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Enron Mail |
Staff Saw Document Shredding at Enron --- Three Former Employees Say Destru= ction Took Place After Investigation Began The Wall Street Journal, 01/22/2002 Ex-Enron staffer details shredding Firm ordered all data be kept=20 Houston Chronicle, 01/22/2002 Second Executive Tells of Andersen E-mail --- Version of Events Bolsters Fi= red Auditor's Account Of Shredded Documents The Wall Street Journal, 01/21/2002 ENRON'S COLLAPSE: THE OVERVIEW EX-OFFICIAL SAYS ENRON EMPLOYEES SHREDDED PAPERS The New York Times, 01/22/2002 THE ENRON INQUIRY Former Exec Says Enron Destroyed Documents Los Angeles Times, 01/22/2002 The Nation Enron's Lay Met With Executive on 'Improprieties,' Lawyer Says A= ccounting: Sherron Watkins was said to be assured the board was studying th= e matter. No findings were issued. Los Angeles Times, 01/20/2002 ENRON'S COLLAPSE: THE ANGER Enron Fired Workers for Complaining Online The New York Times, 01/21/2002 Murky Waters: A Primer on Enron Partnerships --- As Details Surface, They A= ppear Central In Firm's Collapse The Wall Street Journal, 01/21/2002 ENRON'S COLLAPSE: MARKET PLACE For Chief, $200 Million Wasn't Quite Enough Cash The New York Times, 01/22/2002 ENRON'S COLLAPSE: TRANSACTIONS AT ISSUE ENRON CHIEF SAYS HIS SALE OF STOCK WAS TO PAY LOANS The New York Times, 01/21/2002 Lay sold off Enron stock to pay loans Spokesman: Enron chairman wasn't bailing out on company=20 Houston Chronicle, 01/22/2002 ENRON'S COLLAPSE: TEXAS JUDGE Enron Ruling By Nominee To U.S. Court Is Being Noticed The New York Times, 01/22/2002 ENRON'S COLLAPSE: THE PROSECUTOR A Specialist in Tough Cases Steps Into the Legal Tangle The New York Times, 01/21/2002 Accounting for Enron: SEC Feels Heat Over Exemptions to Enron --- In 1993, = Agency Ruled Two of Firm's Units Needen't Register The Wall Street Journal, 01/21/2002 Former employees seek voice in Chapter 11 case=20 Houston Chronicle, 01/21/2002 Jilted by Enron, Workers Turn to Web to Find Community, Job Leads The Wall Street Journal, 01/21/2002 Enron Was No Friend to Free Markets The Wall Street Journal, 01/21/2002 THE ENRON INQUIRY Enron Refuels Energy Debate Politics: The power industry = moves to fight growing skepticism of deregulation after the collapse of its= most vocal proponent and the crisis in California last year. Los Angeles Times, 01/22/2002 Enron Properties Outside the U.S. Hit Auction Block The Wall Street Journal, 01/22/2002 Accounting for Enron: U.S. Fought for Company's Project in India The Wall Street Journal, 01/21/2002 ENRON'S COLLAPSE: LENDERS 2 Early Enron Lenders Didn't See the End Coming The New York Times, 01/22/2002 Accounting for Enron: Bankruptcy Court Filing Causing Ethical Quandary for = Law Firms The Wall Street Journal, 01/21/2002 Were Auditor and Client Too Close-Knit? The Wall Street Journal, 01/21/2002 Routine 401(k) decision became costly flashpoint=20 Houston Chronicle, 01/21/2002 Fight Looms Over Pension-Plan Changes --- Enron's Consequences Lead Legisla= tors to Pursue Tightening Regulations The Wall Street Journal, 01/22/2002 Enron Isn't the Only Retirement Tale That Leads to Hard Lesson: `Diversify' The Wall Street Journal, 01/21/2002 Accounting for Enron: All Tied Up: Retirement-Plan Lockdowns At Lucent and = Elsewhere Draw Questions The Wall Street Journal, 01/21/2002 Accounting for Enron: Andersen Also Audited Qwest, Accounting Questions Sur= faced The Wall Street Journal, 01/22/2002 Moody's Trains Eye on Data Off the Sheet The Wall Street Journal, 01/21/2002 Moody's and S&P, Singed by Enron, May Speed Up Credit Downgrades The Wall Street Journal, 01/22/2002 The Nation COLUMN ONE Enron Case Raises the Bar in Texas A matter that's bi= g even by the state's usual standards has the legal community in a frenzy, = with lawyers hiring their own lawyers and others dodging conflicts. Los Angeles Times, 01/21/2002 Accounting for Enron: Company's Swift Collapse Reverberates Throughout Poli= tical Circles in Texas The Wall Street Journal, 01/21/2002 ENRON'S COLLAPSE: THE POLITICIANS Enron Spread Contributions on Both Sides of the Aisle The New York Times, 01/21/2002 ENRON'S COLLAPSE: FIVE UNCERTAIN YEARS A Bankruptcy Freezes The Settlement of Claims In a Puerto Rico Explosion The New York Times, 01/21/2002 Enron's Woes Revive Debate On Campaigns The New York Times, 01/22/2002 ENRON'S COLLAPSE: THE ANALYST Man Who Doubted Enron Enjoys New Recognition The New York Times, 01/21/2002 Enron Fallout May Cut Stock Prices in General The Wall Street Journal, 01/21/2002 Steel's Shakedown Attempt Will Test Bush's Resolve The Wall Street Journal, 01/22/2002 The Urge to Punish Cheats: It Isn't Merely Vengeance The New York Times, 01/22/2002 Commentary: Enron Got Its Money's Worth Look no further than the national e= nergy plan. Los Angeles Times, 01/22/2002 Down and Out, Enron Can't Count on Friends Los Angeles Times, 01/22/2002 Thinking Things Over: I'm OK, You're OK! Enron's OK? The Wall Street Journal, 01/21/2002 ___________________________________________________________________________= ____ Staff Saw Document Shredding at Enron --- Three Former Employees Say Destru= ction Took Place After Investigation Began By Wall Street Journal staff reporters Tom Hamburger, John R. Emshwiller, R= ebecca Smith and Jonathan Weil 01/22/2002 The Wall Street Journal A3 (Copyright © 2002, Dow Jones & Company, Inc.) Three former Enron Corp. employees say documents were shredded in the accou= nting department of the company's Houston headquarters after federal invest= igators had begun a probe into possible illegalities at the energy giant.= =20 In interviews with ABC World News Tonight and later with The Wall Street Jo= urnal, Maureen Castaneda, a former Enron executive whose office was right a= cross from the accounting department on the 19th floor, said shredding of d= ocuments apparently continued through the middle of January, when she left = the company. Separately, two other former Enron employees told the Journal = they saw several trash bags full of shredded documents in the same area in = November. According to Ms. Castaneda and one of the other employees, the shredded doc= uments appeared to relate to controversial partnerships used by Enron to hi= de debt and inflate its profits. Ms. Castaneda is in possession of shreds o= f Enron accounting documents marked "confidential" and dated December 2001.= =20 One of the shreds contained the word "Jedi," likely a reference to the Enro= n-controlled Joint Energy Development Investment partnership. Another shred= ded document seen by one of the two other employees contained the phrase "L= JM $150 million." LJM is the name of two partnerships set up and run by for= mer Enron Chief Financial Officer Andrew Fastow. Ms. Castaneda -- who said = she planned to use the shredded paper for packing material -- is a plaintif= f in one of the dozens of employee and shareholder suits seeking class-acti= on status against Enron.=20 Last night, Enron counsel Robert S. Bennett issued a statement saying Enron= is "investigating the circumstances of the reported destruction of documen= ts. In October 2001 the company issued several directives to all Enron empl= oyees world-wide that all relevant documents should be preserved in light o= f pending litigation."=20 "If anyone violated those directives," Mr. Bennett added, "they will be dea= lt with appropriately."=20 Enron filed for bankruptcy-court protection on Dec. 2 following a loss of i= nvestor confidence after the company issued several restatements of earning= s dating back to 1997 and disclosures about several questionable partnershi= ps run by its top executives.=20 The Securities and Exchange Commission began looking into possible violatio= ns of securities laws at Enron in late October. Around the same time, the c= ompany's legal department sent out a series of circulars demanding that emp= loyees safeguard all correspondence, written or electronic, related to the = partnerships and other transactions.