Andersen, the giant accounting firm at the centre of the Enron scandal, stood accused by a prominent US Congressman yesterday of knowingly helping the once-mighty energy trader cover its tracks as its finances began to unravel late last year before it filed for bankruptcy protection in December.
The dramatic charge was made by the Representative Jim Greenwood, the chairman of the House Energy and Commerce subcommittee, as he opened hearings into Enron on Capitol Hill. The hearing quickly focused on David Duncan, a partner fired last week from Andersen, which recently changed its name from Arthur Andersen, for shredding Enron documents.
After summoning Mr Duncan to testify before the panel, Mr Greenwood suggested that "Enron robbed the bank, Arthur Andersen provided the getaway car and they say you were at the wheel".
With his lawyer at his side, Mr Duncan declined to answer questions. As expected, he took advantage of the Fifth Amendment to the US Constitution to remain silent for fear of incriminating himself. "On the advice of my counsel, I respectfully decline to answer the question based on the protection afforded me under the Constitution of the United States," he said twice.
Both the House hearing and a separate hearing in the Senate were under way just hours after Kenneth Lay resigned as chief executive of Enron. Mr Lay, who is a close friend of President George Bush, said he could not effectively lead the company and deal with the investigations into Enron's fall from grace.
Other Andersen executives yesterday were at pains to place the blame for the shredding of documents squarely on Mr Duncan. Dorsey Baskin, the managing director of Andersen's professional standards group, told the panel that Mr Duncan directed the destruction of a substantial number of documents just as an investigation of Enron by the Securities and Exchange Commission was beginning.
"We are not proud", Mr Baskin said, while underlining his firm had not shied from coming clean about what happened. "Although the firm was well aware of the potentially devastating impact this discovery could have on our reputation, we did the right thing [in making public the disclosure]."
Andersen submitted a statement to the committee arguing Mr Duncan "organised and expedited efforts to shred or otherwise dispose of Enron-related documents ... without any consultation with others in the firm." This prompted some committee members to accuse the firm of making a scapegoat of Mr Duncan, who has said he was following company instructions.
Andersen could face criminal charges if it is found that it indeed helped shred Enron documents to hide important evidence for the government.
One committee member, Bill Tauzin, said the hearing would determine whether Andersen was aware when the destruction of documents began that investigations into Enron were pending. "If they did, then potentially criminal obstruction of justice charges could be laid," he said.
The broader issue of the relationship between auditors and their clients was discussed at a Senate hearing yesterday. The former SEC chairman Arthur Levitt called on auditing firms and Wall Street analysts to be more independent from the corporations they cover. "It's well past time to recognise that the accounting profession's independence has been compromised," he said.Reuse content