HOUSTON – The prosecution’s star witness in the Arthur Andersen trial testified yesterday that he knew he was breaking the law when he directed employees to follow policies that led to the shredding of Enron-related documents.
“I obstructed justice,” former Andersen partner David B. Duncan said. “I instructed people on the [Enron audit] team to follow the document-retention policy, which I knew would result in the destruction of documents.”
In Duncan’s much-anticipated appearance, he spoke publicly for the first time about Enron’s downfall and his role. The man who led Andersen’s Enron accounting team appeared before Congress this year but invoked his Fifth Amendment right against self-incrimination.
Duncan pleaded guilty last month to obstruction of justice and agreed to testify against his former firm in exchange for leniency in sentencing. He is expected to shed light not only on Enron’s accounting practices but also on its maze of murky partnerships that contributed to its spectacular collapse in December.
Like Duncan, Andersen is charged with obstruction of justice for destroying documents related to Enron. Andersen claims no one intentionally destroyed documents to keep them out of the hands of federal investigators.
Much of the testimony at the trial has touched on Andersen’s little-known document-retention policy, which calls for the retention of material considered important to projects and the destruction of drafts, extraneous or redundant documents or other items considered unnecessary.
Andersen lawyer Nancy Temple sent a companywide e-mail message Oct. 12 – five days before the Securities and Exchange Commission opened an informal inquiry into Enron – reminding workers of the policy.
And in an e-mail message sent Oct. 26, Andersen partner C. E. Andrews fretted that the firm could be “in the crosshairs” of the SEC if the regulatory panel decided to get tough on accounting firms. The message also discussed how to manage a worst-case scenario involving Andersen and federal regulators.
However, Andersen partners Amy Ripepi and James Green testified yesterday that they did not think the reminders were designed to induce employees to destroy Enron-related materials.
Duncan, who took the witness stand late yesterday, met with the Justice Department Jan. 14 and was fired the next day. He agreed to plead guilty April 6, risking up to 10 years in prison.
Andersen could face five years’ probation and a fine of up to $500,000 if convicted. It also could be fined up to twice any gains or damages the court determines were caused by its action and would be barred from auditing publicly traded companies, which would likely drive the firm out of business.
