Enron auditors quizzed

Andersen audit executives faced a tough grilling

Accountancy firm Andersen has come under fire over the collapse of Enron, as two Congressional committees opened hearings into the bankruptcy.

One panel interrogated Andersen officials over the shredding of documents relating to Enron's collapse.

But lawmakers were frustrated by the refusal of sacked partner David Duncan - who is accused of destroying the documents by his former employer - to testify.

The key issues

Political impact: Top-level political links with Bush administration, and Republican and Democratic parties

Accounting process: Company used complex financial partnerships to conceal debt. Shares tumbled when this emerged, leading to bankruptcy

Fraud: Executives investigated for insider dealing and shredding documents. Employees lost billions due to ban on selling stock

Enron scandal at a glance

"We certainly have not found out today the answer to the burning question, which was why those documents were destroyed," said Billy Tauzin, chairman of the full House Energy and Commerce Committee.

Meanwhile a Senate hearing was looking into the role of the regulators, and whether they could have done more to prevent Enron's collapse.

Thursday's hearings were one of many scheduled over the next six weeks as Congress probes the biggest collapse in US corporate history.

Shredding claim

Andersen told the House Energy and Commerce subcommittee that Mr Duncan, Enron's chief auditor, had purposefully ordered the destruction of a "very substantial volume of documents".

Sacked Andersen partner David Duncan has refused to testify

Dorsey Baskin, managing director of Andersen's professional standards group, said the accountancy firm was "not proud" of the shredding of the documents.

But he said Andersen "did the right thing" by revealing that documents had been destroyed, "although the firm was well aware of the potentially devastating impact this discovery could have on our reputation".

Mr Duncan, who was fired by Andersen earlier this month, invoked his constitutional right not to testify and declined to answer any questions.

He has previously said, through his lawyer, that he had done nothing improper.

Mr Duncan's silence hampered "the important work of this committee in our search for the truth", said Mr Greenwood, the panel's chairman.

"Enron robbed the bank, Arthur Andersen provided the getaway car and they say you were at the wheel," Mr Greenwood told Mr Duncan.

Delay

But some doubted that Mr Duncan was totally to blame.

"It is perplexing to me that no one in the highest management of Arthur Andersen had any indication... of what was going on," said committee member Chris John.

Enron chairman Kenneth Lay resigned on Wednesday

And lawmakers were puzzled why it took until 10 November for Andersen in-house lawyer Nancy Temple to send a memo to Mr Duncan and other Enron staff telling to preserve relevant documents.

By this time the US Securities and Exchange Commission (SEC) had already begun an informal investigation into Enron's accounting practices.

But Ms Temple said she was not aware that papers were being shredded.

"I never counselled any destruction of documents," she said.

Independence 'compromised'

Meanwhile the Senate Governmental Affairs Committee is looking into the role of the regulators, and whether they should have done more to prevent the collapse.

The former chairman of the SEC Arthur Levitt called on auditors to re-examine their relationships with their clients.

"It's well past time to recognise that the accounting profession's independence has been compromised," he said.

The committee's chairman Joseph Lieberman said he hoped the panel would ultimately be able to recommend changes in law and regulation to "strengthen the watchdogs in and out of the federal government so that nothing like the Enron scandal ever happens again."

Chairman resigns

The hearings come the day after Kenneth Lay resigned as Enron chief executive and chairman.

Mr Lay, who had run Enron since it was founded in 1986 and is close to senior members of the Bush administration, said the investigations into the collapse had left him unable to concentrate on rescuing the company.

"I want to see Enron survive," said Mr Lay, who will remain a director.

"And for that to happen we need someone at the helm who can focus 100% of his efforts on reorganising the company."