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The admission in court Tuesday by a senior auditor at Arthur Andersen LLP that he broke the law destroying documents in Enron’s collapse gives U.S. prosecutors a powerful tool in the broadening financial investigation, legal experts said. David B. Duncan, a partner at the Andersen accounting firm who was fired in January, could provide the government with details about Enron’s most controversial deals preceding its dramatic failure in December, along with insights into what the Justice Department says was Andersen’s widespread and illegal shredding of related papers and e-mails, experts said. “I predict he has many songs to sing,” said Lowell Peterson, a New York lawyer with Meyer, Suozzi, English & Klein, which is pursuing severance benefits on behalf of about 40 Enron employees. “I would be more worried if I were an Enron officer; Duncan didn’t shred these documents for nothing.” Arthur Andersen has pleaded innocent to obstructing justice. Appearing in federal court in Houston, Duncan told U.S. District Judge Melinda Harmon: “I also personally destroyed such documents. I accept that my conduct violated federal law.” He will remain free until his sentencing in August. “You can’t make these cases without the cooperation of the insiders,” said Ira L. Sorkin, a former regional administrator for the Securities and Exchange Commission, now a lawyer with Carter, Ledyard & Milburn in New York. A criminal obstruction charge can carry fines up to $250,000 and up to 10 years in prison, though it was unclear what effect Duncan’s cooperation might have. In court papers, the government indicated it would not oppose lesser penalties against Duncan “for (his) acceptance of responsibility.” “When you plead guilty to a single count and you’re in the country club set … providing testimony in a subsequent case, judges traditionally don’t give time even if they can,” said Stephen M. Ryan, former general counsel to the Senate Committee on Government Affairs and now a lawyer at Manatt, Phelps & Phillips in Washington, D.C. Duncan also could point to others inside Andersen and Enron who might cooperate with government prosecutors in exchange for plea bargains, experts said. In criminal cases, the government typically makes its most generous offers to those who make deals early. “Once a crack in the armor begins to be visible, you will see other defections,” predicted Robert A. Mintz, a former U.S. prosecutor now with McCarter & English in Newark, N.J. “We’ll likely see other people at Andersen and possibly at Enron striking deals with prosecutors. It’s an every-man-for-himself mentality.” The government won another victory Tuesday when the judge allowed prosecutors to compel Andersen employees to continue appearing before a U.S. grand jury in Houston before the firm’s May 6 trial. Rejecting a request by Andersen to block the practice, Harmon ruled that the Justice Department was investigating “in good faith” employees at Andersen who haven’t yet been indicted. Larry Thompson, the deputy U.S. attorney general, has previously described the Andersen shredding as “not just confined to a few isolated individuals or documents.” He called it a “substantial undertaking over an extended period of time with a very wide scope.” In barely concealed commentary, the judge on Tuesday described the case as “a complex and seemingly ever-expanding investigation.” Duncan has pleaded guilty to orchestrating the shredding at Andersen between Oct. 23 and Nov. 9, according to court documents. The SEC notified Andersen on Nov. 8 that it would issue a subpoena for documents related to the firm’s Enron work. Other experts said Duncan’s decision to plead guilty also carries important direct implications for Andersen, which a grand jury indicted March 7 as a corporation on a single count of obstructing justice. The grand jury accused the firm of destroying “tons of paper” at its offices worldwide and deleting enormous numbers of computer files on its Enron audits. Under federal rules, any criminal acts by Duncan can be more broadly attributed to Andersen unless the firm’s lawyers can show Duncan lied in his guilty plea or that he was a rogue partner whose conduct wasn’t sanctioned. “The government is now going to have an insider who can place a motive behind some of the questionable acts by Andersen personnel leading up to the collapse of Enron,” said Mintz, the former Assistant U.S. Attorney. Mintz said Duncan will describe for prosecutors telephone calls, meetings and conversations among officials at both Enron and Andersen. “He’ll provide an invaluable tool for prosecutors as they sift through documents,” he added. Copyright 2002 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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