Central Andersen Figure Pleads Guilty to Obstruction Charge

TBO.com ^ | 4/9/02 | Kristen Hays

[Tumbleweed_Connection]

The Arthur Andersen auditor who oversaw Enron Corp.'s books pleaded guilty Tuesday to directing the shredding of Enron documents and agreed to cooperate with prosecutors.

Former partner David B. Duncan is believed to be the first person in the Enron case to strike a deal with federal prosecutors. He was fired by Andersen after the firm acknowledged the large-scale destruction of Enron documents and deletion of computer files related to the collapse of the energy giant.

Duncan admitted persuading co-workers and others to shred documents to thwart the government's investigation into the collapse of the energy giant, according to court records filed earlier Tuesday.

Duncan, who was fired in January shortly after Andersen acknowledged massive shredding, pleaded guilty to the charge that he did "knowingly, intentionally and corruptly persuade and attempt to persuade other persons ... to withhold records, documents and other objects from an official proceeding, namely an investigation by the Securities and Exchange Commission."

Standing before U.S. District Judge Melinda Harmon, Duncan described how he ordered Andersen employees to comply with a policy to retain certain documents and destroy others on Oct. 21, two days after he learned that the SEC was investigating the company.

"I also personally destroyed such documents," he told the judge. "I accept that my conduct violated federal law."

An obstruction conviction can carry fines and up to 10 years in prison. It was unclear what punishment Duncan would receive in exchange for his plea, although Harmon warned him the sentence could be more severe than anything prosecutors might have discussed with him.

Under the plea deal, Duncan is immune to any further prosecution related to the Enron case as long as he continues to fully cooperate with federal authorities - which could include testimony at future trials - and agrees not to sell his story or otherwise profit from the debacle.

Duncan remains free until his sentencing hearing on Aug. 26.

The charge against Duncan said the shredding occurred between Oct. 23 and Nov. 9. The SEC notified Andersen on Nov. 8 that it would issue a subpoena for documents related the firm's work on Enron.

Duncan has been cooperating with the government and will continue to do so, his lawyers said.

Duncan could prove pivotal in the investigations into Enron. As the senior auditor in charge of the Enron account, he would presumably have knowledge of the complex web of partnerships used by the company to keep millions of dollars in debt off its books.

A grand jury indicted Andersen on March 7 on a single count of obstructing justice, accusing the firm of destroying "tons of paper" at offices worldwide and deleting enormous numbers of computer files on its audits of Enron.

At times, the government said, the destruction was so frenetic that employees worked overtime and shredding machines couldn't keep pace. The indictment was unsealed March 14, and Andersen has pleaded innocent.

Before the Duncan hearing, Harmon denied Andersen's motion to quash subpoenas of its employees to appear before a grand jury, arguing that the government was using the panel to further its case against the firm.

Harmon sided with the government, which says it needs to hear from employees as it investigates charges against more individuals.

Duncan initially was branded as somewhat of a rogue auditor when Andersen fired him and demoted several others on the Enron team after acknowledging the shredding in January. But later attorneys for the firm and Duncan appeared more unified, asserting the innocence of both.

But Robert Mintz, a former assistant U.S. attorney under Department of Justice criminal division head Michael Chertoff and an expert in white collar crime, said Duncan's plea undermines the united front.

"His defection represents the first thread in the unraveling of the defense," Mintz said. "Andersen's best defense was the presentation of a unified front, categorically denying any intentional wrongdoing by any employees."

He said Duncan's plea significantly weakens Andersen's hand in trying to hammer out a resolution to the criminal case with the government, since Duncan personifies alleged misdeeds.

Lawyers for Andersen met Friday at the Justice Department to negotiate a settlement, but no deal was reached. It was unclear whether future settlement meetings were planned immediately.

"Andersen has to be very concerned. This is the first deal to be struck, and others will follow," Mintz said.

The charge against Andersen is set for trial May 6.

Court documents also have disclosed that a second grand jury was impaneled March 27 in Houston to investigate the collapse of Enron.

Mintz said Duncan's plea is the first building block in a criminal case against Enron, which filed for bankruptcy Dec. 2.

[Digger]

What are these people thinking of that they would risk jail sentences for a job. I say give him an additional 5 years for stupidity or greed.

[Random Access]

This guy must be a real piece of work. First he destroys, hides, shreds and bills for long lunches, then he turns on all of his co workers to save his miserable hide. He is truly the poster boy for the "Me First" crowd.