WASHINGTON — The Justice Department's investigation of Enron Corp.'s collapse could take years and involve a review of millions of paper and electronic records, so the agency has begun looking for a shortcut: an insider who would tell all in exchange for leniency from potential criminal or civil prosecution, authorities confirmed Sunday.
It is a path well trod by federal authorities in other complex white-collar investigations of corporations: Gain the full cooperation of someone high up enough in the hierarchy to have extensive knowledge of its operations--and potential culpability in questionable acts--but not so high that there aren't others in even loftier positions to merit offering a deal.
Current and former Justice Department and FBI officials confirmed that such a process is underway but did not discuss details, saying it is perhaps the most sensitive part of the investigation as it gets up to speed.
"It's obvious: You look for the weak points, someone you have leverage on, who is in a position where they know a lot and has a great deal to lose," said one FBI official, who spoke Sunday on the condition of anonymity. "That will be one of the first points of the investigation. You gain enough information against that person to say, 'This is the only course of action for you that makes sense.' "
And, said two high-ranking senators investigating the burgeoning scandal, it appears as if some executives both at Enron and at its auditor, the accounting firm Andersen, may have engaged in potentially criminal behavior.
"Clearly, on the face of it, some of the activities carried out by the [Enron] corporate executives were not legal, and in violation of rules and regulations--if not laws," Sen. John McCain (R-Ariz.) said Sunday on CBS' "Face the Nation."
Sen. Joseph I. Lieberman (D-Conn.), on the same show, also had harsh words for Enron executives.
"We know that they were trading fast and loose with offshore corporate entities that were hiding their debt from the public," said Lieberman, chairman of the Governmental Affairs Committee, which is conducting one of several congressional investigations into the company's failure. "We know that they were saying things to the public, to shareholders, the retirees . . . about how the stock was going to go up and--at the same time they were selling their stock right then."
The swiftness of Enron's collapse hinged in large part on the company's disclosure in the fall of more than $600 million in losses, the restatement of three years of financial results as well as the existence of scores of complex, off-balance-sheet partnerships. Authorities say they need one, or several, expert guides to help them navigate such byzantine practices.
Both senators said they will reserve judgment on whether such acts were illegal until the various investigations--including those by the congressional committees, the Securities and Exchange Commission and the Labor and Justice departments--are complete.
But they also suggested that executives at Andersen, known until last year as Arthur Andersen, may have violated the law if an Oct. 12 internal memo directed workers to destroy all audit material on Enron--except for "work papers"--when it became clear that Enron was in deep financial trouble. The two senators were asked about the memo, first reported in Time magazine, by "Face the Nation" moderator Bob Schieffer.
"This kind of memo, to destroy documents, raises very serious questions about whether obstruction of justice occurred here," Lieberman said. " . . . If this memo is what it looks like, I'm afraid that the folks at Arthur Andersen could be on the other end of an indictment before this is over."
On Thursday, Andersen acknowledged destroying a "significant" number of documents related to the Enron audit. On Sunday, the company said: "We acknowledge that there were internal communications that raise questions. Until we know more, it would be inappropriate to comment further. We will take actions at the appropriate time."
Despite the senators' comments, authorities said it was far too early to speculate on whether actions by Enron executives and the company's auditors went beyond poor judgment and into the realm of criminal wrongdoing. But they confirmed that they will focus on the destruction of corporate documents, conflicting statements about Enron's financial health, the creation of scores of corporate partnerships and other matters that could amount to criminal violations of fraud and securities laws.
The Justice Department said last week that its top criminal prosecutor in Washington will oversee an Enron task force employing lawyers and agents from at least four cities--an indication that it expects the investigation to be complex.