For three hectic days in late October, Andersen auditors in the offices of financially troubled Enron Corp. collected roughly a ton of paperwork and shipped it off in 18 to 20 seaweed green locker trunks for shredding at the accounting firm’s downtown headquarters a few blocks away.
At one point the auditors ran out of trunks, but Andersen record keepers were so overwhelmed that they refused to empty the contents of the containers. Their supervisor, Sharon Thibaut, plucked papers out of the trunks herself so they could be shuttled back to Enron to be filled with more documents, she testified Thursday.
“If they wanted trunks, I was going to give them trunks,” Thibaut said, adding that by week’s end the massive amount of paper nearly filled an entire storeroom before a company hauled it away to be destroyed.
The swift pace of collection from the Enron office starting on Oct. 23 surprised Thibaut, she told the federal court jury in Andersen’s obstruction-of-justice trial. In three days, the Andersen team working on the Enron account collected more paper to be shredded than it normally would in a year, Thibaut testified.
“There was a sort of buzz in the department,” she said of the near-revolt that happened in the records area as the trunks kept coming.
Thibaut, the records chief in Houston, testified that she had no idea what was behind the surge in materials for shredding from the Enron team. The Andersen team also sent over about three boxes containing files to be retained and coded, she said.
Through Thibaut’s testimony, the prosecution is trying to show jurors the extent and volume of the destruction. Andersen is accused of discarding records as Enron faced a federal probe into more than $1 billion of financial losses.
Andersen claims that nothing of significance was shredded and that it was not attempting to hinder an investigation by the Securities and Exchange Commission. Getting rid of needless paperwork was common, Thibaut said.
Andersen’s Houston office alone shredded roughly 38 tons of materials per year as part of the firm’s policy to destroy scratch memos and non-essential working papers related to client audits, she said.
Papers to be shredded are transported within company offices in elegant lockers with brown leather straps and gold-plated hinges, Thibaut testified. A company called Shred It picks up the materials every Wednesday and grinds them up in trucks parked on the street, then the bits and pieces are hauled away in blue bags, she said.
Although Thibaut did not carefully examine the contents of the trunks from Enron offices last fall, she checked to make sure they did not contain official color-coded files that the firm usually retains for up to six years, she said.
Judge, attorney battle
Under cross-examination from Andersen attorney Rusty Hardin, Thibaut said the blizzard of shredding amounted to less than half a box per person for the 100-plus staff on the firm’s Enron engagement team.
“When you look at it in terms of the whole year, it wouldn’t represent any increase, would it?” Hardin asked Thibaut before U.S. Circuit Judge Melinda Harmon cut off his questioning.
Sniping between Harmon and Hardin marked the day in court as it has for much of the trial. Harmon repeatedly admonished Hardin in and out of view of the jury. Hardin contends that Harmon is prejudicial in her rulings and largely favorable to the government. Harmon has accused Hardin of turning the case into “a circus.”
When cross-examining a salesman for Shred It, Hardin attempted to show that the company also destroys papers for federal offices. Harmon disallowed the line of inquiry.
“Your honor, I am not allowed to show this witness shreds for the FBI?” Hardin asked Harmon, who again angrily waved him off.
“So were the first two letters you said `F-B?”‘ Hardin then asked the witness, before Harmon sided with the prosecution’s objection.
In earlier testimony Thursday, an Andersen partner testified that auditors had realized as early as two months before Enron collapsed in December that the energy company was headed toward bankruptcy.
Andersen felt misled
David Stulb, a senior Andersen partner in the firm’s fraud division, rushed to Houston from New York City in late October to help Andersen auditors respond to faulty accounting issues.
Stulb said he attended a series of meetings to craft Andersen’s defense as lawsuits over Enron loomed.
During cross-examination, Stulb told the jury that Andersen auditors said that Enron officials misled them, especially over questionable deals they had with partnerships.
Knowing that they had to correct the books, Andersen began to fashion a “fraud defense,” Stulb said.
At one point, the lead Andersen auditor, David Duncan, pulled a potentially damaging e-mail to Andersen and seemed ready to throw it away, Stulb said.
“I told Dave he should keep these documents as they would be subject to discovery,” Stulb said, repeating his testimony from Wednesday.
Stulb testified that he had no idea Duncan told his staff only days before to get rid of non-essential paperwork and that a massive cleaning out of documents took place.
“It would have been nice to know,” Stulb answered under questioning from Assistant U.S. Atty. Andrew Weissman.
“If I understood that he was doing anything like that, I would have taken a different response and said `Don’t do it,'” Stulb said later under Hardin’s questioning.
Still, Stulb wouldn’t back down from his stance that Duncan seemed intent on destroying the e-mail. The e-mail was a cover sheet to a memo concerning allegations by an Enron whistleblower of the alleged shady dealings at the energy giant that by year’s end led to Enron’s collapse.
“I walked away thinking he was naive,” Stulb said.
Hardin asked if it would have been possible to retrieve the e-mail from the firm’s computers if Duncan had destroyed it. “It would have been recovered if it was on our system,” Stulb said.