=20 On Nov. 1, at least one of the memos was copied directly to David Duncan, t= he head of the Houston office of Enron's auditor, Arthur Andersen LLP. Mr. = Duncan was dismissed by Andersen last week for having overseen the destruct= ion of documents. Mr. Duncan, in turn, has told congressional investigators= that he was trying to follow the advice of an attorney in Andersen's Chica= go headquarters, Nancy Temple, who sent an Oct. 12 e-mail reminding Houston= personnel of the firm's document-retention and -disposal policy.=20 Mr. Duncan has told investigators that he didn't think there was anything w= rong with destroying Andersen-owned documents because the SEC inquiry begun= in late October concerned Enron, not Andersen. Andersen has said the shred= ding stopped on Nov. 9, Ms. Temple sent an e-mail message for Mr. Duncan te= lling him the SEC had issued a subpoena to Andersen, and that all Enron-rel= ated documents must be preserved. However, that doesn't explain why the shr= edding wasn't halted until eight days after Mr. Duncan apparently received = the Enron memo saying documents should be safeguarded.=20 But a person close to him said Mr. Duncan expected that Andersen's in-house= counsel would tell him when and if documents in the accounting firm's poss= ession needed to be preserved. "The first time he received such an instruct= ion was Nov. 9," this person said, "and he immediately did so."=20 Meanwhile, congressional investigators examining Enron's collapse met for f= our hours yesterday with Ms. Temple, the Andersen in-house counsel who left= the voice-mail message for Mr. Duncan about preserving documents. She was = asked about the reason for her reminders to Andersen employees about her fi= rm's policy on retaining and destroying documents. According to people fami= liar with the questioning, Ms. Temple said yesterday that her reminders wer= e simply routine restatements of Arthur Andersen policy and weren't intende= d as anything more.=20 Ms. Temple is considered likely to be asked to appear at a House Energy and= Commerce subcommittee hearing Thursday examining document destruction. Her= attorney didn't return calls seeking comment.=20 As for Mr. Duncan, his lawyer, Vince DiBlasi, said, "It is premature to req= uire him to testify." But the chairman of the subcommittee, Republican Rep.= Jim Greenwood of Pennsylvania, has said he would subpoena Mr. Duncan if ne= cessary.=20 Ms. Temple sent an Oct. 12 e-mail to Michael Odom, head of risk management = for Arthur Andersen's Houston office, according to people with knowledge of= Mr. Odom's interview with congressional investigators. He told them he for= warded it to Mr. Duncan, who oversaw the shredding of documents until Nov. = 9 when Ms. Temple sent him a voice-mail message.=20 In addition to those two communications, Ms. Temple sent out a terse remind= er of the policy on Oct. 19 to John Stewart, Andersen's director of U.S. ac= counting standards, who holds a powerful regulatory position within the pro= fession as a member of the Financial Accounting Standards Board's Emerging = Issues Task Force. The memo also went to Amy Ripepi, an Andersen executive = who heads the SEC regulations committee for the American Institute of Certi= fied Public Accountants.=20 This is the first indication that Andersen executives with leading regulato= ry positions in the accounting profession were issued reminders about the f= irm's document-retention and -destruction policies.=20 An Andersen spokesman, Charlie Leonard, said he didn't know why Ms. Temple = sent out the Oct. 19 memo. He said Mr. Duncan exercised "extremely bad judg= ment" by destroying documents related to Enron "with full knowledge of an S= EC investigation." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Jan. 22, 2002, 12:51AM Ex-Enron staffer details shredding Firm ordered all data be kept=20 By ROSANNA RUIZ and PATTY REINERT=20 Copyright 2002 Houston Chronicle=20 A former Enron Corp. executive said Monday she witnessed the mass shredding= of financial documents at the energy company's accounting office, a practi= ce that began around Thanksgiving and continued through at least last week.= =20 Maureen Castaneda, Enron's former director of foreign exchange, has turned = over to a lawyer several boxes containing mounds of shredded documents date= d from November and December. The shreds reveal words that refer to Enron's= off-the-books business ventures, the partnerships that led to the company'= s collapse.=20 In an ABC-TV interview that aired Monday night, Castaneda said that around = Thanksgiving she saw several boxes of papers being pulled from storage area= s and then shredded, despite a Securities and Exchange Commission investiga= tion that had begun the month before.=20 Castaneda said the shredding continued through her final day on the job las= t week and that she used paper-filled boxes she found in the hallway to pac= k her belongings. She could not be reached for comment by the Chronicle aft= er the ABC broadcast.=20 Enron spokesman Mark Palmer, however, said that company officials had direc= ted employees when the SEC investigation began to retain all documents, to = destroy nothing.=20 "We don't know the significance nor the pertinence of the documents that th= e plaintiffs' lawyers are parading in front of the media," Palmer said Mond= ay.=20 "But we do know what we have been telling employees sinceOct. 25. We have t= old them repeatedly that they are to retain all documents or materials rela= ted to Enron transactions, statements to the public and investors, handwrit= ten notes -- in short, any method of information recording."=20 The company issued four directives via e-mail about the document retention,= Palmer said. An Oct. 25 e-mail warned employees: "You should know that thi= s document preservation requirement is a requirement of federal law and you= could be individually liable for civil and criminal penalties if you fail = to follow these instructions."=20 Bill Lerach, an attorney representing New York-based Amalgamated Bank in a = lawsuit against Enron executives, said Monday he will seek a restraining or= der in federal court today to prevent the destruction of any other evidence= .=20 Amalgamated Bank, which manages pension funds that hold Enron stock, sued i= n November, alleging that Enron executives and board members sold $1.1 bill= ion in Enron stock during the past three years while not disclosing that th= e stock price was overvalued.=20 Lerach said that while he knows of several former Enron employees who saw t= he shredding, Castaneda was the only one who has come forward.=20 "From what we have learned, destruction of evidence at Enron was open and n= otorious and widespread," Lerach said. "They even shredded on Christmas Day= ."=20 He said he will have the shredded files in court today.=20 "We believe the Enron employees were destroying documents at the same time = Andersen people did," said Lerach, referring to Enron's former auditor. "Th= e question of whether there was a coordinated effort is something to look i= nto."=20 In Washington, investigators pushed for public testimony from former Arthur= Andersen auditor David Duncan, fired last week after the company said he o= rdered the destruction of Enron documents last fall.=20 Duncan since has cooperated with investigators, telling them that Andersen = executives had plenty of information to evaluate Enron's controversial use = of offshore partnerships.=20 The partnerships allowed Enron to hide millions of dollars of debt for year= s and mislead investors and its employees about Enron's financial health.= =20 Duncan "did not sit there and say, `Enron hid all this information from us = and therefore we couldn't count right,' " Rep. Jim Greenwood, R-Pa., who he= ads the House Oversight and Investigations Subcommittee, told The Associate= d Press. "It was more of ... `we made mistakes.'"