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American Morning
All Eyes Focused on Role of Enron's Accountants in Scandal
Aired January 16, 2002 - 08:09 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.
JACK CAFFERTY, CNN ANCHOR: Let's turn back to another of the top stories now -- the Enron investigation. All eyes focused on the role of Enron's accountants of the firm of Arthur Andersen in that scandal. For the moment, there does not appear to be any smoking gun that connects the scandal at Enron with the Bush White House.
Joining us to talk about the Enron investigation and where it may be headed is "Newsweek's" Michael Isikoff, who is in Washington this morning -- Mike, nice to have you with us -- welcome.
MICHAEL ISIKOFF, "NEWSWEEK": Good morning.
CAFFERTY: How much trouble is David Duncan in? He is the partner who was fired by the firm for allegedly ordering the destruction of these documents. Duncan's lawyer says he was just following orders. He is scheduled to meet with congressional investigators later today. What does his future hold?
ISIKOFF: Well, he has been fired. That's a lot of trouble to start with. And you also obviously for a criminal investigation, when you see destruction of documents, that's something prosecutors instinctively hone in on and go after. And the circumstances of how these documents came to be destroyed is going to be, you know, one of the central questions here. I mean, Andersen, as I understand it -- I mean, the most compelling piece of information that came out yesterday, accompanying the firing of Andersen, was the -- the firing of Duncan -- I'm sorry -- is Andersen's account that it was after he became aware that these documents -- that documents related to the Enron reviews were going t be -- were wanted by the SEC as part of, first, an informal investigation, and then a formal investigation.
So Duncan knows that, according to Arthur Andersen's account. And yet, he permits the destruction of -- and even calls in an emergency meeting or some sort of a meeting of special urgency and accelerates the destruction of documents. Now, he is relying on a restatement of policy from Arthur Andersen lawyers that says destruction of documents in some circumstances is permitted. What did the lawyers for Arthur Andersen know and the superiors at Arthur Andersen know about the SEC's interest in Enron's books...
CAFFERTY: Because that becomes...
ISIKOFF: ... at the time that that policy becomes -- that becomes key here. And one can...
CAFFERTY: That becomes potentially obstruction of justice, doesn't it? I mean, if they can prove that...
ISIKOFF: Sure.
CAFFERTY: ... then you've got the...
ISIKOFF: Sure.
CAFFERTY: ... framework for a charge of obstruction.
ISIKOFF: Right. And that's why...
CAFFERTY: Let me ask you...
ISIKOFF: Yeah, that's why...
CAFFERTY: (UNINTELLIGIBLE)...
ISIKOFF: ... Duncan's account is going to be key. If Duncan is cooperating, is he going to point the fingers at higher up and says I was just following orders?
CAFFERTY: Don't you wonder -- don't you wonder what goes through these people's heads? I mean, on the one hand, you've got the Enron story, but I mean, the stupidity of these things that apparently went on at Andersen. I mean, shredding documents? I mean, what is that? I mean, that's just dumb, isn't it?
ISIKOFF: No, I mean, just context is -- just context, look, I mean all companies, all accounting firms shred documents, and huge amounts of documents are generated, you know, as work product all of the time. So it's not, you know, shocking that any documents are shredded.
CAFFERTY: Yes.
ISIKOFF: What is potentially problematic and even criminal here is the circumstances surrounding this particular set of documents after there is some knowledge on the part of Arthur Andersen and David Duncan as the lead partner...
CAFFERTY: Let me...
ISIKOFF: ... that these are going to be wanted for an investigation.
CAFFERTY: Let me get you this quote from the letter written by the woman who apparently is now going to provide one of the key pieces of evidence in all of this. "I am incredibly nervous we will implode in a wave of accounting scandals. My eight years of Enron work history will be worth nothing on my Resume. The business world will consider the past successes as nothing but an elaborate accounting hoax. Jeff Skilling, the CEO, is resigning now for personal reasons. I would think he wasn't having fun, looked down the road, knew this stuff was unfixable and would rather abandon ship now than resign in shame in two years."
That is part of the letter that was sent to Ken Lay that they apparently showed to the law firm.
ISIKOFF: Right.
HAFFETY: And the law firm, according to what I am reading, signed off on it and said, don't worry about it.
ISIKOFF: Exactly. Two points here. I mean, Watkins looks incredibly prescient here, and you know, her letter, written back in August, seems dead on the mark, and everybody else comes off clueless. You're right. After Arthur Andersen, we now have the role of Vinson & Elkins. The premier Houston law firm was Enron's main outside law firm that reviewed all of this at Ken Lay's request after he got -- after Lay gets the letter from Watkins.
And yesterday, they come out with their -- we got a copy of the letter that Vinson & Elkins senior partner sends to Lay saying, look, we've looked into this. Yes, some of the stuff looks bad, but we have talked to Arthur Andersen, we've reviewed it, and there's really nothing to worry about. It's all supported by -- you know, it's all adequately supported.
That certainly looks bad, and what it does underscore is the sort of clubby atmosphere in which everybody is working here. Everybody is trying to help Enron...
CAFFERTY: Sure.
ISIKOFF: ... out. They're all buddies, and they're all looking the other way.
CAFFERTY: Yes, and now, they may all be in a boat that's headed for the bottom of the ocean -- Mike, I've got to leave it there. We'll do this some more as the case moves forward. I appreciate your input -- thanks.
ISIKOFF: Sure.
CAFFERTY: Michael Isikoff, "Newsweek" magazine.
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