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Firm Fires Executive, Places Three on Leave in Enron Case

By James T. Madore
NEWSDAY -- The accounting firm Arthur Andersen Tuesday fired the executive it said had ordered the destruction of documents about Enron Corp. when he learned of a federal investigation of the troubled energy company.

David B. Duncan, who supervised the auditing of Enron’s financial statements as lead partner in Andersen’s Houston office, directed his staff to shred piles of documents and delete thousands of e-mails, the accounting firm said in a statement. The disposal began Oct. 23 after Duncan allegedly learned that Enron had received a request for information from the Securities and Exchange Commission.

Andersen also placed three other Houston partners on administrative leave Tuesday and stripped four more of their management authority in a clear attempt to distance itself from the document destruction. But legal and accounting experts said the Chicago-based firm’s admissions only served to spark new questions about its role.

“This is a startling disclosure ... a bunch of flags now are raised about criminal liability on the part of Arthur Andersen,” said Robert R. Rigg, a criminal law professor at Drake University in Des Moines, Iowa. “The SEC and Justice Department will be all over this.”

Enron declared bankruptcy in December -- the biggest bankruptcy in U.S. corporate history -- and its plunging stock price devastated the retirement accounts of thousands of its employees. The energy company was forced to restate five years’ worth of revenues and profits, prompting a search for blame that has become a hot political and legal issue stretching from Houston to Chicago to Washington to New York, where the bankruptcy was filed.

Duncan, the executive singled out by Andersen’s top brass, could meet with congressional investigators looking into the Enron debacle as early as Wednesday. “We have a meeting with him set up with our investigators,” Ken Johnson, spokesman for the House Energy and Commerce Committee, said Tuesday night. “Now that he has been fired, he may have a little more motivation to cooperate with us.” Duncan had turned over six boxes of documents to the committee but so far refused to be interviewed.

Andersen said the destruction of documents was “on such a scale and of such a nature as to remove any doubt that Andersen’s policies and reasonable good judgment were violated.”

The firm’s investigators also reportedly found that the shredding of Enron documents continued until Nov. 9, a day after Andersen was ordered by the SEC to turn over information about its dealings with Enron. In fact, the documents’ disposal had started about a week before the SEC launched a formal probe of Enron.

Experts said the revelations by Andersen raised the specter that the 89-year-old accounting firm -- one of the industry’s so-called Big Five -- purposely attempted to interfere with a federal investigation.