Enron shredded boxes of documents at its Houston headquarters weeks after the federal government began investigating the company, lawyers representing Enron investors said.
"They even shredded on Christmas Day," William Lerach, an attorney who is suing Enron, said Monday night. He said he was taking some of the shredded documents to court yesterday where he will demand court custody of all relevant Enron papers.
Robert Bennett, an attorney representing Enron, issued a statement saying that Enron is investigating the reported destruction of documents that allegedly took place at its Houston headquarters over a period of seven weeks.
A former Enron executive, Maureen Castaneda, claims that the shredding of documents began after the Thanksgiving holiday in late November on the 19th floor in an accounting office and continued through at least mid-January, Paul Howes, an attorney involved in a class-action lawsuit against Enron, said in court papers to be filed yesterday.
"From what we have learned, destruction of evidence at Enron was open and notorious and widespread," said Lerach, who is involved in the same lawsuit.
The Securities and Exchange Commission began looking into Enron in mid-October and congressional committees began asking for documents in mid-December
"We are investigating the circumstances of the reported destruction of documents," Bennett said. Separately, Enron issued a statement late Monday night saying that the company had issued four emails from Oct. 25 to Jan. 14 warning employees against destroying documents, specifically those related to Enron partnerships.
In an on-air television interview Monday with ABC, Castaneda displayed one box of the shredded material which she said she took home from her workplace "to use for packing material."
There were many more such boxes, she said. ABC was the first to report Enron's alleged destruction of documents.
Howes said Castaneda was laid off from her job on Jan. 18 and in the weeks just prior to her departure "there was an increase in the volume of shredding."
The shredded papers "filled up trash cans each week," she was quoted by Howes as saying.
Howes reported that some of the shredded Enron papers "included those clearly marked Jedi II and Chewco" -- a reference to partnerships through which Enron disguised debt because they were not formally included in the company's balance sheet.
The partnerships were a major factor in sending the company into bankruptcy.
Bennett, the Washington attorney, said that "in October 2001 the company issued several directives to all Enron employees worldwide that all relevant documents should be preserved in light of pending litigation. If anyone violated those directives, they will be dealt with appropriately."
The reported shredding at Enron follows revelations over the past week and a half about document destruction at Arthur Andersen, Enron's accounting firm.
Enron's inquiry into shredding at its headquarters came as congressional investigators pressed for public testimony by an Andersen auditor fired over the destruction at the accounting firm.
"This whole sorry affair keeps getting uglier by the minute, and we're determined to get to the bottom of it," said Ken Johnson, spokesman for the House Energy and Commerce Committee, which has been investigating the destruction of documents at Andersen.
"Making bad business decisions is one thing, but trying to cover up bad business decisions is another," said Johnson when told of the reported shredding at Enron.
Lawyers for fired Andersen auditor David Duncan sought to delay his public testimony, scheduled for Thursday before the House Oversight and Investigations subcommittee, saying that Duncan needs more time to prepare.
But Jim Greenwood, who chairs the subcommittee, rejected the request, arguing Duncan "doesn't really need to recall every detail of what he did for Enron. We're focused on the destruction of documents. We'll subpoena him if we have to."
One of Duncan's attorneys, Robert Giuffra, said, "it's premature to require Mr. Duncan to testify at this hearing at this time."
Appearing Sunday on NBC television's Meet the Press, Anderson chief executive Joseph Berardino said Duncan displayed "at the least ... extremely poor judgment" for his part in discarding the documents in October and November.
Berardino defended attorney Nancy Temple, who advised the Houston office by email on Oct. 12 about the firm's document destruction policy, just four days before Enron announced more than US$600 million in third-quarter losses and took the first step in disclosing partnership details.
Berardino said Temple reminded the Houston office of the policy to do away with some documents "because accountants are pack rats ... We save lots of stuff that's not relevant."
But Duncan told investigators "it was unusual" for a company lawyer to emphasize the document-destruction policy. Another Houston employee of Andersen, Mike Odom, backed up Duncan's account about the unusual nature of the emphasis on document destruction, said congressional sources, speaking on condition of anonymity.
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