Senate asks to subpoena Enron, auditors over destroyed papers

By Jennifer Coleman The Associated Press
Wednesday January 16, 2002

SACRAMENTO — An accounting firm’s destruction of some of energy giant Enron’s financial documents may have violated a state Senate committee’s subpoena, senators investigating the state’s energy crisis said Tuesday. 

Sen. Joe Dunn, chairman of the Senate Select Committee to Investigate Price Manipulation in the Wholesale Energy Market, said he’ll ask for subpoenas to require officials from Enron and Arthur Andersen LLP, Enron’s accountants, to appear for depositions about the destroyed documents. 

The accounting firm has admitted that it destroyed some Enron documents after federal securities regulators asked for information about Enron. 

“We believe that some of the documents that have been destroyed by Arthur Andersen ... are covered by the subpoena served upon Enron last June,” Dunn said. “Destruction of any documents that were under subpoena by this legislative committee is a violation of California law.” 

On Tuesday, Andersen fired its lead auditor of Enron and put three others on leave pending an internal inquiry. Officials with Andersen didn’t immediately return phone calls by The Associated Press seeking comment. 

Enron spokeswoman Karen Denne said the company had cooperated and would continue to cooperate “with all inquiries and investigations.” 

Dunn’s committee has questioned Enron and five other major energy companies as it looks into whether power suppliers influenced the market enough to run up wholesale energy prices last year. 

A huge jump in wholesale electricity prices caused the state’s three largest utilities to incur billions in debts that a deregulation law kept them from passing to consumers. 

The energy companies haven’t signed “non-destruct” agreement regarding documents the committee has subpoenaed, Dunn said, but only Enron has also refused to agree to save relevant financial papers. 

“When things are missing and you say ’the dog ate my homework,’ it means there was an accident,” said committee member Sen. Sheila Kuehl, D-Santa Monica. “What Andersen and Enron have essentially said is ’I fed the dog my homework’ and that is something that cannot stand.” 

Dunn planned to ask the Senate Rules Committee Wednesday to issue the subpoenas for testimony, but admitted that he didn’t expect “great compliance” from Enron executives. 

Last spring, the committee demanded several types of documents from the companies, and in September, Enron agreed to comply. Since then, investigators have reviewed Enron’s offerings and found them “woefully inadequate,” Dunn said. 

The 133,464 documents turned over to California investigators included mostly public records, such as filings with the Federal Energy Regulatory Commission, and none of the internal papers that would show if the company held any sway over the wholesale market, Dunn said. 

Hearings on Enron’s compliance with subpoena will be held soon, Dunn said, adding he was seeking a Legislative Counsel’s opinion about what the state should seek against Enron or Andersen. 

The state Legislature hasn’t imposed sanctions for contempt charges since 1929, when the Senate voted to jail reluctant witnesses during a committee investigation of price fixing and price gouging involving cement sales to the state.