Enron's auditor tells court 'I obstructed justice'

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The Independent Online

David Duncan, the former Andersen partner in charge of the accounting firm's fateful Enron audit, last night finally took the witness stand to admit he obstructed justice and that he told other staff of his one-time employers to destroy Enron documents as well.

"I obstructed justice," declared Mr Duncan, who will be the US government's star witness in its first-ever prosecution of one of the Big Five accounting firms as it attempts to prove Andersen broke the law.

The case, the first criminal prosecution brought in the wake of the biggest bankruptcy in US financial history, is expected to hinge on the credibility of Mr Duncan. He will be the crucial figure in buttressing the government's claim that Andersen deliberately destroyed potentially incriminating Enron audit documents after it learned the Securities and Exchange Commission was launching an inquiry into the energy group.

On 9 April, days after talks between Andersen and the Justice Department that would have, in effect, placed the accounting firm on probation broke down, Mr Duncan struck his own deal with the government, agreeing to plead guilty to obstruction of justice and co-operate with the prosecution. In return, analysts say, he is likely to receive a lesser sentence, or possibly none at all.

Mr Duncan was expected to say he acted with other Andersen partners and on the instructions of head office in Chicago to destroy documents. The Government claims "tons" of Enron-related documents as well as electronic communications were destroyed over a three-week period between October and early November 2001.

But in what is sure to be a ferocious cross-examination, Andersen's defence lawyers will try to show that Mr Duncan, who initially denied wrongdoing, changed his story to avoid a stiff jail sentence.

But Mr Duncan lost no time in denying any such suggestion. "I've been told there's no correlation" between the outcome of the trial and his own sentence, he told the jury soon after taking the stand as the second week of the trial began. Much will depend on Mr Duncan's explanation of a communication from Nancy Temple, a senior Andersen lawyer in Chicago, on 13 October, reminding Andersen's offices in Houston to follow the company's document retention policy, under which non-essential material can be destroyed.

The government contends this was a veiled instruction to set about destroying Enron audit documents. Ms Temple has asserted her fifth amendment right against self-incrimination, and will not testify at the current trial.

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