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Ex-Andersen auditor Duncan pleads guilty in Enron probe

The dismissed top Andersen accountant who led the firm's Enron Corp audits pleaded guilty on Tuesday to obstructing justice, joining the US Justice Department as a crucial witness in its probe of the bankrupt energy trader's collapse.

David Duncan made his plea before US District Judge Melinda Harmon to a single felony count of obstructing justice by ordering thousands of Enron records destroyed.

Duncan's plea gives federal prosecutors a powerful weapon to use against Andersen, which faces a May 6 trial for a nearly identical charge of obstructing justice, and against Enron or any of its executives if they are charged.

"I accept that my conduct violated federal criminal law and I am willing to accept responsibility for it," Duncan told the judge, standing before her with his hands crossed in front of him.

The 43-year-old accountant admitted he personally destroyed records after learning on October 19 that the US Securities and Exchange Commission wanted to review Andersen's Enron files.

"I know documents were in fact destroyed so that they would be unavailable to the SEC and others," he said.

The felony Duncan pleaded guilty to carries a sentence ranging from probation to up to 10 years in prison, a maximum fine of $250,000 and potential restitution costs. Based on his co-operation, prosecutors may recommend a lower sentence, but it is ultimately up to the court's discretion. Sentencing is set for August 26.

It is the first plea deal entered in court as part of the three-month-old Justice Department investigation into Enron's collapse, which landed the Houston firm in the largest-ever US bankruptcy, wiped out billions of shareholder equity, and threw thousands out of work.

The plea puts new pressure on Andersen to cut a deal in its criminal case. Prosecutors and Andersen met on Friday to discuss a potential deal, but none materialised.

Lawyers for Andersen immediately began challenging Duncan's credibility, saying he changed his tune about his guilt.

Andersen attorney Rusty Hardin said in a statement that he was surprised and disappointed that Duncan changed his story, which was the basis for the firm's public statements and negotiations with the Justice Department.

"For months, Mr Duncan has contended that he had no intent to commit any criminal act," Hardin said. "Mr Duncan told a completely new and different story to a judge in Houston."

PLEA 'DEVASTATING'

One former federal prosecutor called Duncan's plea a "devastating blow to Andersen."

"The government now has someone who will provide them with an insider's look at some of the motives behind the conduct of Andersen," said Robert Mintz, now a specialist in white collar criminal defense at the firm of McCarter and English.

It also bears heavily on Andersen's criminal case because the government in theory can use Duncan's conduct, as the head Andersen partner at Enron, to prove the firm obstructed justice, Mintz said.

Andersen fired Duncan on Jan 15, blaming him for the wholesale shredding of papers and deletion of electronic records. That changed on March 14, when the Justice Department unsealed its indictment against Chicago-based Andersen. Since then, Andersen lawyers have sounded a conciliatory note in public statements, saying Duncan may have exercised poor judgment but did nothing illegal.

Duncan admitted otherwise in court on Tuesday, agreeing with charges that he caused Andersen employees to "alter, destroy, mutilate and conceal" information.

On October 22, Enron announced the SEC was looking into transactions between Enron and off-the-books partnerships managed by then-chief financial officer Andrew Fastow from both sides of the negotiating table.

The next day, Duncan called a meeting and asked his team to make sure the Enron audit files complied with Andersen's document retention policy, which allows for the destruction of some files. Court papers in the Andersen case say employees had to work overtime to keep up with the huge volume of shredding.

On November 9, Andersen lawyer Nancy Temple told Duncan the firm had received a subpoena from the SEC and all Enron-related documents should be preserved. Duncan then ordered the shredding to stop, which Andersen said was evidence Duncan was not trying to hide anything.

Temple last month refused to testify at a deposition in a related civil case, invoking her constitutional right against self-incrimination.

Earlier in Houston on Tuesday, Judge Harmon rejected Andersen's request to throw out subpoenas for four employees called to testify before a special grand jury impaneled March 27 to investigate Enron matters. Andersen argued the government was improperly using the investigative panel to help it prepare for trial.

"The court finds that the government's affidavits have shown that it is acting in good faith to investigate unindicted charges against individuals and entities," she said in the six-page decision. "The court finds that there has been no abuse of grand jury process here."

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