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June 17, 2002 Enron probe moves on to new targets; Andersen trial just '1 piece' of inquiry Robert Manor With the conviction of Andersen in hand, federal prosecutors can turn their attention to others who may be responsible for the deceptive accounting at Enron Corp. and the efforts to destroy evidence as investigators moved in. The Justice Department made clear over the weekend that it is not finished looking at Enron and the Andersen accounting firm. "This prosecution has been but one piece of our active and ongoing investigation into the circumstances behind the collapse of Enron," said Deputy U.S. Atty. Gen. Larry Thompson after Andersen was convicted Saturday. Although Andersen said it will stop representing companies before the Securities and Exchange Commission, the SEC said it too is investigating the firm and its employees. "The commission's investigation into Enron Corp., and Andersen's role in it, is continuing," the SEC said. Among the subjects of the expanding government investigation are an in-house lawyer at Andersen, possibly others at the accounting firm and former top managers of Enron. Before the trial began, legal observers thought the Justice Department would easily get an obstruction of justice conviction against Andersen. Prosecutors had in hand a guilty plea from David Duncan, the Andersen partner on the Enron account who oversaw the shredding of thousands of pounds of documents. Duncan's testimony was expected to easily sway a jury. Instead, Andersen put up a fierce defense. Early in their deliberations, half the jurors were in favor of acquittal, they said in interviews following the verdict. Moreover, Andersen preoccupied prosecutors for three months leading up to Saturday's guilty verdict--time they could have devoted to investigating Enron. But lawyers familiar with federal prosecutions say the government suffered no real harm from the delay. Outcome helps prosecutors Assistant Atty. Gen. Michael Chertoff, an experienced prosecutor with a fearsome reputation, leads the Justice Department's task force on Enron. "I know Mike Chertoff," said Timothy McInnis, a former federal prosecutor in New York. "He has an inexhaustible amount of energy." McInnis, who specializes in white-collar defense, said the Andersen verdict will help prosecutors because potential witnesses at Andersen and Enron are more likely to cooperate rather than risk prosecution. "Anytime there is a result like this, lawyers encourage their clients to cooperate with the government," McInnis said. The government has no shortage of people to investigate. Much of the testimony at Andersen's trial dealt with Nancy Temple, an in-house Chicago lawyer for Anderson. It was Temple who told Andersen's Houston office to follow the firm's policy on document retention--an implicit instruction to destroy documents sought by the SEC, according to prosecutors. Temple "made every effort to sanitize their files," said Andrew Weissmann, the lead federal prosecutor in the Andersen trial, shortly after the verdict was issued. Temple was not called as a witness in the trial because her lawyer said she would decline to answer questions that might incriminate her. Other people of interest at Andersen include Tom Bauer, a Houston auditor who allegedly carried out Duncan's orders to shred documents, and Michael Odom. In a videotape shown to jurors, Odom was seen instructing other Andersen workers about the firm's policy on destroying documents. "Whatever there was that may have been of interest to someone, it's gone and it's irretrievable," Odom says on the tape. Temple, Bauer and Odom were not available for comment. Enron is the main target Still, Andersen and its partners remain something of a sideshow, observers say. For prosecutors, Enron is the main target. Of paramount interest is Andrew Fastow, the former chief financial officer at Enron. It was Fastow who set up a series of partnerships that hid debt and inflated income at Enron. Fastow was involved in the partnerships and derived a profit of at least $30 million, all of it coming from Enron and its shareholders. "We have no comment on the verdict or what the Justice Department might do," a spokesman for Fastow said. Other top managers at Enron also are the subjects of government scrutiny. Former Chairman Kenneth Lay and former Chief Executive Officer Jeffrey Skilling have denied knowing the details of Fastow's involvement in the partnerships. A spokesman for Lay declined to comment on the Andersen verdict. Skilling could not be reached for comment. Coming under investigation by federal authorities is no proof of wrongdoing and Temple, Bauer, Odom, Skilling, Fastow and Lay have not been charged with any crimes. U.S. track record poor There is no guarantee that anyone will be convicted for deceptive accounting at Enron. The government has a poor track record in winning convictions for such offenses as insider trading or accounting fraud. Often, defense lawyers argue in such cases, prosecutors are trying to turn bad business decisions into crimes. Juries can become sympathetic--or confused. "There are very complex accounting and financial issues which are going to make prosecution of people at Enron difficult but not impossible," said Royal Martin, a former federal prosecutor who has a Chicago practice defending white-collar cases. "It all depends if the Justice Department can piece together a case that can be understood by a jury." To win a conviction, prosecutors have the difficult task of explaining to jurors the often arcane rules of accounting. Conspiracy to commit deceptive auditing is not the kind of offense that plays on jurors' emotions. If anyone at Enron is prosecuted, Martin said, it most likely will be on charges that are easy for jurors to understand. "I think it would be wire fraud and mail fraud in which there was a scheme to defraud the shareholders of Enron," he said. Prosecutors might have won a powerful ally in Andersen if plea bargain negotiations this spring had been successful. Lawyers for Andersen and the Justice Department tried but failed to reach an agreement before trial. Such agreements invariably require the accused to cooperate with prosecutors in cases against other offenders. "It would have been helpful for Andersen to assist the government in going after Enron," said Douglas McNabb, a Houston defense lawyer. "From what we have seen over the past couple weeks, that is not going to happen," he said. After its conviction, Andersen issued a strongly worded statement that seemed to back up that conclusion. "It is clear that the government failed to uphold its moral responsibility to the public by indicting and prosecuting a firm of 26,000 innocent people," Andersen said, adding that prosecutors had succeeded in "destroying the firm as we knew it." | |