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Accounting firm barred from shredding papers

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HOUSTON — A federal judge has barred Arthur Andersen LLP from shredding any more documents related to Enron Corp. audits and ruled employees who admitted to destroying documents must give depositions as soon as next month.

U.S. District Judge Melinda Harmon's ruling on Thursday also allows the documents to be inspected by plaintiffs' lawyers who are suing the officials for more than $1 billion gained by stock sales before Enron crashed in December in the biggest corporate bankruptcy in U.S. history.

"It sends a pretty good signal," said Bill Federman, who represents shareholders in a lawsuit against 29 current and former Enron executives and board members. "This judge is going to take the high road and really ensure that the investors will have a fair opportunity to gather the evidence and find out what happened."

The judge also said the lawyers can start taking sworn testimony from employees in Arthur Andersen's Houston office who were fired or suspended for shredding Enron-related documents. Depositions can start in 20 days.

"We're pleased," said William Lerach, who represents Amalgamated Bank in the shareholders' lawsuit. "Now we can press forward."

The plaintiffs are suing for more than $1 billion they gained by selling company stock from 1998 through November of last year. In addition to Amalgamated Bank, the plaintiffs include the University of California and pension funds for Georgia, Ohio and Florida.

On Thursday, fired Anderson auditor David Duncan cited his Fifth Amendment rights, declining to testify before Congress about anything he knows or any part he played in the shredding of documents relevant to the collapse of Enron.

But who ordered the shredding? What was on the papers? Was someone trying to stifle a government investigation? And did Arthur Andersen's lucrative consulting business influence its actions as Enron's accountant?

None of these questions were answered Thursday after a House investigations subcommittee concluded its first public hearing into the largest and perhaps most devastating bankruptcy in history.

But with 11 congressional committees and subcommittees eager to probe elements of the Enron debacle and its far-reaching fallout, this is only the beginning.

"We should consider this a practice session," Rep. Jim Greenwood, R-Pa., quipped after his panel grilled three witnesses from Andersen.

For the time being the focus is on paper shredding, but some in Congress also want to probe Enron's ties — or at least its influence — on the White House.

Sen. Joseph Lieberman, D-Conn., whose Senate Governmental Affairs Committee also began hearings on Thursday, said the panel would issue subpoenas for Enron and Andersen's documents related to contacts with the White House or federal agencies and departments.

Lieberman's committee is focusing on why federal regulators did not raise warning flags about Enron's questionable business practices and intervene.

In the House, Greenwood said the hearings will "go wherever the investigation takes us." But he added, "We have seen absolutely nothing that leads us in the direction of the White House."