Lawyers for Big Five firm Arthur Andersen LLP on Wednesday requested access to notes of conversations with former partner David Duncan who headed up Andersen's Enron audit team. Mr. Duncan pleaded guilty to obstruction of justice on April 9.
As part of his plea agreement, Mr. Duncan agreed to cooperate with the Department of Justice in its investigation and prosecution of Andersen. Mr. Duncan is the prosecution's lead witness against Andersen and may begin his testimony yet this week.
Andersen lawyers claim that Mr. Duncan never said he committed a crime in describing the mass destruction of Enron documents until such time as he agreed to cooperate with the government. "April 9 is the first time, we believe, Mr. Duncan told anybody he committed a crime," said Rusty Hardin, Andersen's lead defense lawyer. Andersen lawyers are hoping that the notes of conversations conducted with Mr. Duncan will reveal that he continuously professed his innocence of illegally shredding documents until he decided to plead guilty to the obstruction of justice charge. They believe he agreed to admit to the charge out of a fear of punishment.
Lawyers representing Mr. Duncan's interests are arguing that the notes are confidential and releasing the notes would be extremely prejudicial to their client. In addition to testifying in this case, Mr. Duncan is a defendant in numerous civil cases resulting from Enron's bankruptcy. Although the terms of Mr. Duncan's agreement with the Department of Justice give him immunity from federal prosecution beyond the obstruction of justice charge, exposure of the notes of his conversations could harm his defense in these other cases.
U.S. District Court Judge Melinda Harmon who is hearing the case is examining the notes and will rule on Thursday as to whether Andersen will have access to the notes.
Among Wednesday's witnesses for the prosecution were Securities and Exchange Commissioner Thomas Newkirk, continuing his testimony from Tuesday, Spencer Barasch, a lawyer with the Fort Worth office of the SEC, and James Hecker, a partner in Andersen's Houston office.
Mr. Newkirk concluded his testimony with information about Andersen's involvement in the accounting scandal at Waste Management, Inc. He stated that the SEC charged Andersen with knowingly allowing Waste Management to report false information to the public, and that Andersen agreed to a cash settlement of $7 million and an injunction against future wrongdoing.
Mr. Barasch testified that it was his staff that began investigating Enron after reading an article in The Wall Street Journal about possible improprieties of certain transactions involving Enron's partnerships. He also testified that his office never contacted Andersen in connection with the Enron investigation.
Mr. Hecker testified that he received a memo from Enron Vice President Sherron Watkins expressing questions and concerns about "the propriety of accounting for certain related party transactions," Mr. Hecker relayed Ms. Watkins' concerns to several members of Andersen's Enron audit team as well as the risk management partner for Andersen's Houston office. Andersen made a copy of this memo available to the House Energy and Commerce Committee last January.