FBI raids Enron headquarters as document shredding scandal grows

The Enron scandal deepened still further yesterday after the disclosure that employees of the failed energy trading giant were shredding thousands of sensitive documents at its Houston headquarters as recently as last week.

Meanwhile it emerged that creditors of Enron's European operations are facing losses of about $900m (£629m). Industry sources said PricewaterhouseCoopers, the auditors of Enron Europe, only expected to recoup about $100m of the $1bn in liabilities of Enron Capital Trade Resources (ECTR).

The scale of the shredding operation was confirmed by a former US Enron executive, Maureen Castaneda. She said the shredding of documents at Enron, which is under investigation by the US Department of Justice, had continued for much of this month, long after it filed for bankruptcy and then became the subject of a US Justice Department investigation.

The FBI last night raided Enron's headquarters seeking evidence that sensitive documents were being shredded just two weeks ago.

The shredded documents are thought to include details of the off balance sheet partnerships which Enron set up to conceal the true level of its debts, which stand at anywhere between $30bn and $40bn.

Ms Castaneda, who was laid off last week from her job overseeing foreign exchange and sovereign risk management, worked on the 19th floor of Enron's headquarters opposite the accounts department. She said she took the shredded paper to use as protective packaging for her belongings but later concluded it had come from important papers.

Lawyers representing former Enron employees, including Ms Castaneda, went to a Texas court yesterday demanding steps be taken to prevent more shredding taking place.

"It was a major accounting fraud and now they have been caught destroying the evidence," said one of the lawyers, William Lerach. He said the shredding had been "open and notorious and widespread," consuming "hundreds of thousands of documents" and taking place even on Christmas Day.

The US Congress warned it would subpoena testimony from management inside Andersen, Enron's auditors, to get to the bottom of claims it too allowed the shredding of documents. Andersen fired the former head of the Enron account, David Duncan, after he admitted destroying some papers.

"This whole sorry affair keeps getting uglier by the minute, and we're determined to get to the bottom of it," said Ken Johnson, a spokesman for the House Energy and Commerce Committee. "Making bad business decisions is one thing, but trying to cover up bad business decisions is another." The Committee will hold hearings tomorrow and expects to grill Mr Duncan.

PwC refused to say how severe the losses would be among Enron's European trading partners. But it confirmed that creditors of ECTR faced a "substantial shortfall". At the time of the collapse Enron was sitting on 250,000 open contracts. So far few companies have commented on their exposure to Enron although Centrica, which bought its UK-based energy supply company off the administrators last month, has said it could potentially lose £30m. The German utility RWE has put its exposure at €10m to €11m (£6m to £7m) while TotalFinaElf has estimated the hit at about $25m.

The administrators are due to meet 100 of Enron Europe's creditors on 11 February to spell out the scale of the losses they face. They are writing to creditors imminently.