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CNN Live At Daybreak

Enron Fallout Continues to Mount

Aired January 16, 2002 - 06:01   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: And there is more fallout from the Enron scandal. The Arthur Andersen accounting firm has fired the partner in charge of its Enron audit and disciplined three others working on that audit. Enron says lead partner David Duncan was responsible for destroying documents related to Enron's financial problems. A spokesman for Duncan says he followed the instructions of an in-house attorney.

Now For more on Enron. The fallout from Enron's collapse is not only being dealt with at Arthur Andersen, Washington is also trying to get to the bottom of this mess. We have reports on both investigations.

CNN Congressional Correspondent Jonathan Karl will follow Enron's money trail and government, but first let's get more on the developments at Arthur Andersen from CNN Financial News correspondent Allan Chernoff.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN CORRESPONDENT: Andersen is laying the blame squarely on the partner in charge of the Enron audit, David Duncan, revealing details of its ongoing internal investigation. On October 23rd, Duncan called an urgent meeting organizing an expedited effort to dispose of Enron-related documents. Andersen says that was shortly after Duncan learned the Securities and Exchange Commission had requested information from Enron about its financial reporting. Andersen says employees deleted thousands of e-mails and disposed of -- quote -- "large numbers of paper documents".

ITZHAK SHARAV, COLUMBIA UNIVERSITY: It's common sense is that they figured out that by destroying the papers they'll benefit more and be damaged less than by keeping the papers because these papers could serve as evidence against them.

CHERNOFF: On November 9th, the day after Andersen received an SEC subpoena, Duncan's secretary sent an e-mail to other secretaries at the company as saying "stop the shredding". An attorney for Mr. Duncan told "MONEYLINE" Mr. Duncan is cooperating with all investigations of this matter. He did nothing wrong. He properly followed the instructions of an Andersen in-house lawyer in handling documents.

Included in those instructions, according to an Andersen memo released Monday, only final documents will be retained. Graphs and preliminary versions of information will be destroyed currently. As the accusations fly, accounting experts say Andersen is fighting for its life.

LYNN TURNER, FMR. CHIEF ACCOUNTANT, SEC: They were already the smallest of the big five firms, and certainly this is not going to help them, and it could bring them to their knees financially.

CHERNOFF (on camera): House Energy and Commerce Committee staffers plan to interview Mr. Duncan on Wednesday. He has already provided them with six boxes of his papers, and it is quite clear the investigation is only just beginning.

Allan Chernoff, CNN Financial News, New York.

(BEGIN VIDEOTAPE)

KARL (voice over): Much of the focus on Enron's influence has been on the political contributions and for good reason. The company doled out nearly $6 million to Congressional and Presidential campaigns, including $3.6 million in unregulated soft money to the political parties, more than 70 percent of the money going to Republicans.

SENATOR CARL LEVIN (D) MICHIGAN: I mean this creates an appearance here which simply must be eliminated, an appearance that money can have not only the purchase of access, but the purchase of influence.

KARL: But all that cash dumped into campaigns is just the tip of the Enron iceberg. The company was an even bigger player when it came to lobbying, spending $7.6 million to line up a lobbying force that included several well-connected Democrats.

Enron's army of lobbyists included Jack Quinn, former White House counsel to Bill Clinton; Greg Simon, a top adviser to Al Gore's Presidential campaign; and Michael Lewin, Senator Joe Lieberman's former Chief of Staff. Money also flowed to Democratic organizations, including $50,000 to the New Democratic Network, founded by Lieberman, and at least $50,000 to the Democratic Leadership Council, a group founded in part by Clinton and Gore.

To get a sense of Enron's reach, follow the recusals. Texas Attorney General John Cornyn who has received more than $150,000 from Enron opted out of the investigation, following U.S. Attorney General John Ashcroft's lead. And the entire U.S. Attorney's Office in Houston also had to step aside.

In Washington, Texas Senator Phil Graham says he is considering recusing himself. Graham's wife Wendy earned approximately $300,000 for serving on Enron's Board of Directors.

SCOTT HARSHBARGER, PRESIDENT, COMMON CAUSE: What Enron got here was what everybody who gives this money seeks, influence, access, a chance to be heard, but also a chance not to be overseen by government, when in many, many cases they ought to be overseen. KARL: All Enron's political money certainly bought access, but as the scandal unfolds, it may have an unintended consequence resurrecting an issue that seemed to have died last year, campaign finance reform.

REPRESENTATIVE MARTY MEEHAN (D) MASSACHUSETTS: I believe we will get campaign finance reform, and to the extent that his scandal helps motivate members of Congress to pass campaign finance reform, then maybe that could be a good thing to come out of this.

KARL: And there was a significant development on that front as advocates of campaign finance reform picked up another supporter in the House, bringing them just two signatures away from forcing a final vote on the issue.

Jonathan Karl, CNN, Capitol Hill.

(END VIDEOTAPE)

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