VideoOne by one they sat at the formal table, staring up at their inquisitors and trying to explain what happened at Andersen. And one by one they answered the question of the day with the same two words: David Duncan.
As a cadre of current and former Andersen executives appeared before the House Energy and Commerce Committee yesterday, the company line was crystal clear: Blame Andersen's lead auditor at Enron Corp. for the shredding of critical documents.
James Greenwood, the republican Senator from Pennsylvania, set the tone for the session when he looked down at Duncan and said, "Mr. Duncan, Enron robbed the bank. Arthur Andersen provided the getaway car, and they say you were at the wheel."
Duncan's response: he invoked the fifth amendment and didn't say another word. Then, after taking the fifth for a second time, the recently fired Andersen partner said, "Respectfully, that will be my response to all your questions." He was excused for the day after that.
The big bombshell of the day, however, came in the form of a memo released by Greenwood. In the Oct. 24 memo, an Andersen manager working for Duncan said the auditor's Houston employees were told to work overtime to shred Enron-related documents.
"We do expect that people will be able to do this on an overtime basis, if necessary, for the remainder of the week, or for however long it takes," Kimberly Latham reportedly wrote in the memo released by the Committee, (one of two panels that convened Thursday to probe Enron's collapse and Andersen's role). "Notes folders, personal hard drives, network current year project folders, prior year project folders, CYA documentation."
Latham's letter was written one day after Duncan is said to have met with managers and allegedly ordered an "expedited" destruction of files. "The memo is just one of the results of David Duncan's destruction efforts," Andersen spokesman Patrick Dorton told Bloomberg.
Andersen managing director Dorsey Baskin Jr. testified that on Oct. 23, several days after the SEC began probing whether Enron mislead its investors about its partnership losses, Duncan called a meeting to organize the document destruction. Duncan "directed the purposeful destruction of a very substantial volume of documents just as a government investigation was beginning," Baskin said. "This effort was undertaken without any consultation with others within the firm so far as we know."
Baskin said the shredding ended on Nov. 9 when Duncan learned in a voicemail that the SEC had subpoenaed Enron's documents. "Why didn't the top brass at Andersen immediately send out word to everyone not to touch a document?" Greenwood asked.
"We rely on the engagement partner (Duncan) to make the judgment what to do," said C.E. Andrews, worldwide head of Andersen's global auditing.
Greenwood asked why top management, including CEO Joseph Berardino, didn't better supervise Duncan after learning of the SEC inquiry. "Knowing this meltdown, Mr. Berardino sat silently just assuming Mr. Duncan would do the right thing?" Greenwood asked. "They gave him no direction whatsoever?"
"Mr. Duncan had been advised of policies," Andrews responded.
One person who seemed noticeably shaken by the events and the testimony was Andersen lawyer Nancy Temple. Temple was grilled about why she waited until Nov. 10--two weeks after she had learned of the SEC's inquiry--to write a memo advising auditors at her firm to "keep everything, do not destroy anything." She was also questioned whether her Oct. 12 memo reminding her colleagues about the company's document retention and destruction policy was "interpreted as a shredding order."
Following some intense questioning, Temple responded simply, "I did not instruct Mr. Duncan to shred documents." She said that she told Duncan's team "to retain the relevant documents."
After the hearings ended, Andersen continued to pile on Duncan, issuing a press release blaming Duncan for leading the shredding brigade.
"Andersen learned that at the direction of David Duncan, the lead partner on the Enron engagement, an expedited effort to destroy documents in Houston was undertaken," the statement said. "The effort was initiated following an urgent meeting the lead partner called on Oct. 23 to organize the expedited effort to dispose of Enron-related documents. This meeting occurred shortly after David Duncan learned that Enron had received a request for information from the SEC about its financial accounting and reporting and that Enron had recently reported a substantial loss for the third quarter of 2001 and could be at risk for litigation."
The statement continued: "This effort was undertaken without any consultation with others in the firm and at a time when the engagement team should have had serious questions about their actions. As far as Andersen knows at this time, David Duncan was not authorized by anyone at Andersen to engage in this activity."
A number of the legislators didn't seem to buy the notion that the shredding was led by Duncan--and Duncan alone. "A lot of questions still remain about whether Mr. Duncan was a rogue or a scapegoat," Greenwood said.
And you thought there was nothing good on TV during the day.
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