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Manager Says Enron Shredded Documents
Destruction Alleged After Probe Began

Peter Behr . Washington Post . 22 january 2002

An Enron project manager has told attorneys suing the company that she saw evidence of widespread shredding of documents at Enron's Houston headquarters, beginning after the start of a former federal securities investigation was announced on Oct. 31 last year.

Maureen Castenada, a manager in Enron's foreign-investments section who was laid off in mid-January, said the names of outside partnerships that are at the center of ongoing investigations of Enron are legible on scraps of shredded paper. The shredding took place inside offices on the 19th floor of the headquarters building, where she worked, she said.

Castenada's allegations are contained in a sworn affidavit by attorney G. Paul Howes, whose firm is suing Enron's top officials and directors on behalf of Enron shareholders and investors whose retirement savings were devastated by the company collapse and bankruptcy filing in December. She repeated the allegations in an interview yesterday on ABC News.

Howes said that according to Castenada, boxes of documents from throughout Enron's headquarters were gathered on the 19th floor beginning about Thanksgiving. She said she saw Enron employees going through the boxes' contents page by page and removing documents, Howes's account states.

At the end of the day trash bags and boxes full of shredded documents were stacked up in the hallway, she said, adding that the shredding was continuing as recently as the second week of January.

One scrap described a division of revenue between Enron and one of the off-balance-sheet entities the company created named Raptor, attorneys said.

"We are investigating the circumstances of the reported destruction of documents," Washington attorney Robert S. Bennett, who is representing Enron, said in a statement.

"In October 2001 the company issued several directives to all Enron employees worldwide that all relevant documents should be preserved in light of pending litigation," Bennett added. "If anyone violated those directives, they will be dealt with appropriately."

Enron reported on Oct. 22 that the Securities and Exchange Commission had begun an inquiry into the company's financial dealings. A week later, the SEC upgraded the probe to a formal investigation.

The destruction of documents by Enron's outside accounting firm, Arthur Andersen, already is a key issue for investigators. Andersen fired David B. Duncan, its top Houston auditor on the Enron account, last week after learning he ordered the shredding of documents related to the Enron audit.

Attorney William Lerach, a senior partner in Howes' firm, said last night that he will take a box of shredded material obtained by Castenada into federal court in Houston today to back up his demand that relevant Enron documents be put under the court's control.

"You just have to conclude, based on what we know to date, this was a deliberate, coordinated effort to destroy evidence," Lerach said.

Castenada told ABC News she could tell that a lot of the shredded papers were once accounting documents. "You can tell because of the colors -- yellow and pink," she said. She took one box of shredded paper away with her to give to attorneys. "There were . . . a lot more than this," she said.

Congressional investigators said yesterday that they are still negotiating with Duncan's attorney to secure his testimony at a hearing on the document destruction at Andersen scheduled for Thursday before the House Energy and Commerce Committee's oversight and investigations subcommittee.

Duncan's lawyers sought to delay his public testimony, arguing that Duncan needs more time to prepare.

The subcommittee chairman, Rep. James C. Greenwood (R-Pa.), turned down that request. He said the committee will subpoena Duncan if necessary.

Andersen's chief executive, Joseph F. Berardino, appearing Sunday on NBC's "Meet the Press," criticized Duncan and defended Andersen attorney Nancy Temple, who sent an Oct. 12 e-mail to Andersen's Houston office as a reminder of the firm's document-destruction policy.

Berardino said Duncan displayed "at the least . . . extremely poor judgment" for his part in destroying the documents in October and November. He said Temple sent the reminder "because accountants are pack rats. . . . We save lots of stuff that's not relevant."