USA: Auditor Says Enron Documents Gone

WASHINGTON -- The firm that audited the books of collapsed Enron Corp., Arthur Andersen LLP, disclosed Thursday that its employees had destroyed a ''significant'' number of documents related to Enron. Andersen said it didn't know whether its directive to preserve documents demanded by government investigators was violated.

Federal law enforcement agencies and congressional investigators are seeking the documents as part of their inquiries into the failure of the giant energy-trading company, which left countless investors burned and employees out of work with billions of dollars of losses in their Enron-heavy retirement accounts.

Rep. Billy Tauzin, R-La., whose House Energy and Commerce Committee is among the agencies and panels investigating, called the destruction of documents ''a deeply troubling development.''

''Anyone who destroyed records simply out of stupidity should be fired. Anyone who destroyed records to try and subvert our investigation should be prosecuted,'' Tauzin said.

Ken Johnson, a spokesman for Tauzin, said Andersen officials told committee investigators Thursday that thousands of documents had been destroyed.

Houston-based Enron entered last month into the largest corporate bankruptcy in U.S. history.

Andersen's startling revelation added a new twist to the Enron drama and raised fresh questions about the role of the big accounting firm, already under public scrutiny, whose legal obligation is to blow the whistle if it detects fraud at a company it audits.

At the Securities and Exchange Commission, which is investigating Andersen's auditing work for Enron, Enforcement Director Stephen M. Cutler said destruction of documents ''is obviously an extremely serious matter.''

''Documents are an essential ingredient in our investigations,'' he said. ''The destruction of documents by Arthur Andersen will not deter us from pursuit of our investigation and will be included within the scope of our investigation.''

The SEC is scrutinizing questionable partnerships Enron used to keep some $500 million in debt off its books and allow company executives to profit from the arrangements.

Andersen, one of the Big Five accounting firms, said in a statement that in recent months, electronic files and other documents related to its auditing of Enron had been destroyed or deleted.

Later in the day, Andersen released another statement saying documents were discarded in the months before the SEC issued a subpoena to the accounting firm as part of its investigation, which began in October. Andersen said in response to the subpoena, it issued a directive to employees to preserve documents but said that it has not been able to determine whether that instruction was violated.

On the other hand, Chicago-based Andersen said its company policy ''required in certain circumstances the destruction of certain types of documents.''

However, the firm said, millions of documents related to Enron still exist, and it has managed to retrieve some of the deleted electronic files. Andersen said it is continuing retrieval efforts through electronic backup files, ''and is continuing in its efforts to fully learn and understand all the facts related to this issue.''

Andersen has asked John Danforth, the former Missouri attorney general and U.S. senator, ''to conduct an immediate and comprehensive review of Andersen's records management policy and to recommend improvements.''

The surprise announcement by Andersen came in a day punctuated by revelations from members of the Bush administration concerning Enron.

The White House disclosed that Enron Chairman Kenneth L. Lay reached out to two of President Bush's Cabinet officers when the energy company was collapsing. Attorney General John Ashcroft, who received campaign contributions from Enron executives during his failed 2000 senatorial bid, said he will recuse himself from the criminal investigation of Enron being conducted by the Justice Department.

Andersen said that in recent months, people in the firm involved with the Enron auditing ''disposed of a significant but undetermined number of electronic and paper documents and correspondence.''

• 107 Energy
• 185 Corruption