Document shredding continued after start of investigation

Tuesday, January 22, 2002

WASHINGTON -- Enron is looking into the reported destruction of documents that allegedly took place at its Houston headquarters after the federal government began investigating the company, an attorney for the bankrupt energy giant said Monday night.

In an on-air interview with ABC News, a former Enron executive, identified as Maureen Castaneda, said the shredding of documents took place in an accounting office on the 19th floor.

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.

Some of the shredding may have occurred as recently as this month.

Castaneda said the destruction began after Thanksgiving and continued to at least last week.

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

"We are investigating the circumstances of the reported destruction of documents," Washington attorney Robert Bennett, who is representing Enron, said in a statement.

"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," Bennett added. "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 the Arthur Andersen, Enron's accounting firm.

'Jedi' connection

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.

Plaintiffs' attorney William Lerach, who is suing Enron's board and officers, said he plans to take the box of shredded documents to federal court.

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.

Fired auditor talks

Fired Andersen auditor David Duncan told investigators that Andersen had ample information when it evaluated the controversial partnership arrangements at Enron that were a big factor in its bankruptcy.

Duncan's lawyers sought to delay his public testimony, scheduled for Thursday before the House Oversight and Investigations Subcommittee, arguing that Duncan needs more time to prepare.

In other developments:

The State Department disclosed that Secretary of State Colin Powell referred to Enron's problems regarding a power plant in India in a discussion with India's foreign minister last April 6.

Sen. Barbara Boxer, D-Calif., said accounting firms should be barred from providing management consulting services to the companies they audit. "These conflicts have led to the kind of hide-the-debt shell game that took place at Enron," she said.

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