David Duncan, the former Andersen partner at the heart of the obstruction of justice case against the accounting firm, ignored warnings and stretched accounting rules "to excess" in its audits of Enron, another Andersen partner said yesterday.
Testifying on the third day of Andersen's trial at a federal court in Houston, Ben Neuhausen said Mr Duncan paid no heed to the advice of Andersen's in-house professional standards group in his aggressive treatment of units used to conceal debts run up by secret off-balance sheet partnerships. Revelation of the latters' activities led directly to the US energy giant's spectacular collapse in late 2001.
Mr Neuhausen's evidence came amid signs the crucial testimony of Mr Duncan himself, initially expected yesterday, would be delayed by a day. Mr Duncan was sacked by Andersen after the mass shredding of Enron documents came to light. He has now agreed to co-operate in the Justice Department's prosecution of Andersen for the alleged deliberate destruction of sensitive Enron audit material after it learnt the Securities and Exchange Commission was to launch an investigation into Enron's finances.
The case hinges on whether Mr Duncan acted on his own initiative, as Andersen has maintained all along – or whether, as he and the government insist, he was merely carrying out a policy ordered by Andersen's head office in Chicago.
The prosecution has already claimed in court that Nancy Temple, an Andersen lawyer in Chicago, wrote an internal memo in October about the firm's potential legal exposure in its audit of Enron.
It says that 19 minutes after that, she e-mailed Michael Odom, a senior Andersen partner in Houston, asking him to make sure his office was following the company's document-retention policy. This calls for destroying documents deemed unnecessary to support an audit's conclusions. Ms Temple may be summoned to testify later in the trial.
Meanwhile, Andersen and a group of financial institutions including Citigroup and JP Morgan Chase & Co who are being sued by Enron shareholders and employees have asked a federal judge to dismiss them from the suits, which claim $29bn in damages. They want to avoid the pretrial process of "discovery", which could force them to hand over documents relating to Enron, the largest bankruptcy in US financial history.Reuse content