=20 Greenwood, speaking about comments Duncan made to lawmakers last week, said= that rather than a mea culpa, Duncan gave "a wea culpa; he did not point t= he finger at Enron."=20 Duncan is scheduled to testify before Greenwood's panel Thursday, one day a= fter lawmakers return to Capitol Hill from their winter break. Duncan's law= yers had tried to delay his testimony, saying he needs more time to prepare= , but Greenwood rejected the request, threatening to subpoena Duncan if nec= essary.=20 Duncan "doesn't really need to recall every detail of what he did for Enron= ," Greenwood told the AP. "We're focused on the destruction of documents."= =20 Enron and Arthur Andersen have come under fire in the wake of the Houston c= ompany's implosion last year. Once the world's largest energy trading compa= ny, Enron filed for bankruptcy Dec. 2, costing thousands of employees their= jobs and their retirement nest eggs, much of which were tied up in now vir= tually worthless company stock.=20 At least nine congressional investigations are under way, as are probes by = the Labor Department, the Securities and Exchange Commission and the Justic= e Department, which is looking into possible criminal violations.=20 In addition to the congressional investigations, lawmakers also will turn t= heir attention to legislation aimed at preventing a another debacle like En= ron.=20 On Monday, Sen. Barbara Boxer, D-Calif., said she will introduce a bill thi= s week ensuring that auditors remain independent from the companies they au= dit.=20 The bill comes in the wake of revelations that Andersen received $52 millio= n in annual business from Enron, about half of it from its auditing account= and half in consulting fees.=20 Joseph Berardino, chief executive officer of Andersen, has dismissed concer= ns that his company overlooked Enron's accounting practices to preserve oth= er business with the company.=20 However, appearing on NBC-TV's Meet the Press over the weekend, Berardino s= aid Andersen is considering whether to end its consulting services and focu= s on its auditing business.=20 Also on the congressional agenda in the coming months will be legislation t= hat Boxer sponsored with Sen. Jon Corzine, D-N.J., to protect employee reti= rement accounts.=20 The Boxer-Corzine Pension Protection and Diversification Act, introduced la= st month, encourages workers to diversify retirement investment plans by li= miting to 20 percent the investment an employee can have in any one stock i= n his 401(k).=20 The bill also would allow employees who receive their own company's stock a= s part of their employer's matching contribution to their retirement saving= s plan to sell the stock 90 days after it arrives in their accounts.=20 In Enron's case, employees were not allowed to sell matching stock until ag= e 50.=20 Chronicle reporter Laura Goldberg contributed to this story.=20 Second Executive Tells of Andersen E-mail --- Version of Events Bolsters Fi= red Auditor's Account Of Shredded Documents By Tom Hamburger and Jonathan Weil Staff Reporters of The Wall Street Journal 01/21/2002 The Wall Street Journal A3 (Copyright © 2002, Dow Jones & Company, Inc.) WASHINGTON -- Bolstering the account of a fired Arthur Andersen LLP auditor= , an executive in the accounting firm's Houston office told congressional i= nvestigators that an e-mail from headquarters reminding employees of Anders= en's document-disposal policy was unprecedented, people familiar with his i= nterview say. The Oct. 12 e-mail arrived shortly before Houston personnel b= egan destroying papers relating to Enron Corp.=20 The account by Michael Odom, the head of risk management for the Houston of= fice, is consistent with that given to lawmakers by Enron's lead auditor, D= avid Duncan, who Andersen fired last week for overseeing the document destr= uction. It also helps lawmakers to focus their probe on the role top Anders= en officials played in the downfall of Enron, one of the nation's biggest c= ompanies until it filed for bankruptcy-court protection last month amid que= stions about its accounting practices. The document destruction, which continued after the Securities and Exchange= Commission began inquiries into Enron's financial statements in late Octob= er, will be the subject of a hearing by the House Energy and Commerce Commi= ttee hearing Thursday. Messrs. Duncan and Odom and the Andersen lawyer who = sent the Oct. 12 e-mail likely will be invited to testify.=20 Mr. Odom's lawyer, Peter Fleming, said his client is cooperating fully with= investigators. "Mike Odom has done nothing wrong, and is unaware of any wr= ongdoing," Mr. Fleming said. Andersen has portrayed the shredding of docume= nts as an isolated case of poor judgment and has disciplined several people= in the Houston office, including Mr. Odom, who was stripped of his managem= ent responsibilities.=20 Andersen Chief Executive Joseph Berardino said on NBC's "Meet the Press" ye= sterday that Mr. Duncan was fired after "he displayed extremely poor judgme= nt in the destruction of documents issue." Mr. Berardino blamed Enron's dem= ise on a failed business model, not accounting errors. "A company has faile= d and it has failed because the economics didn't work," he said.=20 Mr. Duncan last week told congressional investigators that he ordered subor= dinates to begin destroying documents related to the Enron account after he= received an e-mail from Nancy Temple, a senior lawyer in Andersen's Chicag= o office. The Oct. 12 e-mail -- sent to Mr. Odom, who passed it on to Mr. D= uncan -- was a reminder of Andersen's longstanding document-retention and d= estruction policy, which called for the disposal of nonessential papers.=20 Both Messrs. Odom and Duncan told congressional investigators that they had= never before been sent such a reminder, according to people familiar with = their interviews. Ms. Temple was a member of an "extended review team" of H= ouston and Chicago officials created to take a closer look at Enron as ques= tions arose about its condition. Members of the team talked with each other= several times a week, Mr. Odom told congressional investigators.=20 Mr. Duncan told investigators he didn't think there was anything wrong with= destroying Andersen-owned documents because the SEC inquiry begun in late = October concerned Enron, not Andersen. The shredding stopped on Nov. 9 when= Ms. Temple left a voice-mail message for Mr. Duncan telling him that the S= EC had issued subpoenas and that all documents must be preserved.=20 A person close to Mr. Duncan says he forwarded that voice mail to the entir= e Enron audit team and instructed his secretary to send an e-mail repeating= the instruction. The next day, Ms. Temple reiterated the message in a foll= ow-up e-mail to Mr. Duncan and others involved with the Enron account.=20 The implication of the account offered by Mr. Duncan and bolstered by Mr. O= dom is that the document destruction began only when the office was reminde= d of Andersen's document-destruction policy by Ms. Temple and stopped only = when the office heard from her again about the subpoenas.=20 But Andersen spokesman Charlie Leonard said Ms. Temple never instructed the= Houston office to begin shredding Enron documents, nor did she intend to o= rder them to stop the shredding, because she didn't know it was going on in= the first place. The November messages from Ms. Temple constituted "an inn= ocent and appropriate reminder from the legal department to the staff in Ho= uston of what the procedures are when somebody receives a subpoena," he sai= d.=20 The finger-pointing over document destruction is part of a larger battle ov= er responsibility for Enron's collapse. Evidence uncovered by lawmakers sug= gests the Enron account was watched closely by officials at Andersen's head= quarters.