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American Morning

In Enron Scandal, There May be Some Electronic Fingerprints Left Behind

Aired January 16, 2002 - 08:10   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: Joining us to talk about the Enron investigation and where it may be headed is "Newsweek's" Michael Isikoff, who's 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 he destruction of these documents. Duncan's lawyer says he was just following orders. He's scheduled to meet with congressional investigators later today. What does his future hold?

ISIKOFF: Well, he's 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 -- 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 -- is Andersen's account that it was after that he became aware that these -- these documents -- that documents related to the Enron reviews were going to 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 it (ph) got (ph), and even calls an emergency meeting -- or some sort of meeting of special urgency -- and accelerates the destruction of documents.

Now he's relying on an account on a restatement of policy from Arthur Andersen lawyers that says, "Destruction of documents in some circumstances is permitted." What do the lawyers for Arthur Andersen know, and the superiors at Arthur Andersen know, about the SEC's interest in Enron's books at the time that that policy becomes -- that becomes key here.

CAFFERTY: Because that becomes -- that becomes potentially obstruction of justice, doesn't it? I mean, if they can prove that...

ISIKOFF: Sure. Sure.

CAFFERTY: ... then you've got the framework for a charge of obstruction.

ISIKOFF: Right. And that's why...

CAFFERTY: Let me ask you this...

ISIKOFF: Yeah, that's why...

CAFFERTY: Go ahead.

ISIKOFF: ... Duncan's account is going to be key, and 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. Huge amounts of documents are generated, you know, as work product all the time. So it's not, you know, shocking that any documents are shredded. What is potentially problematic and even criminal here is the circumstances surrounding this particular set of documents after there's some knowledge on the part of Arthur Andersen and David Duncan, as the lead partner, that these are going to be wanted for investigation.

CAFFERTY: Let me -- let me get you to this quote from the -- 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'm incredibly nervous we will implode 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 pass successes as nothing but an elaborate accounting hoax. Jeff Skilling, the CEO, is resigning now for 'personal reasons,' but I would think he wasn't having fun, looked down the road and 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, and the law firm, according to what I'm 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 clue- less. You're right, after Arthur Andersen, we now have the role of Vincent Elkins (ph), 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 Vincent Elkins' senior partner sends to Lay saying, "Look, we've looked into this. Yeah, some of this stuff looks bad, but we've talked -- we've talked to Arthur Andersen, we've reviewed it, and there's 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 this sort of clubby atmosphere in which everybody's working here. Everybody's trying to help Enron out.

CAFFERTY: Sure.

ISIKOFF: They're all buddies and they're all looking the other way.

CAFFERTY: Yeah, 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.

Now investigators in the case may be slowed by some of those missing documents, but there may be some electronic fingerprints left behind when those documents were deleted. It's a cyber paper trail, if you will, and it could play a significant role, raising questions about how computer documents should be handled. Joining us from Washington in conjunction with this story is Mark Rasch. He's a computer security expert. Mark, good to see you.

MARK RASCH, COMPUTER SECURITY EXPERT: Good morning, Jack.

CAFFERTY: So I get this memo on my computer and I want it to disappear, I hit the delete button. Wrong answer, right? It doesn't go anywhere except off my screen.

RASCH: Well, the basic -- the basic rule is delete doesn't. And when you hit the delete key, all you're really doing is sort of removing the directory that tells you where that file is. You can just hit another key that says, "un-delete" and it's right back there again.

CAFFERTY: With a -- with a company the size of Enron, a company the size of Arthur Andersen, how much trouble might it be to go in and call out the electronic memos and communications and e-mails that might be pertinent to this investigation?

RASCH: Well, even if no documents had been deleted, it's a monumental undertaking to comply with a broad, general subpoena. One of the problems is going to be how the -- how both Andersen and Enron collected and stored its e-mails. If it stored them all in one central place, it's going to be a lot easier to find them. If they're stored on individual hard drives, you're just going to have to go through each individual computer and try to restore and get the documents back. Once you delete the documents, you make it that much harder to -- to find them. CAFFERTY: But they are findable? I mean, if they're willing to take the time and invest the money, it can be done. They can get this stuff back if they want to go to the -- go to the work to do it. Let me ask you a question about the rules of evidence, and then maybe you can answer this and maybe you can't. But are there different rules in terms of the legal -- the criminal justice system that would apply to electronic communications versus a piece of paper that has things written on it?

RASCH: Not really. In fact, the rules of evidence say, "Documents includes documents however they're stored or maintained, whether they're electronic or not." The real problem is proving the authenticity of the document. If you've got a piece of paper that has, you know, somebody's signature on it, it's pretty easy to show they signed it.

CAFFERTY: Right, (UNINTELLIGIBLE).

RASCH: But if you've got a document sitting there in a computer, it's more difficult to prove that this person wrote it, sent it, and the like.

CAFFERTY: So -- so the burden of proof becomes considerably more difficult in understanding (UNINTELLIGIBLE). Mark, I appreciate your time this morning. Perhaps we can revisit this as the case moves forward; if this becomes an issue in proceedings down the road. Thanks for being with us.

RASCH: Thank you, Jack.

CAFFERTY: All right. Mark Rasch, computer security expert, joining us from Washington.

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