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Verdict Puts Ex-Auditor in a Tough Spot

Witness: With his testimony repudiated, many wonder whether David Duncan was foolish to plead guilty.

June 17, 2002|LISA GIRION | TIMES STAFF WRITER

Neither government prosecutors nor David B. Duncan himself, the admitted scofflaw at Arthur Andersen who oversaw the auditing of Enron Corp., could have foreseen that jurors might not buy his testimony or his professed guilt.

Duncan, after all, was supposed to be the government's star witness who would tell the inside story of how Andersen shredded documents related to its faulty audit of Enron in a desperate rush to destroy evidence of its own culpability.

But the jury rejected Duncan's testimony and even rejected the argument that the shredding of Enron-related documents by Andersen employees was a crime. Instead, an in-house lawyer who has not been charged and who refused to testify was held up as the "corrupt persuader" who attempted to thwart a government investigation.

Now many are wondering whether Duncan, who is still facing a possible prison sentence but is cooperating with the Justice Department's investigation of Enron's collapse, was misguided or foolish to plead guilty in the first place.

At best, the only work the well-heeled accountant, who was paid about $700,000 in salary last year, will find is as a cut-rate corporate executive in the little leagues of American business, experts say.

Duncan, a father of three, is certain to lose his accounting license after sentencing, which is set for August. He is barred from making any profit by selling his story.

And although he copped a guilty plea in negotiations with federal prosecutors earlier this year, Duncan testified that he did not think he was doing anything wrong at the time he shredded documents last year.

"He may say to himself, 'I made the wrong decision,' " said Leslie D. Corwin, a New York lawyer with Greenberg Traurig who represents national accounting firms, executives and partners. "Obviously the jury was very confused by him and his role.

"They didn't find him to be the 'corrupt persuader,' and yet he pleaded guilty," he said. "And he still faces jail. You can't put a corporation in jail. Only people go to jail. To give up one's rights and plead guilty is an awfully hard decision.... How can you not feel for Duncan on a personal level? But, for whatever reason with legal advice, he made a decision. He obviously had something to sell."

Duncan's attorney, Samuel Seymour, reached Sunday night, said his client was "totally comfortable with his testimony and the verdict, and he will continue his cooperation with the government." Seymour, a lawyer with Sullivan & Cromwell in New York, declined further comment.

Duncan headed Andersen's Enron team, whose work earned the firm about $1 million in weekly fees but which was viewed by some as perhaps too close to its clients. The team worked out of Enron's headquarters, and its members, including Duncan, attended golf tournaments and went on ski trips with Enron executives.

After the document shredding came to light, Andersen executives made a splash by abruptly firing Duncan and announcing, "Andersen will not tolerate unethical behavior, gross errors in judgment or willful violation of our policies."

But when Duncan testified for the government at Andersen's trial, Rusty Hardin, the firm's lead lawyer, cast him in a much kinder light. In a strange twist, that strategy appears both to have failed to clear the firm and to have helped convince at least some jurors that Duncan was not the bad egg.

"All of us disagreed on David Duncan," said Jack Gallo, a juror who spoke at a news conference after the verdict was announced Saturday. "Some of us believed him, and some of us didn't."

Gallo added, without elaboration, that he believed Duncan had violated the law.

Jurors said they saw Duncan's testimony about document shredding as a peripheral issue and did not incorporate it in their consideration of whether Andersen was guilty of obstruction of justice.

"All this business about telling people to shred documents, that was superficial and largely circumstantial," foreman Oscar Criner said.

The jury didn't find Duncan credible, raising questions about how other jurors might feel in future cases, should the government choose to put him on the stand again.

"It was just very clear that he had a lot of baggage that indicated he was capable of not telling the truth, particularly on his relations with Enron and with the people who were doing those funny deals," Criner said.

The Andersen trial underscored that the government can go only so far with Duncan, said Laurie Levenson, a Loyola University constitutional law professor and a former federal prosecutor.

"He was damaged goods to start out with, and all they have now is confirmation that, yes, he is damaged goods," she said. "How much will they use him? Only as much as they have to. But right now, it's unclear who they have to take his place."

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