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American Morning

"Time" Article Says Andersen Intentionally Destroyed Documents

Aired January 14, 2002 - 08:08   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: Time to move onto another story getting a lot of attention this morning, and that is the Enron story.

The latest allegation in the Enron case comes from "Time" magazine. A new article claims than an attorney for Enron's accounting firm, Arthur Andersen & Company, ordered its auditors to destroy documents relating to Enron. There are now four congressional investigations already under way into the Enron case. Among the questions: Did the company act improperly in the way it handled its employees' 401K funds? And what role, if any, should the government play in protecting 401K funds?

But in the months before the Enron collapse, employees were still the masters of their own fate, decided on their own to hold onto their stock. The story of what happened to Enron's retirement money is not as simply as it seems. CNN's Brooks Jackson has the details.

(BEGIN VIDEOTAPE)

BROOKS JACKSON, CNN CORRESPONDENT (voice-over): Who is to blame for Enron employees losing their savings? Here is how some employees told it last month.

ROBERT VIGIL, ENRON EMPLOYEE: The employees had no choice but to ride the stock into the ground.

JACKSON: But the truth is more complicated.

(on camera): In fact, Enron employees had a choice. They could have sold nearly all the Enron stock in their retirement funds last year at $80 or $70 or $50 or 30. Nothing prevented them.

(voice-over): A year ago, 62 percent of Enron's 401K funds were invested in Enron stock, $1.3 billion, way more than investment advisers say is prudent. But 89 percent of that stock had been bought by Enron employees voluntarily with their own salary deductions and could be sold. Only 11 percent had restrictions on being sold, because it had been given by Enron as a match to employee contributions.

(on camera): Back then, the stock looked like a world beater. January 25, as it was trading at over $81, Enron raised its estimate of earnings for the year. But markets took a dimmer view. Enron's stock price slid to 70, 60, 50 and lower. Why didn't the employees sell? An attorney suing Enron says they were misled.

ELI GOTTESDIENER, ATTORNEY: While they physically and legally had the power to sell their shares, they were being exhorted by the company, don't sell your shares. Don't be a sucker, stick with Enron, we're going to go right back up to the 90 bucks a share we were at.

JACKSON (voice-over): And employees believed it.

UNIDENTIFIED MALE: They said, well, you could have moved in -- you could have rolled out of that, rolled it into something else. But who wants to get off a winning horse?

JACKSON (on camera): But it wasn't a winning horse anymore. By October 16, the stock was already down to below $34. That's when Enron reported that it actually lost money in the third quarter, the date many say was the start of the bad news. Employees still had several days to sell before a lockdown on their 401Ks, when Enron changed the administrator of the plan. The lockdown effectively began at the close of the market Friday, October 26. On that, the last day they could have sold, the stock price closed at $15.40.

During the lockdown, on November 8, Enron restated earnings and announced another $600 million in losses. And by the time the 401Ks were unfrozen, November 12, and employees could sell again, the stock was down to barely over $9 a share. That still left weeks for them to sell before December 2, when Enron filed for bankruptcy, and the stock dropped to 40 cents.

Enron's critics say the law needs changing.

UNIDENTIFIED MALE: Employees definitely have some responsibility, but listen, the deck is stacked against them. You've got a bad law that puts the sky is the limit limit on employer stock.

JACKSON (voice-over): And that's where corporate lobbyists want to leave the limit, though even they say employees should never invest too heavily in a single stock.

UNIDENTIFIED MALE: We think they need to think long and hard about, is that the right course. But we think it's their decision to make. We don't think that the government should be making that decision.

JACKSON (on camera): Enron employees had the freedom to choose, but for many, that freedom led to a roller coaster ride to disaster.

Brooks Jackson, CNN, Washington.

(END VIDEOTAPE)

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