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Enron: The Plot Sickens

Watkins says accounting firm knew about problems at energy trader; auditor Duncan claims he was just following orders; Andersen takes out an ad.
Stephen Taub, CFO.com | US
January 17, 2002

Tell us this isn't starting to sound a lot like Watergate.

Today's Enron revelation: Sherron Watkins, the Enron executive who reportedly sent a letter to chairman Ken Lay warning him about Enron's questionable accounting practices, also sent a similar warning to Enron's auditor, Andersen.

According to published reports, Congressional investigators have discovered a memo in which the Enron global finance vice president communicated her concerns to a friend and former colleague at Andersen. The memo is said to be dated Aug. 20. Reportedly, Watkins' friend passed on her concerns to senior Andersen management working on the Enron account and at the auditor's Houston office, according to wire services.

The reports say a hastily called meeting took place on Aug. 21, attended by David Duncan, Andersen's chief auditor for the Enron account. The gathering took place the day before Watkins communicated her concerns in a meeting with Lay. "It's now clear to us that key players at Andersen as well as Enron knew of the growing problems months before the company imploded," Ken Johnson, spokesman for the House Energy and Commerce Committee, told the Associated Press.

Yesterday, Andersen took out a full-page ad in large-circulation newspapers Wednesday to assure the public that it would ''do what is right'' in the Enron investigation. The ad also pledged that the accounting firm would cooperate with government and congressional investigations.

It remains to be seen whether firing David Duncan qualifies as doing what is right. Duncan, who was canned on Tuesday by Andersen, spoke yesterday with investigators from the Energy and Commerce Committee. During the discussion, the former Enron auditor reportedly claimed he was merely following the instructions of an Andersen lawyer when he ordered a hurry-up of the destruction of documents related to the Enron audit.

According to a wire service account, Duncan said the Big Five firm's lawyers suddenly began emphasizing Andersen's policy allowing destruction of some documents. He says general discussions began at Andersen in September about what documents to discard. "It was unusual" to emphasize the document-destruction policy, Duncan reportedly told Congressional investigators

Also yesterday: the White House yesterday acknowledged that back in mid-October it had economic adviser Larry Lindsey, a former Enron board member, study how a potential Enron collapse would affect the U.S. economy. White House spokesman Ron Ziegl… uh … Ari Fleischer said Lindsey concluded that Enron's collapse would not hurt the U.S. and global markets. Fleischer got into some rather heated discussions with reporters when answering questions about the Enron case.

In case you were curious, economic adviser Lindsey was paid $50,000 by Enron in 2000 as a member of an advisory board, according to the AP.




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