Washington — Enron's lead outside auditor will refuse to testify today before Congress about his role in the destruction of financial documents, his lawyer said.
With a House panel nonetheless compelling the Arthur Andersen auditor, David Duncan, to show up at its hearing, Congress' public inquiry into the shredding of documents is headed for a dramatic opening.
The drama intensified at Enron's Houston headquarters, meanwhile, with the surprise announcement that embattled Chairman Kenneth Lay, one of President Bush's biggest campaign donors, was resigning. FBI agents have been in the building investigating Enron's own alleged shredding of financial documents.
Duncan warned Enron's chief accounting officer last October that the wording of the company's draft press release announcing huge third-quarter losses could be misleading for investors, according to a memo Duncan wrote for the files on Oct. 15 that was obtained by investigators. It says his advice made after consulting with Andersen attorneys was ignored.
One of the attorneys was Nancy Temple, who also was subpoenaed to testify at today's hearing. According to another document, Temple asked Duncan to delete her name and any reference to having consulted with the Andersen attorneys from his memo.
"If my name is mentioned, it increases the chances that I might be a witness, which I prefer to avoid," Temple wrote.
The House Energy and Commerce Committee on Wednesday served a subpoena on Duncan. But one of Duncan's attorneys, Robert Giuffra, told the committee in a letter that his client would "rely on his constitutional right not to testify" unless the panel granted him immunity.
Congress can compel witnesses to show up but cannot force them to answer potentially incriminating questions without granting them immunity from criminal prosecution.
Duncan already has talked to committee investigators.
Andersen, a Chicago-based auditing firm, fired Duncan last week for his role in the extensive destruction of Enron-related documents that took place after federal regulators began investigating possible accounting improprieties.
Duncan's lawyer took issue with the committee's insistence that Duncan come to Washington for the public hearing.
Constitutional rights
"Mr. Duncan should not be punished for exercising his constitutional rights," Giuffra wrote, citing instances during the investigations of Watergate, Iran-Contra and Whitewater in which witnesses invoking the Fifth Amendment were not compelled to appear.
Giuffra said Duncan flew from Houston to Washington on Wednesday.
"Making somebody take the Fifth in public is really not what Congress should be about because it has the effect of embarrassing somebody publicly for exercising their constitutional rights," agreed Joseph diGenova, a counsel to committees in the House and Senate for eight years and a U.S. attorney for five years in the Reagan administration.
Committee spokesman Ken Johnson, while acknowledging Duncan's constitutional right, said he "has knowledge of events that are material to our investigation" and therefore must appear. "We take this investigation very seriously, and we're not going to give anyone a free pass," he said.
Subpoenas served
Granting immunity is not being considered because the committee doesn't want to impede the Justice Department's investigation, Johnson said.
A subpoena also was served Wednesday on Andersen risk manager Michael Odom for his testimony at Thursday's hearing.
The committee had planned to subpoena Andersen chief executive officer Joseph Berardino. But the Big Five accounting firm agreed late Tuesday to send another top official familiar with Andersen's internal investigation. Andersen spokesman Patrick Dorton said the firm planned to send Dorsey Baskin, an expert on auditing standards.
In inquiries with both financial and political overtones, 11 House and Senate committees are investigating Enron, while the Justice Department and the Securities and Exchange Commission pursue their own less-visible probes.
In addition to the House hearing on document destruction by Andersen employees, the Senate Governmental Affairs Committee also is having a hearing today, focusing on whether and how the system of federal regulations can be strengthened to prevent another Enron-style meltdown.
Witnesses include Arthur Levitt, who was SEC chairman through most of the Clinton administration.
The SEC started looking into Enron's accounting in mid-October, after the company reported a third-quarter loss of more than $600 million. The agency's inquiry eventually included demands for financial documents from Enron and Andersen.
Enron's slide into the biggest bankruptcy in U.S. history on Dec. 2 left thousands of employees out of work and stripped of much of their retirement savings after Enron temporarily barred them from selling company stock from their Enron-dominated 401(k) accounts. Investors around the country were burned.
President Bush said Tuesday his mother-in-law, Jenna Welch, lost about $8,000 on her investment in Enron stock.
"A lot of the stockholders didn't know all of the facts. And that's wrong," Bush said.
Associated Press Writer Pete Yost contributed to this report.
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