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Former Andersen Auditor Admits to Breaking Law

BY Admin  May 14, 2002 at 12:09 PM EDT

Duncan told a federal jury in a Houston courtroom, ”I obstructed justice.”

“I instructed people on [the Enron audit team] to follow a document-retention policy which I knew would result in the destruction of documents,” he said, referring to Andersen’s policy to save important client documents and destroy materials considered unnecessary.

In his first public statement on the Enron matter, Duncan said he was aware he was breaking the law by directing his colleagues to shred documents relevant to a federal investigation into the energy giant’s accounting practices.

Duncan was Andersen’s chief audit partner for the Enron account until last January when he was fired for overseeing the destruction of Enron documents.

Last month, Duncan pleaded guilty to an obstruction-of-justice charge and agreed to testify against his former employer in exchange for a plea bargain that could result in up to 10 years in prison.

The 43-year-old accountant is the government’s key witness against Andersen, which faces criminal charges for shredding key documents after the Securities and Exchange Commission opened an investigation into the Enron’s accounting methods.

The accounting firm now must prove that Duncan did not commit any illegal acts by destroying documents, but merely acted on poor professional judgement. A limited liability partnership like Andersen can be held criminally responsible for the acts of one of its partners.

During opening arguments last week, an Andersen attorney said that the firm was not trying to hinder a federal investigation but was trying to organize its materials on Enron. Andersen’s attorney also suggested that Duncan was pressured to plead guilty, noting that in early statements Duncan had told federal investigators he had done nothing wrong.

If Andersen is convicted of obstructing justice, the firm could be banned from auditing publicly traded companies unless it receives a waiver from the SEC. The company could be fined up to twice any gains or damages the court finds were caused by the firm’s actions. Andersen could also face a separate fine of up to $500,000.

Duncan is scheduled to continue his testimony Tuesday.

Before the Enron scandal, Andersen employed more than 85,000 people worldwide and was ranked among the top five accounting firms in the world.