=20 For example, top Andersen officials have portrayed as routine a meeting con= vened on Feb. 5 to discuss whether to retain Enron as a client. Andersen's = Mr. Berardino said yesterday it was "part of a normal process we go through= every year" for all clients. But Mr. Duncan told investigators that he mad= e a point of including top Andersen executives, including several via phone= from Chicago, because he was concerned that the Enron account posed "signi= ficant risk," a person present when he was questioned said.=20 An Andersen spokesman said he didn't know why particular executives were in= vited to the meeting and declined to say whether routine retention meetings= normally include several top executives. Other evidence points to active i= nvolvement in the Enron account by top Andersen executives. Enron CEO Kenne= th Lay told employees in an online exchange on Sept. 26 that financial tran= sactions being questioned at the time had all been approved by Andersen -- = "in many cases, not only" by Houston-based auditors but also by "Andersen's= headquarters office from some of the world's leading experts in these type= s of financing," according to a transcript released by lawyers for Enron em= ployees suing the company over stock losses in their retirement accounts.= =20 ---=20 WASHINGTON -- Bolstering the account of a fired Arthur Andersen LLP auditor= , an executive in the accounting firm's Houston office told congressional i= nvestigators that an e-mail from headquarters reminding employees of Anders= en's document-disposal policy was unprecedented, people familiar with his i= nterview say. The Oct. 12 e-mail arrived shortly before Houston personnel b= egan destroying papers relating to Enron Corp.=20 The account by Michael Odom, the head of risk management for the Houston of= fice, is consistent with that given to lawmakers by Enron's lead auditor, D= avid Duncan, who Andersen fired last week for overseeing the document destr= uction. It also helps lawmakers to focus their probe on the role top Anders= en officials played in the downfall of Enron, one of the nation's biggest c= ompanies until it filed for bankruptcy-court protection last month amid que= stions about its accounting practices.=20 The document destruction, which continued after the Securities and Exchange= Commission began inquiries into Enron's financial statements in late Octob= er, will be the subject of a hearing by the House Energy and Commerce Commi= ttee hearing Thursday. Messrs. Duncan and Odom and the Andersen lawyer who = sent the Oct. 12 e-mail likely will be invited to testify.=20 Mr. Odom's lawyer, Peter Fleming, said his client is cooperating fully with= investigators. "Mike Odom has done nothing wrong, and is unaware of any wr= ongdoing," Mr. Fleming said. Andersen has portrayed the shredding of docume= nts as an isolated case of poor judgment and has disciplined several people= in the Houston office, including Mr. Odom, who was stripped of his managem= ent responsibilities.=20 Andersen Chief Executive Joseph Berardino said on NBC's "Meet the Press" ye= sterday that Mr. Duncan was fired after "he displayed extremely poor judgme= nt in the destruction of documents issue." Mr. Berardino blamed Enron's dem= ise on a failed business model, not accounting errors. "A company has faile= d and it has failed because the economics didn't work," he said.=20 Mr. Duncan last week told congressional investigators that he ordered subor= dinates to begin destroying documents related to the Enron account after he= received an e-mail from Nancy Temple, a senior lawyer in Andersen's Chicag= o office. The Oct. 12 e-mail -- sent to Mr. Odom, who passed it on to Mr. D= uncan -- was a reminder of Andersen's longstanding document-retention and d= estruction policy, which called for the disposal of nonessential papers.=20 Both Messrs. Odom and Duncan told congressional investigators that they had= never before been sent such a reminder, according to people familiar with = their interviews. Ms. Temple was a member of an "extended review team" of H= ouston and Chicago officials created to take a closer look at Enron as ques= tions arose about its condition. Members of the team talked with each other= several times a week, Mr. Odom told congressional investigators.=20 Mr. Duncan told investigators he didn't think there was anything wrong with= destroying Andersen-owned documents because the SEC inquiry begun in late = October concerned Enron, not Andersen. The shredding stopped on Nov. 9 when= Ms. Temple left a voice-mail message for Mr. Duncan telling him that the S= EC had issued subpoenas and that all documents must be preserved.=20 A person close to Mr. Duncan says he forwarded that voice mail to the entir= e Enron audit team and instructed his secretary to send an e-mail repeating= the instruction. The next day, Ms. Temple reiterated the message in a foll= ow-up e-mail to Mr. Duncan and others involved with the Enron account.=20 The implication of the account offered by Mr. Duncan and bolstered by Mr. O= dom is that the document destruction began only when the office was reminde= d of Andersen's document-destruction policy by Ms. Temple and stopped only = when the office heard from her again about the subpoenas.=20 But Andersen spokesman Charlie Leonard said Ms. Temple never instructed the= Houston office to begin shredding Enron documents, nor did she intend to o= rder them to stop the shredding, because she didn't know it was going on in= the first place. The November messages from Ms. Temple constituted "an inn= ocent and appropriate reminder from the legal department to the staff in Ho= uston of what the procedures are when somebody receives a subpoena," he sai= d.=20 The finger-pointing over document destruction is part of a larger battle ov= er responsibility for Enron's collapse. Evidence uncovered by lawmakers sug= gests the Enron account was watched closely by officials at Andersen's head= quarters.=20 For example, top Andersen officials have portrayed as routine a meeting con= vened on Feb. 5 to discuss whether to retain Enron as a client. Andersen's = Mr. Berardino said yesterday it was "part of a normal process we go through= every year" for all clients. But Mr. Duncan told investigators that he mad= e a point of including top Andersen executives, including several via phone= from Chicago, because he was concerned that the Enron account posed "signi= ficant risk," a person present when he was questioned said.=20 An Andersen spokesman said he didn't know why particular executives were in= vited to the meeting and declined to say whether routine retention meetings= normally include several top executives. Other evidence points to active i= nvolvement in the Enron account by top Andersen executives. Enron CEO Kenne= th Lay told employees in an online exchange on Sept. 26 that financial tran= sactions being questioned at the time had all been approved by Andersen -- = "in many cases, not only" by Houston-based auditors but also by "Andersen's= headquarters office from some of the world's leading experts in these type= s of financing," according to a transcript released by lawyers for Enron em= ployees suing the company over stock losses in their retirement accounts.= =20 ---=20 Ken Brown in New York contributed to this article. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section A ENRON'S COLLAPSE: THE OVERVIEW EX-OFFICIAL SAYS ENRON EMPLOYEES SHREDDED PAPERS By JONATHAN D. GLATER and MICHAEL BRICK 01/22/2002 The New York Times Page 1, Column 1 c. 2002 New York Times Company Enron employees were shredding documents at the company's Houston offices a= s recently as last week, a former executive said yesterday. Her statement w= as the first indication that documents were destroyed at Enron amid investi= gations of the company's collapse by Congress and the Justice Department an= d followed reports of document shredding by accountants at Enron's auditor,= Arthur Andersen.