HOUSTON — An Arthur Andersen LLP partner who criticized some of the deals that fueled Enron Corp.'s descent into bankruptcy last year said he was barred from advising auditors when the energy trader's former chief accounting officer complained he was too "cynical."
Carl Bass, however, acknowledged today at Andersen's obstruction of justice trial that he continued to consult on Enron accounting, though not directly to the Enron audit team. His boss, John Stewart, would get a call from the team and Stewart would seek Bass' expertise "on some issues," he said.
Bass first took the stand Thursday and said he was upset at being dismissed from such a high-profile account.
He also didn't like "the fact we had a client telling the firm basically who or who not to have the (auditor team) consult with on transactions," Bass said.
He had objected to special-purpose entities known as the Raptors, which were backed by Enron stock but reported as separate from the company in financial statements. The Raptors enabled Enron to keep hundreds of millions of dollars in debt off its books.
Bass also complained early last year about other deals with accounting that he said "pushed the envelope."
Gary Goolsby, a global risk partner, soon informed Bass that Enron's then-chief accounting officer, Rick Causey, considered him to be "caustic, cynical toward their transactions" and that Bass was no longer involved with the energy company's auditors.
Bass said David Duncan, who was in charge of Enron's account until Andersen fired him in January, spoke to Causey on Bass' behalf, but Causey stood firm.
Andersen is charged with one count of obstruction of justice for the alleged mass destruction of Enron documents as a Securities and Exchange Commission inquiry loomed.
If convicted, Andersen could face a fine of up to $500,000 and five years of probation. It also could be fined up to twice any gains or damages the court determines were caused by the firm's action and would be suspended from auditing publicly traded companies, effectively dooming the firm.
Duncan has pleaded guilty to the same charge. He went to the federal courthouse Thursday afternoon but didn't testify.
Andersen's lawyer, Rusty Hardin, said the pace of questioning with other witnesses could delay Duncan's testimony until early next week.
Goolsby was one of several partners disciplined in January shortly after Andersen acknowledged the shredding. Causey was fired in February this year.
Bass also said he was relieved of auditing duties on an Enron subsidiary in 1999 because the company thought he was "too rule-oriented."
The Raptors were created and run by Andrew Fastow, Enron's former chief financial officer. A partner at Andersen's Chicago headquarters, Ben Neuhausen, testified Thursday that Duncan sought Neuhausen's opinion on Fastow and the Raptors in 1999.
"It was terrible from a business point of view," Neuhausen said. "Conflicts of interest galore."
He said Duncan agreed, but told him, "Andy (Fastow) is convinced this is such a win-win that everybody will buy into it."
Neuhausen testified he deleted most of his Enron-related e-mails in October, soon after receiving a memo reminding employees of the firm's "document-retention policy." He later said he may have deleted some of those e-mails before seeing the memo, and he wasn't trying to hide anything from the SEC.
Kate Agnew, a former Andersen manager on Enron's account, invoked her Fifth Amendment right against self-incrimination during a bench conference outside the presence of the jury. Prosecutor Andrew Weissmann announced her plan to invoke that right before she entered the courtroom.
Harmon allowed her to do so at the bench after Weissmann said during the conference that Temple would invoke the Fifth Amendment by mail. Shredding at Andersen began in earnest after Temple's e-mail to the firm's Houston office about the firm's document-retention and destruction policy.
Hardin complained that prosecutors threatened Agnew when they didn't like what she told them and informed her last week that she was under investigation.
"This is nothing but intentional intimidation of people," Hardin said.
He said later Thursday that prosecutors, who have declined to comment throughout the trial, have used similar tactics with at least two other witnesses.