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EDITIONS
Tuesday, 14 May, 2002, 23:02 GMT 00:02 UK
Auditor 'saw Enron papers shredded'
David Duncan and Andersen logo
David Duncan, the government's star witness in the Andersen trial, has said he saw colleagues at the accountancy firm "cleaning out" Enron related documents as federal investigators prepared to launch an investigation.

The former Andersen accountant, in his second day on the witness stand, said the shredding began after a meeting on 23 October after he gave Andersen staff a coded instruction to destroy potentially incriminating documents.

While the shredding order was not explicit, "it was generally understood", Mr Duncan said.

He began clearing out his own files after the meeting, deleting e-mails relating to Enron.

"I expected all of the partners and managers to do the same thing," he said, adding that he saw colleagues "cleaning out" office areas.

Disputed e-mail

The comments added to an admission on Monday by Mr Duncan, who had headed Andersen Enron audit account since 1987 until his dismissal in January, that he had "obstructed the course of justice" by destroying evidence.

David Duncan
Aged 43
Andersen employee for 20 years
In charge of Enron account since 1987
Salary in 2001: $700,000
Dismissed by Andersen in January
Pleaded guilty on 9 April
Maximum possible prison sentence: 10 years

The move denied key documents to federal investigators probing the demise of Enron, an energy firm which filed for bankruptcy in December in the biggest corporate failure in US history.

Concerns over the quality of financial controls at the firm before its collapse - and the paperwork destruction afterwards - have since sparked meltdown at Andersen, Enron's auditors.

The case, in which Andersen is charged with obstruction of justice for destroying Enron-related documents, centres on whether Mr Duncan acted alone, or on orders from above.

Mr Duncan claims he was acting on an e-mail from Andersen lawyer Nancy Temple, who denies giving such advice.

Andersen claims no one intentionally destroyed documents to keep them out of the hands of the federal investigators.

"Problematic" issue

Also on Tuesday Mr Duncan outlined early fears among partners at Andersen, which had already been placed on probation over sloppy accounting, over the Enron accounts.

Nineteen senior Andersen partners had last year discussed ways of tackling the appearance of massive losses at Enron, and avoiding the threat of further watchdog intervention.

Andersen had taken at face value the findings of Enron's lawyers over a complicated off balance sheet set-up, later considered a primary factor behind Enron's collapse.

"It was essential there was a resolution of the problem before the third quarter earnings release," Mr Duncan said.

"If it was an error it would have been very problematic. It would also raise the risk of a review by an outsider."

It was a decision in November to restate earnings downwards by about $600m which sparked the Enron crisis.

Mr Duncan's admission of destroying evidence could see him jailed for up to 10 years, although he is hoping for leniency in return for coming clean on his actions.

He will be sentenced on 26 August.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Mark Gregory reports from Houston
"David Duncan is an intriguing character"

The trial

The disintegration

Background

IN-DEPTH
See also:

14 May 02 | Business
06 May 02 | Business
06 May 02 | Business
05 May 02 | Business
02 Apr 02 | Business
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