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CNN Live At Daybreak

Enron Auditors in the Hot Seat

Aired January 25, 2002 - 06:05   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: First day of the House panel's hearings into the Enron scandal left lawmakers with more questions than answers surrounding the destruction of documents.

As CNN's Allan Chernoff reports, Enron's auditors were on the hot seat.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Mr. Duncan, do you swear that you will tell ...

ALLAN CHERNOFF, CNN CORRESPONDENT: David Duncan, the fired Andersen partner who led the Enron audit invoking his Fifth Amendment right against self-incrimination.

DAVID DUNCAN: On the advice of my counsel, I respectively decline to answer the question based on the protection afforded me under the Constitution of the United States.

CHERNOFF: Even after Duncan left he remained the focus of the hearing. Andersen executives put in the blame for document disposal on Duncan.

C.E. ANDREWS, MANAGING PARTNER, ANDERSEN: And we rely on the engagement partner to make that judgment, to make the judgment of what to do.

CHERNOFF: But why asks Congressman Billy Tauzin would an accountant be responsible for a legal decision.

REP. BILLY TAUZIN (R-LA), HOUSE ENERGY AND COMMERCE COMMITTEE: If all of your policies let an accountant decide when it's legal to destroy documents in a pending investigation, an awful lot of people are going to be in trouble down the road, not just in this case.

CHERNOFF: Committee members repeatedly scolded Andersen, portraying a major accounting firm that could see no evil, hear no evil after an October 23 meeting in Houston that led to document shredding.

REP. CHRIS JOHN, (D), LOUISIANA: It is perplexing to me that no one in the highest management of Arthur Andersen's had any indication of this meeting. ANDREWS: I agree that the action that took place on October 23 and the subsequent elimination of e-mails and destruction of documents is an action that is totally inappropriate.

CHERNOFF: Singled out in the tough questioning, Nancy Temple, the Andersen lawyer who waited until November 9 to send a memo explicitly telling employees to retain all Enron-related documents several weeks after the SEC began investigating Enron's financials.

NANCY TEMPLE, ANDERSEN ATTORNEY: I never counseled any destruction or shredding of documents, and I only wish that someone had raised the question so that we could have consulted and addressed the situation.

CHERNOFF: The hearing did little to uncover new details of document destruction at Andersen, it did, however, leave the impression of a big-five accounting firm with major gaps and oversights. Gaps, executives say, they will fill.

Allan Chernoff, CNN Financial News, Washington.

(END VIDEOTAPE)

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