FBI talks to Enron employees

January 22, 2002 Posted: 2228 GMT

NEW YORK (CNN/Money) -- Enron Corp. allowed the Federal Bureau of Investigation to interview workers located on the 19^th and 20^th floors of its Houston headquarters and stationed security guards there Tuesday to prevent further shredding of documents, Enron lawyers said during a federal court hearing in Houston.

Separately, lawyers representing Enron investors asked a federal judge to assign a U.S. marshal or security team inside the building to ensure no more documents are destroyed. An initial search of the 19th floor revealed one wastebasket filled with shredded documents that have been turned over to authorities.

The actions come as ex-Enron employees revealed Monday that possibly important documents were shredded as recently as last week at Enron headquarters. The shredding continued despite federal subpoenas and court orders since late October forbidding the practice.

Maureen Castaneda, who served as director of international investment for Enron, told CNNfn Tuesday morning that she took some of the shredded documents home to use as packing material before she realized what the paper contained. "I thought, well, wait a minute -- if there's threatening legal suits, why are there still shredded documents?" she said. (WAV 136 KB) (AIF 136 KB)

The Wall Street Journal said Tuesday that at least two other employees said the documents shredded at Enron appear to relate to controversial partnerships used to hide debt, and that Enron's counsel said it was investigating.

Enron spokesman Mark Palmer said the company has repeatedly told employees to preserve documents. Details

Other recent developments

Enron filed for bankruptcy on Dec. 2, the biggest Chapter 11 filing in the history of the United States. Since then the energy company has become the subject of a criminal investigation by government regulators and other shareholder lawsuits. Recent developments include:

Enron creditors, including Wiser Oil Co. and EnerVest Energy LP, asked Judge Arthur Gonzalez, who is overseeing the Enron bankruptcy case, to appoint a trustee for Enron North America Corp., court documents said Tuesday.

The creditors are asking Enron North America to turn over its books, records, files and cash to the appointed trustee. Enron North America is comprised of the wholesale business that was recently sold to UBS, attorney Charles Panzer, who represents Wiser Oil, said.

"We want to make sure that the assets of Enron North America Corp. are used to pay creditors of Enron North America and not creditors of other Enron entities," Panzer said Tuesday.

Another executive of Andersen LLP testified last week that the firm's Houston office began destroying documents after receiving an e-mail from Andersen's head office.

Michael Odom, the risk management partner responsible for the Houston office, gave testimony Friday that bolstered the account given by lead partner David Duncan last week, sources with knowledge of the investigation told CNN/Money.

Odom's testimony amplifies the finger-pointing between Duncan and Andersen over who initiated the destruction of auditing documents considered vital to the investigation of Enron's bankruptcy. Details

Arthur Andersen CEO Joseph Berardino conceded Sunday that his company made errors but said that the energy company's demise was ultimately the result of a failed business model, not shady accounting.

"At its base, this is an economic failure," said Andersen Chief Executive Officer Joseph Berardino on NBC's "Meet the Press." Details

In a telephone interview with the New York Times, the attorney for Enron CEO Kenneth L. Lay said his client repeatedly used shares of the company as collateral for other investments that he would not specify.

Attorney Earl J. Silbert said Lay's decision to sell shares of Enron late last year reflected concern about the loans, and was not tied to warnings from a company vice president about Enron's financial situation.

Responding to severe market criticism of how it handled now-bankrupt Enron's ratings, Moody's Investors Service says it is considering making changes in how it rates companies.

The review by one of the three leading U.S. credit rating agencies -- the others are Standard & Poor's and Fitch -- follows criticism of the agencies' perceived lack of speed in downgrading energy trader Enron's ratings to junk status in November. Details

Weeks before his company filed for the largest bankruptcy in U.S. history, Lay touted the energy trader's stock as an "incredible bargain" in a Web chat with his employees.

In a transcript of the in-house chat session, which took place Sept. 26, the Enron CEO also defended Arthur Andersen, the accounting firm recently accused of destroying key documents and covering up sizable financial losses. Details


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