FBI arrives at Enron offices; failed energy company posts guards over records

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Posted 8:07AM on Wednesday, January 23, 2002

HOUSTON - Enron Corp. invited the FBI to its headquarters after a former executive said she saw employees shredding documents as recently as last week, the company said. FBI agents arrived at Enron's headquarters Tuesday to investigate the shredding allegations, while company guards blocked employee access to the floors where the accounting and finance offices are located. "The company has done everything you'd expect under these circumstances," Enron attorney Kenneth Marks told U.S. District Judge Melinda Harmon. The FBI declined to comment, but officials at the collapsed energy-trading company said the agents were on hand to talk with workers and check into the shredding claims. Maureen Castaneda, who was laid off last week as Enron's director of foreign exchange and sovereign risk, said in a court brief released Monday that finance and accounting employees were involved in a "gather-review-shred" process beginning Oct. 31, when the Securities and Exchange Commission announced a formal investigation into Enron's finances. She said the shredding continued through at least Jan. 14 and involved thousands of documents. "I'd be surprised if there's any more shredding after that," said William Lerach, one of the attorneys for Enron shareholders who are suing the company. He said he was satisfied "the FBI can watch over them." Lerach carried a box of shredded paper into court Tuesday, saying it came from Castaneda. He agreed to turn the box over to the FBI. Marks said Enron officials late Monday seized a trash can filled with shredded documents after learning of the allegations. Shareholders are filing the suit over more than $1 billion executives and directors gained from selling Enron stock from 1998 through last November. The judge urged attorneys for Enron and the investors to come up with a plan to protect company documents and get back to her on Wednesday. The company's former auditing firm, Arthur Andersen, already is under a Texas court order prohibiting the shredding of Enron-related documents. Lerach said multiple lawyers representing shareholders want the judge to let them inspect Andersen documents and take depositions from top Andersen personnel. They also want Harmon to eliminate Andersen policies that require the destruction of documents after they are kept for a certain amount of time. Enron slid into the biggest bankruptcy in U.S. history last month after investigators began examining several complex partnerships used to keep a half-billion dollars in debt off company books. Enron shares plummeted, and thousands of employees lost their jobs and their stock-loaded retirement savings plans. On Tuesday, the White House disclosed that President Bush's mother-in-law, Jenna Welch, had invested in Enron and lost $8,100. Bush, a friend of Enron chairman Kenneth Lay, said again that he had no intention of releasing details of Enron contacts with White House aides who developed his energy plan. He said if "somebody has an accusation of wrongdoing, let me know." Congressional investigators said they plan to subpoena senior officials at Andersen, including the chief executive, to testify Thursday about the destruction of Enron-related documents. "No one's getting a free pass on this one," Ken Johnson, spokesman for the House Energy and Commerce Committee, said Tuesday. Andersen acknowledged earlier this month that its Houston office had shredded Enron-related documents. Andersen attorney Rusty Hardin told Harmon that the company now has its Enron-related documents under guard. "The shredding is over," he said. Robert Bennett, a Washington lawyer representing Enron, said the company told employees after coming under investigation that they were not to destroy relevant documents. He said the company is looking into charges papers were destroyed despite that directive.