Testimony Continues for Andersen's Duncan

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Former Andersen partner and leader of the firm's Enron audit team, David Duncan, returned to the U.S. District Court in Houston on Tuesday, May 14, for his second day of testimony. Mr. Duncan is considered to be the lead witness for the prosecution's obstruction of justice case against Big Five firm Andersen.

On his first day of testimony, Mr. Duncan stated that he knows that he obstructed justice when he ordered the destruction of documents relating to the Enron audit. Mr. Duncan's order went out to his staff after it became clear that Enron was to be the subject of an investigation by the Securities and Exchange Commission, but before any documents of Andersen's were subpoenaed in regard to that investigation.

The second day of Mr. Duncan's testimony included his statement that he did not bluntly order the destruction of Enron documents, but that he called together his staff and reminded them of the firm's document retention policy after receiving an e-mail message about the policy from Andersen lawyer, Nancy Temple. Andersen's document retention policy calls for the retention of significant documents and the destruction of drafts, redundant documents, and other items not considered necessary to support the work performed by the firm. "I wanted them to endeavor to come into compliance with the policy," said Mr. Duncan. "I told them to not do anything more or less than follow the policy."

Mr. Duncan stated that he was not aware that the destruction of documents was a federal crime. "I thought this was all entirely appropriate until one received a subpoena," he said. He said he only realized that the destruction was a crime after federal investigators explained the law to him.

Mr. Duncan knew that the potential for an investigation existed, and it was his concern that this knowledge was on his mind when he ordered the compliance with the firm's document retention policy that drove him to talk to the federal government about his role in the document destruction. When he first spoke with federal investigators, Mr. Duncan failed to disclose "the fact that I understood that the potential for civil litigation and investigation of the SEC and review by others was on my mind when I asked other people to do this." Later, he concluded that his state of mind at the time of the document destruction created a motive for obstructing justice.

In addition, Mr. Duncan testified that Ms. Temple was a party to discussions about Andersen's role in reporting Enron's finances, but that Ms. Temple asked Mr. Duncan to remove her name from the list of discussion participants, presumably to protect the contents of the meetings. "In that context, if you have a lawyer and therefore have attorney-client privilege, the topics of that meeting and the contents of the meeting were not discoverable by outside parties," said Mr. Duncan. Ms. Temple has invoked her Fifth Amendment right not to testify at this trial.

Mr. Duncan's testimony will continue on Wednesday, May 15.

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