WASHINGTON, Jan. 24 (UPI) -- Congressional lawmakers of the House Energy and Commerce Committee began unraveling Thursday why financial documents were destroyed by the Enron Corporation's former accounting firm Arthur Andersen -- with fired Andersen manager, David B. Duncan, taking the Fifth Amendment to avoid self-incrimination in response to committee questions.
Other Andersen officials at the hearing denied knowing of Duncan's destruction of documents until after the fact.
Duncan, Andersen's lead auditor for Enron, was urged by lawmakers not to plead the Fifth Amendment, after having given lengthy closed-door testimony to congressional investigators last week, but repeated several times "on the advice of counsel, I invoke the rights afforded under the Constitution" before finally being excused.
Andersen officials also offering testimony Thursday laid the blame for destroyed Enron-related documentation squarely on Duncan.
The Thursday hearing by a subcommittee of the House Energy committee was the kickoff of what will be congressional scrutiny by at least 11 different committees into the sudden collapse of energy firm Enron, formerly the world's largest energy trading firm. The Houston-based company filed for bankruptcy on Dec. 2, the largest such filing in U.S. history, putting thousands of its own employees out of work and wiping out the retirement savings of both employees and many outside investors. Much of Enron's collapse was amid questions about the company's accounting practices.
"Today's hearing will explore how one of the world's premier professional organizations (Andersen) could have actually compounded a catastrophic business failure by allowing the systematic destruction of Enron-related audit documents at a time when it was clear to everyone and certainly to Andersen that government investigators and civil litigants would soon be demanding the documents," said Rep. Greenwood, R-Pa., chair of House Energy's Subcommittee on Oversight and Investigation.
Rep. John D. Dingell, D-Mich., the ranking Democrat on the Energy and Commerce panel, added the he looked forward to additional hearings "on the accounting skullduggery that flourished" at Enron Corp., which employed complicated accounting means to move debt off the company books.
Subpoenaed to appear along with Duncan were various Arthur Andersen top officials including Andersen chief executive Joseph F. Berardino, (who sent two substitutes) along with Andersen attorney Nancy Temple and risk manager Michael Odom.
Rep. Greenwood said he was "disappointed" by Duncan invoking the Fifth Amendment, adding that the lack of testimony "would hamper the important work of this committee in our search for the truth about what transpired at Andersen during the critical period we are examining."
Appearing instead of Andersen CEO Beradino were C.E. Andrews, a global managing partner for the firm, and Dorsey L Baskin, Jr., a managing director.
Emphasizing that the document destruction had been revealed by Andersen -- which did so in news breaking disclosure last week -- Baskin added that the company intended to cooperate fully with Congressional and other investigators, saying "we are determined to get to the bottom of what happened. And we will take whatever decisive action is necessary to restore public confidence in the firm."
Andersen, one the top five U.S. accounting firms, has scrambled to combat the devastating publicity of its role in the Enron debacle, including the issue of Andersen destroying documents. Among other measures, the company has taken out full-page newspaper advertisements defending its credibility. The stakes are high for the company, as further negative publicity could lead to large-scale defection of clients.
"In our view, Mr. Duncan's actions reflected a failure of judgment that is simply unacceptable in a person who has major responsibility at our firm," said Baskin regarding Andersen's firing of Duncan. "He was the lead engagement partner for a significant client, exercising very substantial responsibility within the firm. Yet our investigation indicated that he directed the purposeful destruction of a very substantial volume of documents."
Baskin added that Duncan's destruction of documents "gave every appearance of destroying these materials in anticipation of a government request for documents."
"This is the kind of conduct that Andersen cannot tolerate," said Baskin in testimony that was echoed by Andersen global managing partner Andrews.
Each of the Andersen officials faced sharp questioning from lawmakers on why destruction of documents took place during an 18 day period from Oct 23 until Nov. 10 without company knowledge, with Andrews, Baskin, Temple and Odom all saying that Duncan took measure to destroy certain documents without consulting any senior supervising colleagues.
Andersen attorney Temple defended her exchanges with Duncan, saying of an Oct. 12 e-mail to Duncan citing Andersen's "document retention" policy, "I did not instruct Mr. Duncan to shred documents." She added that a Nov. 10 voice mail to Duncan which emphasized that Enron-related documents should not be destroyed was in response to learning of a Securities and Exchange Commission inquiry into Andersen's role in Enron accounting.
Temple said she was not aware of "any shredding activity," when she left a voice mail for Duncan regarding the preservation of any Enron-related Andersen documents.
Andersen officials said the company has launched its own investigation into the Enron-document destruction, vowing to supply Congressional lawmakers and other investigators with any findings along with any reconstructed documents and e-mails. The company has also retained former Sen. John Danforth to assist with the investigation, to "ensure that all appropriate steps are taken to deal internally with misconduct by Andersen personnel."
Thursday's hearing before the subcommittee of the House Energy Committee is to be followed by two days of hearings before the full Energy Committee further focusing on Andersen's relationship with Enron to be held Tuesday, Jan. 29 and Wednesday, Jan. 30.
On the Senate side, the Governmental Affairs Committee, headed by Sen. Joseph Lieberman, D-Conn., held a Thursday hearing to look at whether various government agencies could have done more to protect the thousands of Americans and the many U.S. businesses hurt by the what is the largest bankruptcy in American history.
Among others testifying was former S.E.C. chairman Arthur D. Levitt.
It is widely expected that Thursday's hearings are just the start of a congressional investigative effort likely to last several months at least.
They come on the heels of a formal FBI probe into Enron, which began Wednesday with their arrival at Enron's headquarters in Houston to investigate and stop possible further document shredding at the company.
In addition, the company faces ongoing probes from the Justice Department and the S.E.C.
Also, in Enron related news, Kenneth L. Lay, CEO of the embattle Enron Corporation, resigned Tuesday at the urging of the company's creditors. "This was a decision the board and I reached in cooperation with our creditors' committee," Lay said in a statement released Wednesday night by Enron.