=20 The company said last night that it was looking into the claims by the exec= utive, Maureen Castaneda, who was Enron's director of foreign exchange and = sovereign risk management. Enron said that it had repeatedly directed worke= rs to preserve all documents once it learned in October that the Securities= and Exchange Commission had begun an investigation of its accounting pract= ices. Lawmakers investigating Enron's collapse and former prosecutors said that e= vidence of document destruction would play a central role in Congressional = and criminal inquiries into the company's fall.=20 ''If anyone in Enron, or for that matter Arthur Andersen, is shredding docu= ments that have anything to do with this entire matter, they are going to b= e in a whole lot of trouble,'' said Representative James C. Greenwood, Repu= blican of Pennsylvania, who is chairman of a House subcommittee that will h= old a hearing Thursday into shredding by Andersen. Ms. Castaneda described = the shredding by Enron employees on ABC News last night.=20 As for Arthur Andersen, an internal document shows that as early as Novembe= r 2000, the accounting firm had concluded that Enron's Internet services un= it, which the company considered crucial to its growth, had such poor contr= ols that there was a ''high risk'' that its financial results would be misr= epresented.=20 Andersen continued to sign off on the results, and the performance of the u= nit, Enron Broadband Services, rapidly deteriorated with the bursting of th= e Internet bubble. After losing $60 million in all of 2000, the unit report= ed losses of $494 million in the nine months that ended last Sept. 30.=20 The stock market's decline as the air went out of the new-economy boom appa= rently also took a harsh toll on the finances of Kenneth L. Lay, Enron's ch= airman. Though he received more than $200 million in compensation and profi= ts from exercising Enron stock options over three years, Mr. Lay was forced= to borrow millions more from the company last year to meet his obligations= .=20 In a telephone interview yesterday afternoon, Ms. Castaneda said that docum= ent shredding at Enron began before Christmas and continued through last we= ek.=20 Ms. Castaneda said that employees in Enron's accounting department, which h= ad offices across the hall from her own on the 19th floor of an Enron offic= e tower, collected about 15 boxes of documents after Thanksgiving. She watc= hed as the department employees searched through the boxes, Ms. Castaneda s= aid, and later noticed that shredded paper was accumulating in trash bins.= =20 ''I can't tell you what they were searching for, but they were definitely i= nterested in picking out certain documents,'' Ms. Castaneda said.=20 Robert S. Bennett, a lawyer representing Enron, said that the company was i= nvestigating the reports of shredded documents.=20 ''In October 2001 the company issued several directives to all Enron employ= ees worldwide that all relevant documents should be preserved in light of p= ending litigation,'' Mr. Bennett said. ''If anyone violated those directive= s, they will be dealt with appropriately.''=20 The company said that it had sent employees four e-mail messages on documen= t retention since Oct. 25, most recently last Monday.=20 Legal experts said it would be a crime deliberately to destroy documents th= at might be sought by the S.E.C. or other government agencies.=20 ''It is really dumb,'' said Michael J. Shepard, former chief of the special= prosecutions division in the United States attorney's office in Chicago an= d now a partner at Heller Ehrman White & McAuliffe in San Francisco. Destro= ying documents makes it very difficult to argue that their content was not = incriminating, he said.=20 ''Maybe,'' he said, ''the document says, 'Man, did we cheat, and the roof i= s about to fall in.' Maybe the document is really, really bad. But in a lot= of cases, it can be better to have the documents because you can explain t= hem.''=20 Another former Enron employee, who asked not to be identified, said yesterd= ay that she witnessed two to five people shredding documents in a room in l= ate November or early December.=20 The former employee was unable to identify the people and said she had obse= rved them only casually. She added that she was not aware of any orders not= to shred documents but said that several Enron employees later indicated t= hat they had also seen the shredding taking place.=20 Ms. Castaneda said that she collected a box of shredded documents at the su= ggestion of G. Paul Howes, an investigator for the law firm of Milberg Weis= s Hynes Bershad & Lerach, which has filed a suit against Enron and its offi= cers and directors on behalf of investors.=20 The shredded pages include accounting records, expense reimbursement reques= ts, wire fund transfer requests and what appear to be insurance records. So= me of them are dated after Enron said it sent out notices about preservatio= n of documents, and some include the words ''post-petition,'' which Mr. How= es said suggested they were related to the company's bankruptcy filing.=20 Some of the shredded strips have the names of secretive partnerships --JEDI= II and Raptor -- that have been linked to transactions allowing Enron to k= eep some of its debt hidden from investors.=20 Bill Lerach, a partner at Milberg Weiss, said last night that he planned to= take the box of shredded documents before a judge in Houston today and ask= that other Enron documents be taken into the custody of the court immediat= ely.=20 Congressional hearings begin on Thursday before both the Senate Governmenta= l Affairs Committee and Mr. Greenwood's House Energy and Commerce subcommit= tee. The House hearing will focus on the admission last week by Andersen th= at employees in its Houston office destroyed thousands of Enron documents s= hortly after learning that the S.E.C. was investigating Enron.=20 Last week, Andersen fired the lead partner on the Enron audits, David B. Du= ncan, saying that he orchestrated the shredding. Mr. Duncan has told invest= igators that he was following a directive from a lawyer in Andersen's home = office in Chicago, Nancy Temple, who in an Oct. 12 e-mail message re-emphas= ized the firm's document-destruction policy. Mr. Duncan has told investigat= ors that it was ''unusual'' for the firm to re-emphasize that policy, accor= ding to people close to the investigation. Officials with the House subcomm= ittee said Ms. Temple was likely to testify Thursday.=20 In his interview with investigators, Mr. Duncan also attributed some blame = for accounting errors to himself, Mr. Greenwood said. Mr. Greenwood said hi= s staff members had told him that ''the bottom line'' from Mr. Duncan's tes= timony was that ''he did not point the finger at Enron, and he did not clai= m that Enron hid information from him.''=20 ''Our hearing will be focused on the destruction of documents,'' Mr. Greenw= ood said. ''Did Arthur Andersen destroy documents strictly pursuant to its = normal protocol, or was there an aggressive attempt to destroy documents to= cover up? These are the questions we need to get to in our hearing.''=20 The analysis by Andersen of Enron Broadband Services examined the company's= efforts to limit the financial risk in 10 of the unit's business areas. Th= e report found that half of the areas reviewed had inadequate financial con= trol; the other half were rated ''satisfactory.'' None of the areas receive= d the next highest rating, which was ''good.''=20 The Andersen report, in many passages, is critical of the Enron management'= s ability to keep track of the unit's financial commitments, saying that th= e company lacked many of the formal procedures that would allow its top off= icers to spot problems early.=20 An Andersen spokesman declined to comment, saying he did not have a copy of= the report. Mark Palmer, an Enron spokesman, said that since Andersen serv= ed as the company's internal auditor, it was the accounting firm's responsi= bility to detect trouble spots in Enron's financial controls.=20 ''As part of that job, they would offer suggestions on how to fix any probl= ems that they found,'' Mr. Palmer said.