Judge to investigate Enron shredding allegations
By Kristen Hays
Associated Press Writer

HOUSTON (AP) — A judge prodded parties in a lawsuit against Enron Corp. on Tuesday to work out a plan to halt the destruction of documents. FBI agents, meanwhile, were dispatched to Enron headquarters to investigate new allegations of document shredding.

“This is the shredded evidence that we got out of Enron,” attorney William Lerach said as he hurried into the downtown Houston courthouse. He asked U.S. District Judge Melinda Harmon to ban any shredding by Enron’s former auditor, Arthur Andersen.

Harmon did not issue an immediate ruling, instead asking plaintiffs and Andersen to discuss the problem and get back to her Wednesday. As for Enron, Lerach said he wants to depose company chairman and chief executive Kenneth Lay and others about new allegations of shredding at Enron headquarters.

Enron bankruptcy attorney Melanie Gray countered that any rulings on taking custody of Enron’s own documents must come from the New York bankruptcy court handling the company’s Chapter 11 filing.

Lerach represents shareholders suing 29 current and former Enron Corp. executives and directors in the collapse of the company.

A state judge’s order already prohibits Andersen’s Houston office from shredding Enron-related documents. Chicago-based Andersen acknowledged earlier this month its Houston office had destroyed a significant but undetermined amount of audit-related work.

Andersen lawyer Rusty Hardin told Harmon the accounting firm has about 20 million Enron documents in its possession.

While attorneys argued in court, FBI agents were a few blocks away inside Enron’s 50-story headquarters building looking into the latest allegations of shredding. Company spokesman Mark Palmer said they were on site at the request of Enron’s lawyers.

“We proactively offered our full cooperation in any investigation the Department of Justice might wish to conduct,” Palmer said. He said the company thinks “such an investigation is properly done by federal authorities, not plaintiffs’ counsel for benefit of a lawsuit.”

Late Monday, Lerach’s law partner, Paul Howes, released a court brief in which a former Enron executive saw staffers in the accounting and finance department review and shred thousands of documents.

Maureen Raymond Castaneda, who was laid off as Enron’s director of foreign exchange and sovereign risk, told Howes the “gather-review-shred” process started Oct. 31, when the Securities and Exchange Commission announced a formal investigation into Enron finances, and continued through at least Jan. 14.

In a statement released Monday, Enron reiterated that it has had a strict anti-shredding policy in place since last autumn.

“Since Oct. 25, Enron has notified employees in no uncertain terms that they are to preserve all documents and materials. The company has sent out four e-mails to that effect from Oct. 25, 2001, through Jan. 14, 2002,” said the statement.

Castaneda confirmed she saw at least two such e-mails from Enron general counsel James Derrick.

Houston-based Enron cited Andersen’s shredding issues when it fired the venerable accounting firm last week.

ABC News was the first to report Enron’s own alleged destruction of documents, interviewing Castaneda on Monday.

Neil Rothstein, attorney for another plaintiff, the Archdiocese of Milwaukee Support Fund, said Tuesday morning that justice can be served only with intact evidence.

“We are entitled to see what they have,” Rothstein said, referring to anyone with pertinent Enron documentation. “No one should have destroyed documents.”

Lerach said Castaneda took some boxes of shredded documents home, intending to use them as packing material as she moved to a more affordable house. She gave Lerach’s team the spindly documents, which Howes said were clearly marked as related to debt-laden partnerships that fueled the company’s downfall.

“Enron’s communications with its employees were very clear on the destruction of documents, and any breach of the company’s policy will be dealt with swiftly and severely,” the company said.

credits

TCU Daily Skiff © 2002