andersen disclosed Monday that an in-house lawyer spelled out the firm's document destruction policy for auditors on Oct. 12, four days before Enron announced third-quarter losses of hundreds of millions of dollars. The Andersen lawyer, Nancy Temple, e-mailed the policy to a partner in the firm's office in Houston.

Berardino testified to Congress last month that Andersen notified Enron's audit committee on Nov. 2 of "possible illegal acts within the company."

He did not mention Andersen's destruction last fall of thousands of documents related to Enron, which the SEC, the Justice Department and congressional investigators are seeking in their probes.

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