Lead Enron Accountant Fired; Stock Shelved

A day after the public release of an explosive memo in which an Enron executive warned CEO Kenneth Lay of impending "accounting scandals," the firm's accountant, Arthur Andersen, fired its auditor in charge of Enron matters.

In a statement released today, Arthur Andersen announced it was dismissing its manager in charge of auditing on Enron's books, David B. Duncan, and was placing three other high-level employees involved in the case on "administrative leave."

"This was a painful decision, but it was absolutely the right thing to do," said Arthur Andersen's CEO, Joseph Berardino. "We are prepared to take all appropriate steps necessary to maintain confidence in the integrity of our firm."

Arthur Andersen is also the subject of subpoenas from the House Energy and Commerce Committee and in the federal investigations into Enron. The company announced last week it had destroyed thousands of documents pertaining to Enron.

In today's statement, Andersen says that in October, as Enron's troubles became public knowledge, "at the direction of the lead partner an expedited effort to destroy documents in Houston was undertaken."

On Nov. 8, the Securities and Exchange Commission sent a subpoena to Arthur Andersen over the Enron case, and the next day, the lead partner's assistant sent an e-mail to co-workers asking them to "stop the shredding."

Through representatives, Duncan released a statement today saying he "is cooperating with all investigations in this matter. He did nothing wrong. He followed the instructions of an Andersen in-house lawyer in handling documents."

On Dec. 2, Enron filed the biggest bankruptcy petition in U.S. history. The New York Stock Exchange suspended trading of Enron shares today as a prelude to delisting the stock, which has been trading at under $1 per share for more than a month.

Enron will begin trading on the over-the-counter market on Wednesday.

Letter Predicted 'Wave of Accounting Scandals'

Excerpts from the startling internal Enron letter were released Monday by Rep. Billy Tauzin, R-La., chairman of the House Energy and Commerce Committee, one of a handful of congressional committees planning to hold hearings soon on the spectacular collapse of Enron.

The memo, sent to Lay in August by Sherron Watkins, Enron's vice president of corporate development, expresses concern that the energy trading company "will implode in a wave of accounting scandals," and raises further questions about Lay's knowledge of his company's inner workings.

"I thought he should know the facts and look into them," Watkins told ABCNEWS this afternoon, when asked why she sent the letter to Lay. She said the CEO's reaction was one of "concern, surprise, and he assured me he would look into it."

Read the Letter from Sherron Watkins to Kenneth Lay

Watkins took a confrontational tone in her note, beginning with a pointed question: "Has Enron become a risky place to work? For those of us who didn't get rich over the last few years, can we afford to stay?"

Watkins went on to complain about a "veil of secrecy" surrounding the so-called special-purpose entities in which Enron masked hundreds of millions of dollars of debt and investment losses. Watkins added that company officials "consistently and constantly" complained about the accounting practices to former Enron CEO Jeffrey Skilling, who was replaced by Lay in August.

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