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"Time" Magazine Reports Arthur Andersen & Company Ordered Employees to Destroy Documents Related to Enron Case

Aired January 14, 2002 - 07:07   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.
PAULA ZAHN, CNN ANCHOR: A major new allegation in the Enron case to talk about this morning. "Time" magazine reports that an attorney for Enron's accounting firm, Arthur Andersen & Company, ordered the Andersen employees to destroy documents related to the Enron case. If so, that could subject the huge accounting firm to criminal charges and some say might even force Andersen out of business.

There are lots of questions concerning who knew what about Enron and when, and many of those questions are being focused on Wall Street.

Here's CNN's Greg Clarkin.

(BEGIN VIDEOTAPE)

GREG CLARKIN, CNN CORRESPONDENT (voice-over): It's already engulfed Houston and Washington, and now the Enron collapse threatens to pull in Wall Street. A number of Enron critics are asking if Wall Street's bankers played a role in keeping information away from the public as the one time energy giant collapsed.

WILLIAM LERACH, SECURITIES LITIGATION ATTORNEY: A fraud of this scope and size simply cannot be perpetrated without the assistance of sophisticated professionals. This case is going to continue to evolve and expand. There are other professionals, lawyers, investment bankers and the like, who appear to be deeply implicated.

CLARKIN: The former head of the Securities and Exchange Commission agreed, saying Wall Street bears some of the blame.

ARTHUR LEVITT, FORMER SEC CHAIRMAN: It's not just the auditors, it's the security analysts, it's the rating agencies that dropped the ball, it's the investment bankers who cooked up the scheme to hide matters from the general public.

CLARKIN: As for the auditors, Arthur Andersen, Enron's accounting firm, has admitted to destroying documents relating to the company. "Time" magazine reports Andersen employees were direct to destroy all but the most basic ``work papers.'' One member of Congress said if true, it may lead to criminal charges.

SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: If this memo was what it looks like, I'm afraid that the folks at Arthur Andersen could be on the other end of an indictment before this is over.

CLARKIN: Senator Lieberman also said the Enron disaster could bring down Andersen as well.

LIEBERMAN: Arthur Andersen is a great company with a great name. That name is being sullied and ultimately this Enron episode may end this company's history.

CLARKIN: Andersen's role has many demanding new oversight of those charged with checking the books of corporate America. Former SEC Chairman Levitt points out what happened at Enron could happen to other corporate heavyweights.

Greg Clarkin, CNN Financial News, New York.

(END VIDEOTAPE)

ZAHN: So could this corporate scandal become a major political scandal?

Joining us now from Washington is Evan Thomas of "Newsweek" magazine. "Enron's Epic Power Failure" is "Newsweek's" cover story. Appreciate your joining us again. Good to see you, Evan.

EVAN THOMAS, "NEWSWEEK": Hi, Paula.

ZAHN: All right, Evan, first of all, you just heard a little bit of "Time" magazine's reporting that Arthur Andersen employees were actually instructed to destroy documents related to this case. How likely do you think a criminal indictment is of Andersen?

THOMAS: Well, if it is what it sounds like, very likely. But we don't, we don't know all the facts here. It sounds damning and it could be. Obviously it's a terrible problem for Arthur Andersen. Whether that means people will go to jail we'll just have to see.

ZAHN: Is there any evidence that you have seen that there's a potential indictment of anyone in the Bush administration?

THOMAS: No. You know, there's a kind of ritual quality to these scandals where everybody starts asking what did they know and when did they know it. And the assumption is that there's wrongdoing and a cover-up. But so far at least -- and I emphasize so far because who knows what's going to come up -- but so far it looks like the White House actually resisted pressure. I mean, Enron had former Secretary of the Treasury Bob Rubin, who is considered to be god in the financial world, had him calling up a Treasury official, Peter Fisher, to lean on him to get the federal government to bail out Enron and they didn't do it.

I mean the fact is as best we can tell the federal government did nothing. Despite all the money that Enron had put out and all its ties to the White House, the federal government didn't do anything.

ZAHN: Do you think that was an appropriate call for Bob Rubin to have made? THOMAS: Well, Rubin's an outsider now and he's, you know, he's a private individual. He can do what he wants. I tell you, it's good news for the Republicans in the sense that you have a Democrat, a very prominent Democrat, pushing for relief for Enron. So it's political manna from heaven for the Republicans. Whether it was appropriate for Rubin, he's a private citizen now.

ZAHN: Let's quickly replay some of what Senator Lieberman, another Democrat, had to say about the perceptions caused by this Enron debacle. Let's listen in now.

(BEGIN VIDEO CLIP)

LIEBERMAN: I have not seen any evidence up to this time that officials of the Bush administration acted improperly with regard to Enron. In fact, based on the stories that are being told, I'd say that the cabinet members in the Bush administration who were called by Enron executives for help as the company was about to go into bankruptcy acted properly by not giving any help.

(END VIDEO CLIP)

ZAHN: All right, so we know where the Senator stands on this so far. But is there anything else, do you think, down the road that's going to give the Bush administration trouble?

THOMAS: I can tell you what the press is going to look for. They're going to look for somebody in the bureaucracy down low warning that there was trouble ahead in Enron and people up the chain of command doing nothing about it because the perception was that Enron was some kind of protected entity, that Enron had a lot of friends in the White House, better leave them alone. That's what the reporters and investigators are going to be looking for.

They sure haven't found it yet, but that's where the hunt will go. Not so much what happened this past fall, because it looks like the administration is clean on that. But earlier when the house of cards was being built, did somebody down low, some regulator, somebody say hey, we really ought to take a closer look at this and somebody high in the administration say well, let's not, they're our friends.

ZAHN: Well, then that's just going to reignite that whole debate, right, about whether it is, in fact, government's responsibility to bail out a company like Enron, right?

THOMAS: Right. Well, they'll be an endless -- no, I'm not talking about bailing out. I'm talking about warning that there is trouble ahead, , warning investors that there was trouble ahead. And, you know, a house of cards was being built here. An awful lot of people were looking the other way. Certainly people in the private sector were. The question is were people in a position of responsibility in the government seeing that things were going wrong and could they have warned -- not past fall, not when it was too late, but, say, last, say a year ago.

ZAHN: All right, Evan Thomas, as always, good to have your insights.

THOMAS: Thanks, Paula.

ZAHN: Thank you so much for your time this morning.

THOMAS: Thank you.

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