Ex-partner discussed accounting worries over Enron
HOUSTON (AP) – As a former Arthur Andersen LLP partner was telling federal investigators he did nothing wrong by destroying Enron-related documents last year, he told his family he might be guilty of a crime, he testified Wednesday. David B. Duncan testified during Andersen’s obstruction of justice trial that he had signed an agreement with Andersen to present a united front that neither did anything wrong.
In discussions with federal prosecutors through mid-March, Duncan maintained he was innocent of directing shredding to keep Enron documents out of the hands of the Securities and Exchange Commission.
He said Wednesday that he thought it was acceptable to destroy documents until Andersen received a subpoena Nov. 9 from the SEC.
However, “right about that time, I was discussing the fact that I might have committed a crime with my family,” he said.
Duncan, the former Andersen partner in charge of Enron audits, said he decided to abandon the agreement with the firm and plead guilty to obstruction in early April after “a lot of soul searching about my intent and what was in my head at the time.”
It was his third day of testimony, and the first under questioning from Andersen’s attorney.
On Tuesday Duncan testified that the day after he learned the SEC was looking into Enron’s books, he informed his superiors they needed to get their accounting in order.
The partners in Houston and Andersen’s Chicago headquarters did not, however, talk about destroying documents in that hastily arranged Oct. 20 conference call, Duncan said.
Duncan has admitted illegally shredding documents and is cooperating with the government in exchange for lenience.
The issue of shredding and deleting documents came up during a meeting of Enron’s audit team on Oct. 23, 11 days after in-house Andersen lawyer Nancy Temple sent an e-mail to the Houston office reminding workers of the firm’s document retention policy.
Duncan said he did not explicitly order the mass shredding and deleting that was carried out by the audit team, but said he gave employees a reminder on Oct. 23 about Andersen’s document retention policy that prompted them to shred documents.
He said he was unaware at the time that shredding the documents was illegal.
“I told them to not do anything more or less than follow the policy,” said Duncan.
But he and other members of the audit team agreed that Enron was under pressure over its financial disclosures after announcing a $618 million third-quarter loss and a $1.2 billion writedown in shareholder equity.
Duncan told his colleagues he had “received a request to make sure the engagement team was in compliance with policy. We all agreed that seemed to be a good thing to do.”
The policy requires that only final work papers be retained when an annual audit is finished and that extraneous records be destroyed, Duncan said.
Duncan also testified Tuesday that he huddled with superiors in August after Sherron Watkins, an Enron vice president, related worries about transactions that could prove costly to Enron investors.
He said the firm eventually accepted the word of Enron’s outside law firm, Vinson & Elkins, that everything appeared proper.