David Duncan, the government's key witness in its prosecution of Arthur Andersen LLP, said the company's plans for destroying Enron Corp documents were "generally understood" by employees of the accounting firm.
"I saw people cleaning out their office area and I saw people shred documents," Duncan said in testimony today. Duncan said he was reminded by Andersen lawyer Nancy Temple of a company policy on getting rid of extraneous documents.
Andersen, Enron's auditor for 16 years, is accused of obstructing a federal investigation into whether fraud caused the energy trader to file the biggest bankruptcy in history in December.
Duncan, the former lead auditor on the Enron account, said Temple told him extraneous documents "are often used against us in litigation. A plaintiffs' lawyer can take the most innocent thing and make it look" guilty, Duncan said on his second day of testimony at the accounting firm's criminal trial in Houston.
The policy required removing documents at the end of the audit season in March, not in October and November, when Andersen employees started the destruction, Duncan said.
Duncan told employees in an Oct. 23 meeting to comply with the document retention policy. Although he never directly ordered them to shred the documents, Duncan said it was "understood" that they should dispose of the papers, he testified.
The meeting was spurred by concerns of civil litigation, a US Securities and Exchange Commission investigation into Enron, possible restated Enron earnings, and an unfavorable analysts' call, he said.
"I went through my desk files and gathered documents that I thought were extraneous and gave them to my secretary to get rid of," Duncan said. He said he didn't know his actions were illegal at the time. They were "entirely appropriate," he thought, until receiving a subpoena, he said.
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