=20 Even as the market for broadband capacity and services collapsed in 2000, E= nron Broadband reported significant gains from equity investments in other = companies, sales of fiber optic cable among a group of partnerships affilia= ted with Enron, and other transactions.=20 But in November, when Enron restated its earnings going back to 1997, that = performance proved illusory. The division's year-end loss of $60 million cl= imbed to $357 million by the third quarter of 2001, according to S.E.C. fil= ings.=20 The Andersen analysis found that for its investments in projects involving = large cash commitments in fixed assets, like a fiber optic network, Enron B= roadband's ''current conditions indicate informal processes, lack of overal= l communication and coordination and monitoring controls.''=20 Andersen, which rated the controls for capital projects as ''inadequate,'' = wrote that there was no formal policy at the company for approving such inv= estments, and that there was no management process in place to track the st= atus of projects after they began.=20 The Andersen report also found controls in numerous other areas inadequate.= It cited deficiencies that prevented the company from identifying and disp= osing of obsolete inventory. It also found that the company historically bo= ught services without proper authorizations or documentation. All told, the= report says, the division had no formal procurement policy.=20 Even in the areas where the financial controls were rated as ''satisfactory= ,'' shortcomings were found, according to the Andersen report.=20 In the division's merchant investing business, the report said that Enron e= xecutives responsible for placing a value on possible investments were not = always consulted before a decision was made to commit the company's money.= =20 Moreover, the report said, policies to prevent employees from profiting on = their knowledge of the division's decisions were inadequate.=20 The report contains a long list of ''management action plans'' to address t= he problems. But the plans, all of which are labeled ''tentative and prelim= inary,'' failed to impose the controls that the division needed, former exe= cutives said. Photos: An Enron executive, Maureen Castaneda, said in an ABC interview tha= t employees shredded documents as recently as last week. Enron said that it= had repeatedly directed workers to preserve all documents once it learned = in October of a Securities and Exchange Commission inquiry. (Vincent Lafore= t/The New York Times); (James Estrin/The New York Times)(pg. C6)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Financial Desk THE ENRON INQUIRY Former Exec Says Enron Destroyed Documents MEGAN GARVEY; LEE ROMNEY TIMES STAFF WRITERS 01/22/2002 Los Angeles Times Home Edition A-1 Copyright 2002 / The Times Mirror Company HOUSTON -- Enron Corp. shredded documents after the company came under fede= ral investigation, attorneys for shareholders said Monday, and the energy c= ompany said it would review the allegations.=20 The claim that shredding took place in Enron's accounting offices was made = Monday by a former Enron executive who was laid off from the company this m= onth. The executive, Maureen Castaneda, collected a box of shreddings and will be= a witness for plaintiffs suing over stock losses in the Enron collapse, sa= id attorney William Lerach, who represents a group of shareholders.=20 "Not just one document was destroyed, but it looks like hundreds of thousan= ds were destroyed."=20 Lerach said he intended to raise the issue at a federal court hearing here = today.=20 Castaneda, a director in Enron's foreign investments section, said in an in= terview with ABC News that she witnessed the shredding of documents that be= gan around Thanksgiving and continued at least until she left the company i= n the second week of this month.=20 Enron's accounting firm, Andersen, previously acknowledged that thousands o= f documents related to Enron were shredded by its Houston office. But Casta= neda is the first to say publicly that Enron destroyed relevant papers.=20 Paul Howes, an attorney working with Lerach, said text was legible in some = of the shredded documents and included references to controversial partners= hips such as Jedi II and Chewco. Losses by such off-the-book partnerships p= layed a key role in triggering Enron's collapse.=20 Based on statements from witnesses, Lerach estimated that possibly hundreds= of thousands of documents were destroyed.=20 "We are investigating the circumstances of the reported destruction of docu= ments," Robert Bennett, a Washington attorney who is representing Enron, sa= id in a statement issued late Monday.=20 Bennett said Enron had issued "several directives" in October to all employ= ees saying that "all relevant documents should be preserved in light of pen= ding litigation."=20 "If anyone violated those directives," Bennett said, "they will be dealt wi= th appropriately."=20 Ken Johnson, a spokesman for the House Energy and Commerce Committee, said = congressional investigators will look into the allegations.=20 "This whole sorry affair keeps getting uglier by the minute," he said. "It'= s one thing to make bad business decisions. It's something else entirely to= try to cover up bad business decisions."=20 Howes said fired Enron employees were told to gather their work papers in b= oxes and turn them over to company officials, who went through them and shr= edded numerous documents.=20 He said the shredding began with the layoffs triggered by Enron's Dec. 2 de= claration of bankruptcy, and accelerated during the Christmas and New Year'= s holidays. He said the shredded documents were dated from at least 1994 th= rough Dec. 20, 2001.=20 Enron spokesman Mark Palmer said the company does not "have any knowledge o= f the material that the plaintiffs' attorneys are parading in front of the = media." But he said that if the allegations prove true, the people responsi= ble will be fired.=20 The company sent e-mails to employees on Oct. 25, Oct. 26, Oct. 31 and Jan.= 14 instructing them to retain all documents dealing with "related-party tr= ansactions, SEC requests, or any Enron transactions or accounting for those= transactions," he said.=20 The January e-mail was sent as a reminder after it was revealed that Anders= en had shredded Enron-related documents.=20 "These e-mails were very specific that employees who did not follow these p= rocedures were liable for civil or criminal penalties," Palmer said.=20 Palmer confirmed that Castaneda was an employee at Enron who left the compa= ny in a recent round of layoffs.=20 She was director of "foreign exchange and sovereign risk," analyzing curren= cy exchange rates and the possibility that companies outside the U.S. would= nationalize assets.=20 Phil Schiliro, chief of staff to Rep. Henry A. Waxman (D-Los Angeles), a se= nior Democrat on the House Energy and Commerce Committee, said that if docu= ments were destroyed, it "raises the real possibility of obstruction of jus= tice. We need to know if Enron is destroying documents, and if they are, le= arn what Enron is trying to hide."=20 Though many companies routinely shred old or sensitive documents, business = experts expressed surprise Monday that Enron might have destroyed key recor= ds, particularly after the company became the target of numerous lawsuits a= nd government investigations.=20 On Oct. 22, the company disclosed that the Securities and Exchange Commissi= on had launched a preliminary inquiry into some of the company's partnershi= ps.=20 "Under the circumstances, this could be a very serious issue," said Nichola= s Economides, business professor at New York University's Leonard N. Stern = School of Business.=20 "'When someone destroys documents, people start wondering what was in those= documents," Economides said. "Even if they didn't say something horrible, = a bad impression remains. And at Enron, there's no justification. Certainly= no one could say they destroyed documents because they thought they were u= nimportant."