Panel cites widespread destruction of documents

Former lead auditor refuses to testify

David Duncan is sworn in before a congressional panel on Thursday

WASHINGTON (CNN) -- A congressional panel described a widespread effort at Andersen LLP to destroy Enron-related documents as a chief witness, the accounting company's former lead auditor in charge of the energy giant's books, refused to testify at a hearing Thursday.

Top auditor David Duncan, since fired by Andersen -- which handled the Texas-based Enron Corp.'s accounts -- invoked his Fifth Amendment rights against self incrimination when asked about shredding potentially critical documents. Thursday was the opening day in what is bound to be a lengthy series of Capitol Hill hearings into Enron's bankruptcy and collapse.

The House Energy and Commerce Committee panel described what they called a widespread and systematic effort to shred documents and delete computer files at Andersen. Legislators on the investigations subcommittee charged that the practice, which was later suspended, has impeded investigations and could lead to criminal charges.

Duncan, who was the first Andersen executive to be called to testify, had earlier said through his lawyer that he would refuse to testify before the congressional panel unless he was granted immunity. Lawmakers, who issued a subpoena to force his appearance, left open the possibility that Duncan would be called back to testify at a later date.

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"Mr. Duncan, Enron robbed the bank. Arthur Andersen provided the getaway car, and they say you were at the wheel," Rep. James Greenwood, R-Pennsylvania, the subcommittee chairman, told Duncan shortly after he was sworn in to testify. When Greenwood then asked whether he ordered the destruction of Enron documents in an attempt to subvert investigators, Duncan declined to answer.

"Mr. Chairman, I would like to answer the committee's questions but on the advice of my counsel I respectfully decline to answer the question based on the protection afforded to me under the Constitution of the United States," Duncan said, repeating it when asked to clarify.

Lawmakers skeptical of Andersen executives

Other Andersen executives later told the committee that Duncan initiated the shredding campaign on his own. But several lawmakers expressed skepticism, sharply questioning them on whether Duncan acted without the knowledge of his peers or superiors. Duncan, through his attorney, had previously told congressional investigators that he had been following the advice of Andersen's in-house counsel.

One congressional aide told CNN the document destruction at Andersen was more widespread than the company has acknowledged, involving as many as 80 employees.

"I would not be surprised if some criminal indictments come out of this," Rep. Billy Tauzin -- chairman of the full committee -- said before the hearing started.

At the hearing, Dorsey Baskin, the Andersen executive in charge of auditing standards, told lawmakers the company wanted to unravel the circumstances surrounding the destruction of the documents and is conducting its own investigation into the matter.

"We are determined to get to the bottom of what happened," Baskin said. "We have publicly acknowledged, and will continue to acknowledge mistakes that we have made."

But legislators were highly critical of Andersen's policies and repeatedly questioned the executives why no clear directive was immediately issued to order that all Enron-related documents be preserved once it became apparent that the bankruptcy would be federally investigated.

"It is clear that scores of professionals and support staff were involved in the shredding of paper and deletion of computer files relating to the Enron audit. Yet to date, committee investigators have been unable to locate or learn about a single Andersen employee who raised any concerns or objections about destroying Enron-related documents even after the [Securities and Exchange Commission] inquiry became public," Greenwood said.

Rep. John Dingell, D-Michigan, the ranking member on the panel, said the accounting firm's shredding of documents "was either criminally stupid or stupidly criminal, or both."

Lay resigns as CEO

The hearing came a day after Kenneth Lay resigned from his role as chairman and chief executive of the collapsed energy giant.

"I want to see Enron survive, and for that to happen, we need someone at the helm who can focus 100 percent of his efforts on reorganizing the company and preserving value for our creditors and hard-working employees," Lay said in a written statement.

"Unfortunately, with the multiple inquiries and investigations that currently require much of my time, it is becoming increasingly difficult to concentrate fully on what is most important to Enron's stakeholders."

Lay will remain on Enron's board, but he will step down as the company's leadership post, the company announced.

Enron filed for bankruptcy in December. Before its sudden collapse, it was ranked the seventh-largest U.S. company in terms of revenue. In October, Enron was forced to disclose that it had concealed more than $500 million in debt from related partnerships led by company executives. Its stock, which once traded at nearly $90 a share, sank to less than $1 a share.

The company's collapse has sparked a Justice Department probe and numerous congressional investigations. The company and its executives have been the single biggest group of contributors to President Bush and other Republican campaigns, and they have donated to many Democratic lawmakers as well.

Enron's executives and directors sold about $1.3 billion worth of stock in the last three years, with Lay making $119 million, according to a Thomson Financial study that CNN commissioned. One particularly controversial aspect of the company's collapse is that employees were barred from selling stock held in their 401 (k) plans even as executives were unloading their plummeting shares. The prohibition decimated the retirement accounts of thousands of employees.

The Andersen accounting firm admitted its employees shredded documents relating to Enron audits in the days after the company's problems became public.

Andersen CEO Joseph Berardino conceded Sunday that his company made errors but said that Enron's demise ultimately was the result of a failed business model, not shady accounting.

A former Enron executive said Monday that employees at the company's headquarters in Houston, Texas, were shredding documents as late as January 14 in spite of the company's bankruptcy filing that costs thousands of investors and employees their life savings. Security guards were posted in the building Wednesday to prevent further shredding.