Stop the shredding

Associated Press

WASHINGTON — Arthur Andersen LLP said Tuesday that auditors destroyed Enron Corp. documents after federal securities regulators requested information on the collapsed energy company. The lead auditor is being fired, and disciplinary action is being taken against others.

Andersen said it also is replacing the management of its office in Houston, where Enron is based. Four Andersen partners in the Houston office have been relieved of their management responsibilities, the accounting firm said.

It cited the deletion of thousands of e-mail messages and the "rushed disposal" of paper documents. The lead auditor directed an expedited effort to destroy documents in Houston, Andersen said.

In a desperate Nov. 9 e-mail to other secretaries, the lead auditor’s assistant said, "Stop the shredding." A day earlier, Andersen had received a federal government subpoena for the documents.

Andersen’s chief executive officer, Joseph Berardino, did not rule out the possibility that the wrongdoing reached higher into the accounting firm than the auditors being disciplined.

"We’re not quite sure yet," he said in a telephone interview. "We want to make sure we have enough facts to make a call."

The firm said it will fire any other employees found to have participated in the improper destruction of documents, which it disclosed Thursday.

The Securities and Exchange Commission has been investigating Andersen’s role in Enron’s complex accounting, including questionable partnerships that kept about $500 million in debt off the energy company’s books and allowed Enron executives to profit from the arrangements.

The SEC’s enforcement director, Stephen Cutler, said last week the agency was widening the scope of its investigation to include Andersen’s destruction of documents.

The Big Five accounting firm said it was firing the lead Enron auditing partner, David Duncan, and placing Enron auditors Thomas Bauer, Debra Cash and Roger Willard on administrative leave.

Duncan called an urgent meeting on Oct. 23 to organize an "expedited effort" to destroy documents, Andersen said, a few days after he learned that the SEC had requested information. The SEC sent a letter to Enron on Oct. 17 asking for information after the company reported hundreds of millions of dollars in third-quarter losses.

The fact that Andersen employees discarded documents after learning of the SEC inquiry "is more than just unethical, it could be criminal as well," said Ken Johnson, spokesman for Rep. Billy Tauzin, R-La., chairman of the House Energy and Commerce Committee.

Duncan is scheduled to meet Wednesday with committee investigators. He already has provided them with six boxes of personal files and records.

"Now that he’s been fired, he may have a little more motivation to be cooperative," Johnson suggested.

A telephone message left at Duncan’s home in Houston was not immediately returned.

Partners removed from the Houston office are D. Stephen Goddard Jr., Michael Lowther, Gary Goolsby and Michael Odom.

"This was a painful decision, but it was absolutely the right thing to do," Berardino said in a statement. "We are prepared to take all appropriate steps necessary to maintain confidence in the integrity of our firm."