WASHINGTON — Fired Enron auditor David Duncan refused to testify to Congress about the shredding of the Texas-based energy company's documents, invoking his Fifth Amendment protection Thursday against self-incrimination.
Top officials of the Arthur Andersen accounting firm, meanwhile, sought to shift the blame for the document shredding to Duncan, drawing warnings from some lawmakers not to seek scapegoats in the case.
Duncan, who had been Andersen's lead auditor on the Enron account, was the first witness before a House Energy and Commerce subcommittee investigating the Enron collapse.
"Enron robbed the bank, Arthur Andersen provided the getaway car and they say you were at the wheel," the subcommittee chairman, Rep. Jim Greenwood, R-Pa., told Duncan.
But when Greenwood began to question Duncan, asking him if he had deliberately given an order to destroy documents to "subvert governmental investigations," Duncan invoked his constitutional right to silence.
Duncan invoked the Fifth Amendment twice, telling the investigations and oversight subcommittee, "Respectfully, that will be my response to all your questions." He was not questioned further and was excused.
At the hearing, Sen. Bob Bennett, R-Utah, said all security systems failed that were supposed to have protected investors from the lies and greed of executives.
"We investors depend on auditors. We depend on the analysts from the big investment firms. And we depend on the system of outside directors (to find problems)," he said. "That system has failed."
Bennett, a member of the committee, said the one silver lining from Enron's collapse is that it now presents "an opportunity for us to examine all aspects of the way public companies work in this country."
Bennett complained that schemes by Enron managers were "as dangerous as going to Las Vegas and putting their chips on a roulette wheel." He added, "What distresses me is that no one who was looking over their shoulders pointed out that they were gambling in such high-risk circumstances."
While the Governmental Affairs Committee griped about conflicts of interest by auditors, corporate boards and government regulators who were watchdogs of Enron, members acknowledged the public may question it also because of large donations its members received from Enron through the years.
Bennett, for example, received $8,000 from an Enron political action committee in recent years. His press secretary, Mary Jane Collipriest, said that doesn't present a major conflict. She said Bennett believes in allowing people to donate to campaigns, and the Enron PAC was merely a conduit for company employees to do so.
All of Utah's members of Congress had received money from Enron. However, Rep. Jim Matheson, D-Utah, announced on Wednesday he is donating the $1,000 he received from an Enron PAC to a Houston charity seeking to help Enron employees who lost jobs and life savings.
Dorsey Baskin Jr., managing director of Andersen's professional standards group, told the panel that Duncan directed the destruction of a substantial number of documents just as an investigation was beginning.
Dorsey Baskin Jr., managing director of Andersen's professional standards group, told the panel that Duncan directed the destruction of a substantial number of documents just as an investigation was beginning.
"We are not proud" of the destruction of the records, Baskin said.
"Although the firm was well aware of the potentially devastating impact this discovery could have on our reputation, we did the right thing" in making public the disclosure.
The efforts by Baskin and other Andersen officials to lay the full blame on Duncan for the shredding drew skeptical comments from some subcommittee members.
"Is Mr.Duncan being made a scapegoat here this morning?" asked. Rep. Cliff Stearns, R-Fla.
Duncan sat stoically for more than an hour in a second-row seat of the crowded hearing room as one lawmaker after another denounced the paper shredding at Andersen and the business practices that led to Enron's collapse.
Greenwood said that Andersen's destruction of records clearly "compounded the catastrophic business failure" of the Houston-based energy conglomerate
In a written statement, Baskin and another Andersen official, C.E. Andrews, said that Duncan "organized and expedited efforts to shred or otherwise dispose of Enron-related documents...without any consultation with others in the firm."
The statement said that Duncan "gave every appearance of destroying these materials in anticipation of a government request for documents."
Andrews, under questioning, called the destruction of thousands of pages of Enron documents "totally inappropriate."
"We do not condone that. It is not what the firm's policy would require," he said.
Last week, Andersen fired Duncan because of his role in Enron-related,document destruction in October and November, just as Enron's problems were publicly emerging and the SEC began a formal investigation.
On Wednesday, Enron chairman Kenneth Lay, whose close ties to members of the Bush administration are also being investigated by Congress, resigned.
Greenwood said Duncan's decision to take the Fifth Amendment, while a constitutional right, "will hamper the important work of this committee."
On the other side of the Capitol, meanwhile, the Senate Governmental Affairs Committees planned to question former regulators and other experts on whether the government failed to exercise proper oversight of Enron.
Former SEC Chairman Arthur Levitt, testifying before that panel, called on auditing firms and Wall Street analysts to be more independent from the corporations they cover.
"It's well past time to recognize that the accounting profession's independence has been compromised," he said in prepared testimony.
Committee Chairman Joe Lieberman, D-Conn., asked, "Are the auditors, with their enormous consulting fees, too beholden to management to protect the shareholders interests?" he said. "Are analysts too concerned about protecting the lucrative business relationships of their Wall Street firms to be objective in their assessments of companies?"
The Securities and Exchange Commission started looking into Enron's accounting in mid-October, after the company reported a third-quarter loss of more than $600 million. The agency's inquiry eventually included demands for financial documents from Enron and Andersen.
Enron's slide into the biggest bankruptcy in U.S. history on Dec. 2 left thousands of employees without jobs and their retirement savings all but gone because the funds had been tied largely to now-nearly worthless Enron stock. Other investors and creditors also have lost hundreds of millions of dollars.
At least 11 congressional committees plan hearings on the collapse of what once was the nation's seventh-largest corporation.
While reports emerged this week of document shredding at Enron's Houston headquarters as well, the focus of the House subcommittee, for the time being, is on the destruction of Enron-related papers at Anderson at a time last fall when the energy giant was descending toward bankruptcy.
Last week, Andersen fired Duncan because of his role in Enron-related document destruction in October and November, just as Enron's problems were publicly emerging and the SEC began a formal investigation.
But Duncan has claimed to investigators that he was following company guidance on document destruction laid out in an Oct. 12 e-mail from Andersen corporate attorney Nancy Temple at the firm's Chicago headquarters.
Temple and Baskin, managing director of Andersen's professional standards group, were expected to be quizzed by the House panel as to why the memo was written and on the firm's normal paper shredding policies. The company claims the Temple memo was routine and aimed only to combat the "pack-rat" mentality of many accountants.
Duncan's interpretation of the Oct. 12 memo reflected a sinister view, one supported by another Andersen manager, Michael C. Odom, who also has told investigators he viewed the memo as unusual. He also has been subpoenaed to testify.
And a new Andersen document, obtained from committee sources Wednesday, also suggests the Temple directive was more than routine. In the Oct. 24 memo from a manager, employees were told the document shredding was so important that it should be pursued even "on an overtime basis, if necessary for the remainder of this week or for however long it takes."
White House spokesman Ari Fleischer said regardless of any relationships with Enron executives, "nothing is going to stop the president and this administration from pursuing justice."
Contributing: Lee Davidson, Deseret News Washington correspondent