Risk & Compliance

Whole Lot of Shredding Going On

Former director of Enron's foreign investments section tells ABC News the company destroyed accounting documents.
Stephen TaubJanuary 22, 2002

Two things came to mind while we watched ABC News’ report last night claiming that Enron employees were shredding documents as recently as last week: First, if the allegations are true, did the employees really think they would get away with it? And second, why did Enron buy such crappy shredding machines?

In the report, Maureen Castaneda, the former director of Enron’s foreign investments section, claims the shredding was done in an accounting office on the 19th floor of the company’s Houston headquarters. ABC clearly displayed large bits of the allegedly shredded documents (they sure look shredded to us). Viewers could clearly see headings of the documents on the TV screen: confetti-like strips of paper containing words like “confidential,” and “Jedi,” one of the entities involved in off-balance-sheet financings.

It would seem the document-destroyers committed a crime, considering federal subpoenas and court orders since last October have forbidden the destruction of documents. In fact, Enron attorney Bob Bennett told ABC News that all employees were forbidden to shred any documents as of Oct. 25. “At a very early time, the legal team made all employees aware of the pending litigation and that all documents should be retained,” Bennett told the television network. “If anyone has disobeyed that policy or if anyone is discovered to have shredded documents it will not be tolerated and severe action will be taken.”

Yet, many employees were seemingly unimpressed by the prospect of being prosecuted. “I left the second week of January and the shredding was going on until the day I left, and I have no idea if it continues,” said Castaneda, who worked across the hall from the accounting office. “After Thanksgiving, there was great interest in the accounting documents stored. They pulled out all the boxes and people had to go through every box.”

Castaneda said she stumbled upon the shredded paper when she was she was looking for packing material. She said she discovered boxes full of shredded documents in the hallway, dated from November and December. “A lot are accounting documents,” Castaneda claimed. “You can tell because of the colors yellow and pink.”

Meanwhile, William Lerach, an attorney who is suing Enron, told The Associated Press Monday night that Enron shredded boxes of documents at its Houston headquarters after the federal government began investigating the company. “They even shredded on Christmas Day,” he told the wire service.

After the ABC report, Enron quickly put out a press release stating, in part: “Since October 25th Enron has notified employees in no uncertain terms that they are to preserve all documents and materials. The company has sent out four emails to that effect from Oct. 25, 2001 through January 14, 2002.” Maybe those messages got shredded, too.

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In other Enron developments on Monday, lawyers for fired Andersen auditor David Duncan tried to push back his public testimony, which is scheduled for Thursday before the House Oversight and Investigations subcommittee. Apparently, Duncan needs more time to prepare.

But according to published reports, Rep. Jim Greenwood (R-Pa.), who chairs the subcommittee, said the show will go on as scheduled. Duncan “doesn’t really need to recall every detail of what he did for Enron,” Greenwood reportedly told wire services. “We’re focused on the destruction of documents. We’ll subpoena him if we have to.”

In an exclusive CFO.com poll, almost 80 percent of the respondents said they believe Duncan did not act on his own in disposing of Enron-related documents.