It didn’t carry a computer virus that wiped out every Enron file, but an extraordinary e-mail from Chicago to Houston may have produced similar results.
That e-mail, sent Oct. 12 by Nancy Temple, an attorney in the Chicago headquarters of auditing giant Andersen, remains at the center of questions about thousands of Enron-related documents destroyed at Andersen’s Houston office just as the energy trader imploded and a federal securities investigation got under way.
Like every tale, there are at least two views about Andersen’s massive shredding.
The auditing firm, which is conducting an internal investigation of the shredding, has said a rogue Houston partner, David Duncan, is to blame, acting without counsel or direction from Chicago. Congressional leaders probing the shredding are more skeptical. They believe Temple’s extraordinary e-mail may have prompted the destruction.
Either way, crucial questions linger about what happened and who knew what at the firm’s headquarters.
Congressional investigators have asked Andersen to provide the names of everyone who destroyed documents, their titles and the location of their offices.
And they want all notes taken during a key conference call Oct. 23. An agenda of that telephone meeting was circulated to top Andersen brass in Chicago, records show, and it included scheduled discussion of the Securities and Exchange Commission, which was investigating Enron, along with the “status of documentation.”
Temple, a Harvard-trained lawyer and former partner at the Chicago firm of Sidley & Austin, belonged to a cadre of Andersen executives in Houston and Chicago who were on a special team assembled to deal with the looming Enron crisis.
The team, records show, was formed in late August or early September after an Enron vice president sent an anonymous letter to the company’s chairman, prophetically worrying that Enron would implode “in a wave of accounting scandals.”
During at least one of the Andersen conference calls, which investigators believe occurred Oct. 10 or Oct. 11, Temple specifically asked Houston personnel on the Enron audit whether they were complying with the firm’s document policy, according to congressional testimony.
The policy is complex, but its main principles are straightforward: To be in compliance, anything not needed to support a final audit should be destroyed once the books are closed. That includes e-mails, other electronic records, paper documents and even voice-mail messages, records show.
The exceptions: Once an investigation has commenced, or there is threatened litigation, no documents related to an audit should be shredded.
In Enron’s case, records that didn’t support Andersen’s approval of the company’s books could have included crucial papers detailing the accounting techniques that helped prompt the company’s collapse, congressional investigators say.
Temple testified before Congress that her conference-call discussion about compliance with the policy was not meant to prompt shredding in Houston. But Duncan and another Andersen team member from Houston on line for the call, Michael C. Odom, told congressional investigators they viewed Temple’s statement during the call as advice from their attorney to start getting rid of Enron-related records, investigators and lawmakers say.
Follow-up by e-mail
Temple followed her conference call discussion with an e-mail Oct. 12 to Odom, a senior manager in Houston. In turn, Odom forwarded it to Duncan.
The e-mail read: “It might be useful to consider reminding the [Enron] engagement team of our documentation and retention policy. It will be helpful to make sure that we have complied with this policy.”
Temple attached an electronic link to the policy.
When he forwarded the message to Duncan, records show, Odom added the notation, “more help.” Odom testified he was being sarcastic because “all of us knew where our document retention policy was, yet we had gotten a note with [the policy] attached. … It was not something that was particularly helpful.”
Duncan, who declined to testify before Congress, citing his right against self-incrimination, told investigators he could not recall getting a similar e-mail originating from headquarters during his entire tenure at Andersen. Odom also told investigators the e-mail was extraordinary.
When pressed during her Jan. 24 testimony before Congress, her only public statements to date, even Temple acknowledged it was not a normal practice, citing only one other specific time she had done it, though she said there could have been more.
Temple also testified about consultations she held with supervisors in Chicago on the “legal advice” she would offer Houston about the policy. This came before she raised the document issue in the conference call and before sending her Oct. 12 e-mail, records show.
Temple told congressional investigators she consulted both with her boss, Donald Dreyfus, a supervisor in the firm’s legal department, and James A. Friedlieb, one of the policy’s authors, about what should be said to Houston members of the Enron audit team. Congressional investigators have not questioned either man so far, sources said.
Neither man returned requests for comment. Temple’s Washington lawyer also did not return calls last week.
Andersen says “most of the activity to delete e-mails and discard desk files and other documents” took place in the days following an urgent meeting called by Duncan on Oct. 23. It blames Duncan for ordering and orchestrating the destruction, saying none of it was authorized by Temple’s e-mail.
Duncan’s defense, according to congressional sources, is similar to Temple’s. The Houston partner has said he simply passed out a copy of the same policy forwarded by Temple, telling Houston personnel they needed to comply with its terms.
Additional questions remain
But other questions about the role of Andersen personnel in Chicago linger.
For example, Andersen acknowledges retaining a prominent law firm, Davis Polk & Wardwell, on Oct. 9 to represent it in “possible litigation” stemming from the Enron implosion. Andersen’s document policy says no records should be destroyed if there is threatened litigation, but the hiring of the firm didn’t prompt Temple, or anyone else in Chicago, to tell Houston that circumstances had changed and everything should be saved.
Likewise, the policy makes it clear that nothing should be destroyed once a government investigation has been launched. Enron announced Oct. 22 that the SEC had launched an inquiry, but no one in Chicago specifically told Houston personnel to preserve all records until Nov. 9, after the firm was subpoenaed by the SEC, records show. That order came from Temple.
The nearly three-week gap in direction from headquarters has been particularly difficult to swallow for members of the lead congressional panel investigating Andersen and Enron. Rep. James Greenwood, a Pennsylvania Republican who heads the House Energy and Commerce subcommittee on oversight and investigations, said last week that his staff had yet to determine whether that lag and other acts amounted to “benign neglect” or something worse.
