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Tuesday, 21 May, 2002, 10:49 GMT 11:49 UK
Andersen jury sees shredding video
Andersen graphic
Prosecutors in the trial of Arthur Andersen have shown the court a video of audit team managers being told that - in general terms - it was "great" to destroy documents because potential evidence would be "gone".

The comments were made by Michael Odom, a partner in Andersen's Houston office, as he told managers to follow the company's document retention policy, which involved destroying unneeded documents.

Arthur Andersen is on trial for obstruction of justice over the illegal shredding of documents relating to collapsed energy firm Enron.

The case hinges on whether the illegal shredding was down to David Duncan, Andersen's audit team leader for Enron who has pleaded guilty, or was prompted by top management.

'Irretrievable'

The video showed Mr Odom talking to audit team managers.

"If it's destroyed in the course of normal policy and litigation is filed the next day, that's great, you know, because we've followed our own policy and whatever there's been of interest to somebody is gone and irretrievable," he said.

He added that all that needed to be explained should be included in the firm's audit work papers.

The video was on filmed on 10 October, a few days before the Securities and Exchange Commission (SEC) told Andersen of its inquiry, and was made at the Houston office that dealt with Enron.

Prosecutors also produced e-mails and handwritten notes from several Andersen staff to support their case that Andersen's head office was complicit in the shredding.

One of them was from Andersen counsel Nancy Temple. She allegedly noted after a conference call with Andersen partners on 9 October that it was "highly probably" that the SEC would investigate Enron.

Tape dismissed

Andersen's defence lawyer Rusty Hardin said the latest evidence was proof that the firm had nothing to hide.

"They got all these documents which they're using against us, which means by definition we didn't shred them," he told journalists outside the court.

Andersen's lawyers have argued the firm was merely urging its branch office to carry out routine policy on document retention.

The prosecution's star witness, Mr Duncan, testified last week that reminders about the shredding policy were "generally understood" to be tied to growing controversy over Enron.

Mr Duncan testified that he saw colleagues at the accountancy firm "cleaning out" Enron related documents as federal investigators prepared to launch an investigation.

Pleading innocence

Mr Duncan entered into a plea agreement with the Department of Justice in early April in which he admitted guilt in obstructing justice by ordering the destruction of documents related to Enron accounting practices.

In doing so he hopes to gain leniency from the court, which could sentence up to 10 years in prison.

If convicted, Andersen could face of fine of $500,000 (343,000) and could be fined up to twice any gains or damages as determined by the court.

In addition, the firm would be barred from practicing before the SEC, effectively putting the firm out of business.

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The BBC's Alison Gee
"The head of Arthur Andersen's forensic investigations unit call the off-balance sheet partnership report a whitewash."

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