=20 Former employees reacted with concern and anger to the new charges.=20 "It does take it to a new level," said Maritta Mullet, 58, a 10-year employ= ee who lost nearly half a million dollars in would-be retirement benefit wh= en the company crashed. "It's criminal. You just don't destroy evidence."= =20 The accusations of document shredding at Enron came as congressional invest= igators continued preparations for a hearing scheduled Thursday into the de= struction of thousands of documents by Chicago-based Andersen.=20 Congressional investigators said they will issue subpoenas today for key wi= tnesses who fail to commit to testifying at Thursday's hearing.=20 The House Energy and Commerce investigations subcommittee turned down an ap= peal Monday from David B. Duncan for more time to prepare. Duncan was Ander= sen's lead partner on the Enron account until he was fired last week for al= legedly destroying documents. Duncan maintains he was following company ord= ers.=20 "Apparently [Duncan] would like to have more time to refresh his memory abo= ut events," said Johnson, who works for committee Chairman Rep. W.J. "Billy= " Tauzin (R-La.).=20 "The bottom line is he will agree to testify by [today] or he will be subpo= enaed," Johnson said. "All the witnesses have been put on notice that they = are expected to appear and will face contempt-of-Congress charges and crimi= nal penalties if they do not."=20 In a letter to the committee Monday, Duncan's attorney, Robert Giuffra, sai= d it is premature to require his client's testimony. Giuffra said Duncan wa= nts to review boxes of documents that Andersen gave the committee but has n= ot yet shared with him.=20 At issue is Andersen's destruction of documents relating to Enron, shreddin= g that took place even after the accounting firm was aware that the SEC was= looking into the company's collapse.=20 In firing Duncan, Joseph F. Berardino, Andersen's managing partner and chie= f executive, asserted that the 42-year-old executive had organized the dest= ruction of records. The firm, he said, would not tolerate "unethical behavi= or, gross errors in judgment or willful violation of our policies."=20 In private interviews with congressional staffers last week, Duncan and ano= ther Andersen official, Michael C. Odom, indicated that others at the accou= nting firm were "at the table" when the memo regarding the destruction of m= aterial was discussed, one congressional investigator said Monday.=20 Andersen attorney Nancy Temple sent a memo Oct. 12 reminding employees of t= he company's long-standing policy to get rid of nonessential documents.=20 "Duncan and Odom said there were other partners and managers at the table w= hen the retention policy was handed out," said an investigator, who spoke o= n the condition of anonymity. "Employees were told to do no less or no more= than the policy called for."=20 A month later, and nearly three weeks after Enron disclosed it was the subj= ect of an SEC probe, Temple wrote another memo instructing company employee= s to preserve Enron documents. As of late Monday, she was the only one of f= our Andersen executives summoned who has told investigators she will appear= on Capitol Hill for the Thursday hearing.=20 The inquiry has been called to investigate who was involved in the destruct= ion of evidence, which documents were destroyed and why.=20 Odom, who was in charge of risk management at Andersen's Houston office, wa= s told Monday that he would be called to testify. The subcommittee also has= summoned Berardino, who has been given the option of sending a proxy and w= ho is familiar with his company's internal investigation into the document = destruction.=20 In an appearance over the weekend on NBC's "Meet the Press," Berardino did = not indicate his plans for the hearing.=20 Enron's bankruptcy is widely considered to have the potential to become a p= olitical scandal because of the donations--almost $6 million over the last = decade--to both parties from the company's officers, directors, employees a= nd political action committee. Kenneth L. Lay, Enron's chairman and chief e= xecutive, was one of President Bush's top donors.=20 A number of legislative efforts have been proposed to prevent a reoccurrenc= e of Enron's unraveling.=20 Sen. Barbara Boxer (D-Calif.) said Monday that she plans to introduce a bil= l this week that would prohibit accounting firms from also serving as consu= ltants for the companies they are auditing.=20 The practice, which in the case of Enron allowed Andersen to earn more in c= onsulting fees than from actual audit charges, has been widely derided in t= he wake of the bankruptcy as a clear-cut conflict of interest.=20 *=20 Garvey reported from Washington and Romney from Houston. Times staff writer= s David Streitfeld, Jeff Leeds, Edmund Sanders and Richard Simon contribute= d to this report. PHOTO: Former Enron executive Maureen Castaneda says she saw the shredding = of documents beginning around Thanksgiving.; ; PHOTOGRAPHER: ABC News=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 National Desk The Nation Enron's Lay Met With Executive on 'Improprieties,' Lawyer Says A= ccounting: Sherron Watkins was said to be assured the board was studying th= e matter. No findings were issued. DAVID STREITFELD TIMES STAFF WRITER 01/20/2002 Los Angeles Times Home Edition A-32 Copyright 2002 / The Times Mirror Company HOUSTON -- Enron Corp. Chairman Kenneth L. Lay held several meetings in lat= e October with a vice president who had urged him to clean up a series of "= improprieties," her lawyer said in an interview Saturday.=20 Lay first met with Sherron S. Watkins, Enron's vice president for corporate= development, for half an hour Aug. 22, shortly after she wrote him an anon= ymous letter detailing her fears that the energy company would "implode in = a wave of accounting scandals." But Philip Hilder, Watkins' lawyer, said "t= here were also subsequent meetings in October." At one of the meetings, Lay told Watkins that the Enron board had formed a = committee to look into the accounting issues, Hilder said. But he declined = to provide further details of the meetings, which have not been previously = reported.=20 By October, the energy company was indeed beginning to implode. On Oct. 16,= Enron announced an unexpected charge against earnings of more than $1 bill= ion. On Oct. 22, the Securities and Exchange Commission began an inquiry. O= n Oct. 24, Chief Financial Officer Andrew Fastow took a leave of absence. O= n Oct. 31, the board announced the formation of the special committee, whic= h has not yet issued any findings.=20 An Enron spokeswoman said Saturday that she had no details about the Lay-Wa= tkins meetings in October.=20 Hilder also provided a better timeline for how the 42-year-old Watkins disc= overed and acted on the accounting irregularities, which involved so-called= special purpose entities, some of which were based in the Cayman Islands, = a haven for tax shelters.=20 An eight-year veteran of Enron, Watkins had spent less than two months work= ing for Fastow when, in the course of reviewing which assets could be sold,= she "stumbled across" details on the entities, Hilder said.=20 "The numbers just didn't add up," Hilder said.=20 He said Watkins didn't confront Fastow. "She felt he knew what was going on= and, if she confronted him with it, that would have been the end of her at= Enron," the lawyer said.=20 When Enron Chief Executive Jeffrey Skilling resigned Aug. 14 after only six= months on the job, Watkins had her opening. Skilling's abrupt departure fo= r "personal reasons" stunned the company, and Lay scheduled an Aug. 16 meet= ing at the Hyatt Regency here for all concerned employees. He invited them = to submit questions in advance--anonymously, if they wished.=20 Watkins wrote a one-page letter, saying, "Skilling's abrupt departure will = raise suspicions of accounting improprieties and valuation issues . . . . I= am incredibly nervous."