Andersen allegedly feared sanctions

HOUSTON - Prosecutors called a securities investigator as their first witness against Arthur Andersen LLP as they tried to bolster their argument that the accounting firm shredded Enron-related documents out of fear of sanctions stemming from the energy trader&#39;s downfall. <br> <br> Securities and Exchange Commission investigator Thomas Newkirk testified Tuesday that Arthur Andersen was under a pledge at the time of the shredding to comply with securities laws as part of a $7 million agreement to settle allegations of issuing false and misleading audits in an unrelated case. <br> <br> ``Those (Andersen) partners realized the law was coming and those partners made a simple series of choices, which is what this case is all about,&#39;&#39; Assistant U.S. attorney Matt Friedrich said Tuesday as testimony began in Andersen&#39;s obstruction of justice trial.<br> <br> But defense attorney Rusty Hardin said Andersen was following a ``document retention policy&#39;&#39; and should have been shredding needless files for months. <br> <br> ``These are e-mails and documents that reflect differences&#39;&#39; between the Chicago headquarters and the Houston audit team over Enron, he said, holding up a thick stack of papers for jurors. ``If these documents showed internal arguments ... wouldn&#39;t you expect those to be destroyed?&#39;&#39; <br> <br> Andersen has pleaded innocent to a single count of obstruction in connection with its shredding of information related to the government&#39;s investigation into Enron. <br> <br> A conviction could be a final blow to the firm, which has lost clients, partners and employees in the Enron fallout.<br> <br> If convicted, Andersen could face up to a $500,000 fine and five years of probation. It could also be fined up to twice any gains or damages the court determines were caused by the firm&#39;s action. <br> <br> David Duncan, the former Andersen auditor who was in charge of Enron&#39;s account until he was fired shortly after the firm acknowledged the shredding in January, is expected to testify later this week, said Sam Seymour, one of his attorneys. <br> <br> Duncan pleaded guilty April 9 to obstruction for directing the shredding, and could discuss the complicated partnerships that fueled Enron&#39;s descent into bankruptcy. <br> <br> Justice Department spokesman Bryan Sierra said other SEC investigators were expected to testify Wednesday.<br> <br> Andersen agreed last June to pay the $7 million fine to settle SEC allegations that it had issued false and misleading reports on behalf of Waste Management Inc. that inflated the company&#39;s profits from 1993 to 1996. Newkirk also said the SEC has a case pending against appliance maker Sunbeam Corp., another Andersen client, in an investigation of inflated profits in 1996 and 1997. <br> <br> He said accounting firms that repeatedly violate SEC rules can be barred from auditing public companies. <br> <br> Newkirk said he is not involved in the Enron probe, leading Hardin to question his testimony. <br> <br> ``Did (prosecutors) tell you to come in here and throw a bunch of mud on the wall?&#39;&#39; Hardin said over government lawyers&#39; objections. ``Did they ask you to bring in a bunch of extraneous stuff?&#39;&#39;

http://accesswdun.com/article/2002/5/194959