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THE NATION | THE ENRON INQUIRY

Andersen Memo Cites Objections

January 24, 2002|EDMUND SANDERS and RICHARD SIMON | TIMES STAFF WRITERS

WASHINGTON — A fired executive with Enron Corp.'s accounting firm, Andersen, warned the energy trading company that some of its public statements might mislead investors, a memo obtained Wednesday shows.

As Enron was preparing to make the first public disclosure of its financial problems, David B. Duncan, the Andersen partner who oversaw the Enron account, advised Enron that language in its news release "could be misconstrued or misunderstood by investors," according to an Oct. 15 memo written by Duncan.

Duncan is expected to be called to testify today at the first congressional hearing to examine why Andersen destroyed thousands of documents related to the Enron account. Andersen, claiming Duncan acted against orders in shredding documents, fired him last week.

Duncan has contended that Andersen executives in Chicago were aware of Enron's problems and that he was singled out as a scapegoat.

On Oct. 16, Enron reported a $1.2-billion charge against shareholder equity. In his memo a day earlier, which he prepared for his files and copied to Andersen attorney Nancy Temple, Duncan said he raised objections to Enron's characterization of some of the charges as "non-recurring" in a company news release. He noted that the Securities and Exchange Commission had been cracking down on companies that improperly used the term.

Temple wrote back and suggested that Duncan delete her name from the memo due to a concern that the reference to Andersen's legal department might be viewed as a waiver of attorney-client privilege.

"If my name is mentioned, it increases the chances that I might be a witness, which I prefer to avoid," Temple wrote on Oct. 16, according to a copy of her e-mail.

Duncan, who was fired by Andersen for allegedly orchestrating the destruction, has pointed to an "unusual" Oct. 12 e-mail from Temple, reminding employees to abide by the company's policy for deleting old files.

Sources close to the Enron investigation say the new memos show that Andersen was concerned in mid-October about its own legal liability in the Enron scandal, including the possibility that Temple might later be called as a witness.

But the company did not advise its workers to preserve Enron documents until Nov. 9, after it was subpoenaed by government investigators.

An Andersen spokesman called the memos standard and appropriate. He said Temple didn't want a reference to her conversations with Duncan because they were covered by attorney-client privilege.

An attorney for Duncan declined to comment on the memo.

But in a contentious opening salvo to the government's burgeoning inquiry, Duncan plans to refuse to testify today before the House Energy and Commerce Committee.

The public standoff between Duncan, who wanted immunity in exchange for his testimony today, and the committee, which refused his request for a temporary postponement of his appearance, are the first examples of what Washington experts predict could be several months of finger-pointing and legal maneuvering.

"He's flying from Houston to Washington to assert the 5th [Amendment] and leave," said Duncan's attorney, Robert J. Giuffra Jr.

In a letter to the committee Wednesday, Giuffra expressed frustration that the committee would not allow Duncan to postpone his testimony in order to review two boxes of Andersen documents that were not provided to him until Tuesday.

He also noted that it was unusual to require a potential witness to appear before a congressional committee and be sworn in, merely to invoke his constitutional right to refuse to testify. Duncan had offered to provide the committee with a sworn statement invoking the 5th Amendment in lieu of appearing at the televised hearing.

"Most of the time, these things are worked out," said Jack Blum, a Washington attorney and former Senate investigator. "But if the effect you want is drama, you bring them in to take the 5th."

Committee spokesman Ken Johnson noted that Duncan spent 4 1/2 hours talking to committee investigators behind closed doors.

"All we're asking is that he provide the same information to the committee under oath."

The committee also planned to subpoena Andersen Chief Executive Joseph F. Berardino but reportedly has agreed to allow an Andersen partner, Dorsey Baskin, to come in Berardino's place.

The Senate Governmental Affairs Committee, which Sen. Joseph I. Lieberman (D-Conn.) chairs, is also holding hearings today, focusing primarily on issues related to the SEC, pensions, investor confidence, derivatives trading and the energy market. Former SEC Chairman Arthur Levitt is the primary witness.

*

Times staff writers Eric Lichtblau, Janet Hook and Nick Anderson in Washington contributed to this report.

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