=20 The meeting with employees didn't produce the resolution Watkins wanted, Hi= lder said, so her next step was to call a friend at Andersen, Enron's accou= nting firm. "She went to him as a sounding board," Hilder said. "Here she f= eels she is hanging out all alone. These deals must have been looked at by = the accountants, maybe the lawyers, the top company brass. She had some dou= bt that maybe she had gotten it wrong."=20 Watkins ultimately sought and was granted an Aug. 22 meeting with Lay, at w= hich she gave him a six-page memo that detailed her questions and talked ge= nerally about the high level of employee worry. "I wish we would get caught= ," she quoted one Enron manager as saying in the memo. "We're such a crooke= d company."=20 Lay later asked Vinson & Elkins, Enron's principal outside law firm, to con= duct the review. Watkins had urged him not to hire that firm, saying Vinson= & Elkins had a conflict because they had provided opinions on some of the = deals.=20 By the beginning of September, Watkins had transferred out of Fastow's offi= ce. On Oct. 15, Vinson & Elkins issued its report, which basically gave the= special partnerships a clean bill of health.=20 Watkins' reaction to the report, the lawyer said, "is probably pretty obvio= us, given her feelings about them looking into the matter . . . ." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section C ENRON'S COLLAPSE: THE ANGER Enron Fired Workers for Complaining Online By ALEX BERENSON 01/21/2002 The New York Times Page 1, Column 2 c. 2002 New York Times Company The Enron Corporation fired at least two employees in the last two months f= or posting information or negative opinions about it on Internet message bo= ards.=20 One of the fired employees, Clayton Vernon, had asked Kenneth L. Lay, Enron= 's chairman, during an earlier internal online discussion whether Enron had= used aggressive accounting to overstate its profits. It is unclear whether= Mr. Vernon's question to Mr. Lay, which came in September, two months befo= re he was dismissed, played any role in his firing. But a coarsely worded m= essage critical of Mr. Lay that Mr. Vernon posted in November under a scree= n alias was traced back to him in less than a day. The second fired employee, according to Enron, was the person who revealed = in early December on the Internet that Enron had paid $55 million in retent= ion bonuses to top managers and executives just before it filed for bankrup= tcy protection and laid off 4,000 workers on Dec. 2. The bonuses were sharp= ly criticized by Enron employees, many of whom had their retirement savings= wiped out by Enron's collapse. Enron declined to identify the second fired= employee.=20 Enron also declined to comment on any other details of the two firings, and= it would not say whether it had dismissed any other employees because of I= nternet postings. Mr. Vernon confirmed that he had been fired for postings = that the company viewed as offensive.=20 ''We're not going to discuss internal security actions,'' said Mark Palmer,= a spokesman for Enron. ''But we will say that we will protect very vigorou= sly the corporation's property.''=20 Both firings involved material posted in an online forum about Enron on Yah= oo, whose message boards are among the most heavily used on the Internet.= =20 It was not clear how Enron identified the employees behind the postings. Pe= ople who post messages on Yahoo often believe that they cannot be traced if= they do not use their real names. But many companies have the technical me= ans to track the online activities of employees who use company computers a= nd servers.=20 In addition, Yahoo's privacy policy allows it to disclose personal informat= ion about people who post messages that it deems abusive or ''invasive of a= nother's privacy, hateful, or racially, ethnically or otherwise objectionab= le,'' or that reveals confidential corporate data.=20 Even so, a Yahoo spokeswoman said Yahoo had not given Enron any information= about anyone who posted a message. Despite the disclaimer in its privacy p= olicy, she said, Yahoo generally divulges personal information about users = only in response to a court order.=20 In any case, Enron apparently had little difficulty finding Mr. Vernon, who= posted most of his messages from the company's Houston headquarters, where= he worked designing computer-based models to estimate the value of Enron's= energy trades.=20 A native of Midland, Tex., who describes himself as a political progressive= , Mr. Vernon said that when he joined Enron in December 1999, he hoped that= the company would be diverse and a meritocracy.=20 But in the course of two years working at Enron, he said, he ''realized it = was just another Houston, Texas, corrupt thing -- that we grow in this town= -- where the rich white Republicans think they can write any law they want= to at any time.''=20 His frustration grew, he said, when Mr. Lay took part in an online chat wit= hin the company on Sept. 26 and brushed off Mr. Vernon's question about the= way Enron had accounted for deals it had made with supposedly independent = partnerships. Enron began to collapse after it became known in November tha= t it had used the partnerships to overstate earnings by at least $600 milli= on.=20 By mid-November, with Enron's stock plunging, Mr. Vernon had begun to post = dozens of messages a day on the Yahoo discussion board under the screen nam= e ''utlonghornsrule,'' referring to the University of Texas, where he recei= ved a master's degree in economics.=20 His messages warned investors away from Enron's stock, and many sharply cri= ticized Enron and Mr. Lay. ''We were just sitting there with nothing to do,= '' Mr. Vernon said of the period when he posted the messages. ''We were jus= t sitting there watching our stocks go down.''=20 The final straw for him came Nov. 19, he said, when Enron canceled its Chri= stmas party. At 5:16 p.m. that day, in a (not always grammatical) message s= prinkled with vulgarities, Mr. Vernon wrote that Mr. Lay had ''just cancell= ed the Enron christmas party so he wouldn't have to show up for his own par= ty with armed bodyguards.''=20 He went on, ''Lied and said employees were ambivalent. Trust me, nobody bel= ieves a word'' that Mr. Lay says, the posting said, using a vulgar epithet.= ''People have enjoyed the company spending a few dollars on them and givin= g them a chance to laugh and dance a bit. Esp since most of us adore our co= workers.=20 ''Ken Lay is the sorriest sack of garbage I have ever been associated with,= a truly evil and satanic figure.''=20 Other people quickly posted responses defending Mr. Lay, including one who = wrote, ''1) You are an embarrassment to UT -- so shut up. 2) You don't know= what you are talking about -- You don't run with the big dogs.'' Mr. Verno= n said the style of that note led him to think that it was the work of a se= nior Enron employee.=20 It did not take long for Enron to find out the identity of ''utlonghornsrul= e.'' The day after his vituperative posting, Mr. Vernon said, he was called= into a meeting with his manager and a top human resources officer. ''My bo= ss said, 'What were you doing?' and I said, 'I was frustrated,' '' Mr. Vern= on said. ''They escorted me out immediately.'' He said he had been paid his= salary, but no severance pay.=20 Mr. Vernon said he understood why he was fired. ''I was using their equipme= nt,'' he said, ''I was in their building, and it was a flagrant violation o= f company policy to do what I did. I'm not going to litigate it. I don't th= ink it was unfair.''=20 He does not see himself as a whistle-blower, he said, and he is embarrassed= by the language his anger led him to use -- but he is still angry. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Murky Waters: A Primer on Enron Partnerships --- As Details Surface, They A= ppear Central In Firm's Collapse By John
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