Hearing scheduled in Enron probe

By Pete Yost
Associated Press

WASHINGTON — The head of Enron's accounting firm yesterday strongly criticized a fired auditor who congressional investigators want as their star witness at a hearing into the destruction of thousands of Enron-related documents.

Chris Knauer, center, and another unidentified investigator for the House Energy and Commerce Committee leave Enron Corp. headquarters in Houston Thursday, Jan. 17, followed by news cameras and reporters. Associated Press

Fired auditor David Duncan has told investigators he was simply following the advice of Andersen's legal department when he directed the shredding.

The House subcommittee on oversight and investigations has scheduled a hearing for Thursday.

The tentative witness list includes Duncan, legal department attorney Nancy Temple and Berardino or another top-ranking Andersen official in his place.

It was uncertain whether Duncan would appear voluntarily.

"We have made it clear that we'll be prepared to subpoena any reluctant witnesses," said Ken Johnson, spokesman for the House Energy and Commerce Committee, of which the subcommittee is a part.

Johnson would say only that "a number of people have approached the committee about immunity, but we have not offered it to anyone nor have we seriously considered it up to this point."

"We're very interested in finding out where Andersen is in its internal investigation" of the Enron affair "and we want to examine administrative and disciplinary actions taken in the wake of the disclosure that documents were destroyed," said Johnson.

Temple, an Andersen lawyer in Chicago, e-mailed a copy of the firm's document destruction policy to the Houston office where Duncan and other accountants worked on the Enron account.

Temple sent the e-mail just four days before Enron announced more than $600 million in third-quarter losses. At the same time, Enron also took the first of several steps in publicly disclosing details of partnerships that had kept hundreds of millions of dollars in Enron debt off the company's balance sheet.

Appearing on NBC's "Meet the Press," Berardino defended Temple's sending the e-mail, saying "Nancy just told people to use their judgment. She did not instruct them to do anything, to my knowledge."

According to congressional investigators, Duncan said last week that general discussions began at Andersen in September about what Enron-related documents to discard.

"It was unusual" to emphasize the document-destruction policy, Duncan told the investigators, according to congressional sources familiar with what he said. The sources spoke on condition of anonymity.

Berardino also offered his most direct criticism to date of Enron, saying the company failed "because the economics didn't work" rather than due to flawed accounting.

At the same time, Berardino acknowledged that Andersen was responsible for "many of these issues" that have come up in the Enron bankruptcy, including the controversy over the partnerships.

"We'd been involved with the company as these various investments were made," the Andersen chief said.