Andersen Dismisses Lead Auditor on Enron Job

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Big Five firm Andersen has fired David B. Duncan, the partner who headed the Enron audit, after learning the partner ordered the "rushed disposal" of documents relating to the audit. Mr. Duncan ordered the destruction of documents during a meeting on October 23, having just learned of the Securities and Exchange Commission's intent to investigate Enron. Two weeks later, the day after Andersen received a federal subpoena for documents, an assistant for Mr. Duncan sent an e-mail message requesting that firm members "stop the shredding."

In what appears to be the first hint of possible criminal activity on the part of Andersen, the firm indicated that some documents appeared to have been destroyed after the SEC subpoena was issued. In a statement reported in the Financial Times, Andersen claimed no authorization had been given regarding the destruction of documents. However, Mr. Duncan's lawyer responded that his client was acting on instructions from the firm's head office in Chicago.

In a statement on Tuesday, Andersen said, "Although the firm is still working to collect all the facts, it has learned that at the direction of the lead partner an expedited effort to destroy documents in Houston was undertaken."

Three other Enron auditors, Thomas H. Bauer, Debra A. Cash, and Roger D. Willard, have been placed on administrative leave, and four partners in the firm's Houston office, D. Stephen Goddard Jr., Michael M. Lowther, Gary B. Goolsby, and Michael C. Odom, have been fired. "This was a painful decision, but it was absolutely the right thing to do," said Joseph Berardino, Andersen CEO. "We are prepared to take all appropriate steps necessary to maintain confidence in the integrity of our firm."

Mr. Duncan has agreed to meet with investigators from the House Energy and Commerce Committee on Wednesday. The panel has been examining Andersen's role in the Enron collapse. Mr. Duncan's lawyer, Robert Guiffra, indicated that Mr. Duncan was cooperating with all investigations into the Enron matter. So far, six congressional committees, the Securities and Exchange Commission, the U.S. Department of Labor, and the U.S. Department of Justice are examining the Enron situation.

Enron VP's Letter is "Smoking Gun"

Meanwhile, a seven-page letter from Enron vice president Sherron Watkins to Enron Chairman Kenneth Lay has been released by Billy Tauzin, chairman of the House Energy and Commerce Committee. The letter relates a conversation Ms. Watkins overheard in which a senior Enron manager said, "I know it would be devastating to all of us, but I wish we would get caught." Ms. Watkins also stated in her letter, "I realize that we have had a lot of smart people looking at this and a lot of accountants including AA&Co. (Arthur Andersen & Co.) have blessed the accounting treatment. None of that will protect Enron if these transactions are ever disclosed in the bright light of day." Prophetically, Ms. Watkins added, "I am incredibly nervous that we will implode in a wave of accounting scandals."

Ms. Watkins sent her letter to Mr. Lay last August, months before the company restated its earnings in October and filed for bankruptcy in December. Mr. Tauzin distributed copies of the letter to members of the press on Tuesday using the letter as evidence that Mr. Lay had been made aware of the company's financial problems at least a few months in advance of any public announcements. Ken Johnson of the House committee referred to the letter as "the first real smoking gun that showed company officials had some knowledge, or at least were warned of a potential problem in advance."

California Legislators Subpoena Andersen, Enron Documents

In California, memories of last summer's energy crisis are all too clear. Expressing concern that energy companies, including Enron, were behind the jump in wholesale electricity prices that caused the state's three largest utilities to incur billions of dollars in debt, the state's Senate Select Committee to Investigate Price Manipulation in the Wholesale Energy Market has launched an investigation of Enron and its auditor, Andersen LLP.

Previously, the committee had spoken with Enron and five other major energy companies regarding its investigation, and documents were subpoenaed from Enron last summer.

Now, the committee has announced it will subpoena additional documents from both Enron and Andersen and will require officials from both companies to appear for depositions.

"We believe that some of the documents that have been destroyed by Arthur Andersen . . . are covered by the subpoena served upon Enron last June," said Joe Dunn, chairman of the committee. "Destruction of any documents that were under subpoena by this legislative committee is a violation of California law."

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