Andersen Exec Says Firm Trashed ‘Smoking Guns’

HOUSTON —  A senior Arthur Andersen executive defended his firm’s document policies Tuesday, telling a federal jury here that Andersen routinely destroyed drafts and other files to prevent lawyers from taking them out of context and using them as evidence in lawsuits against the firm or its clients.

Richard Corgel, the first witness called by Andersen lawyers in the firm’s obstruction-of-justice trial, said the firm maintained a policy of destroying certain drafts and internal correspondence to keep potential plaintiffs who obtained the documents from using them to second-guess or “in some way to make accusations or cause harm where none is warranted.”

A grand jury indicted Andersen in March on obstruction-of-justice charges for allegedly shredding documents to undermine a Securities and Exchange Commission inquiry of Enron Corp.

Andersen contends that it destroyed records as part of a routine cleanup effort and did not intend to impede any investigation.

David B. Duncan, formerly the chief Andersen partner in charge of auditing Enron, has pleaded guilty to obstruction and has testified for the government in the trial, which is in its fourth week.

In testimony Tuesday, Corgel said he first became concerned that Enron’s financial problems would force the energy giant to restate its earnings around Oct. 25--two days after Duncan ordered subordinates in the Houston office to comply with the firm’s document policy. Corgel said he didn’t become aware of any destruction until weeks later.

Corgel, who heads Andersen’s U.S. audit division in Los Angeles, also said he believed Enron should have disclosed its woes--including an estimated $500 million in earnings reduction arising from its off-the-books partnerships--sooner than it did.

He said he had planned for Andersen’s Enron auditors and the firm’s in-house accounting experts to meet to resolve disputes over how Enron accounted for certain controversial transactions.

Prosecutor Andrew Weissmann referred to the event as a “kumbaya, let’s hold hands” meeting--a description Corgel angrily rejected.

The two also clashed over an e-mail from one Andersen executive to another suggesting the destruction of documents considered “smoking guns.”

The e-mail, sent about three weeks after Andersen ceased shredding Enron-related papers in Houston, said, “Don’t leave smoking guns in your work papers or elsewhere that can be devastating to the firm.”

Corgel reiterated his point that Andersen routinely needed to purge its files of drafts or other documents that could be “abused” by plaintiffs’ lawyers.

Outside court, Andersen attorney Rusty Hardin said the existence of the e-mail “proves our point.” If the firm had been trying to impede a federal investigation, he said, such e-mails “wouldn’t have been produced” to prosecutors in trial discovery.

Also Tuesday, an Andersen employee who served as a technical consultant to the Enron team said he did not intend to obstruct the SEC inquiry when he sent his co-workers an e-mail Oct. 24 asking them to go through their e-mail and hard drives and comply with the firm’s document policy.

Chad DeJohn said he told employees to comply with the policy immediately--a deadline he said he knew to be artificial because he knew they were occupied with finishing work on other projects. He said his instruction was prompted by an e-mail from his supervisor.

Former Andersen manager Jennifer Stevenson, who worked on the firm’s Enron audit team, testified that she did not recall being told to destroy documents.

She said she interpreted a directive to comply with the document policy on Oct. 23 to mean that she should, “first and foremost, make sure that our audit files were complete.”