- The Washington Times - Thursday, May 30, 2002

HOUSTON (AP) A former Arthur Andersen LLP auditor testified yesterday that he directed his team to keep all documents related to audits for Portland General Electric, an Enron Corp. subsidiary, after receiving a reminder of the firm's document-retention policy.
"It seemed to be the conservative thing to do," said Shane Philpot, who was a senior auditor on the Portland General Electric account before joining KPMG earlier this month.
Prosecutors in Andersen's obstruction of justice trial say that sudden emphasis on the firm's document-retention policy in October and early November was an implicit order to shred Enron-related documents to thwart a Securities and Exchange Commission probe.
The indictment, unsealed March 14, said that shredding took place at Andersen's offices in Houston, Portland, Ore., and London, as well as its Chicago headquarters.
Andersen says it was cleaning its files under firm policy, which calls for retention of documents that support final audit conclusions and destruction of extraneous papers and e-mails. All Andersen witnesses who have testified, including former top Enron auditor David Duncan who appeared under a plea deal with prosecutors said they did not think they were doing anything wrong at the time.
But Mr. Philpot testified yesterday that he did the opposite after he inquired about a voice-mail message in late October instructing Portland General Electric auditors that "an effort should be taken to clean up the audit files of PGE."
He said he regularly followed Andersen's policy before October. But he asked his boss, Andersen partner Tim McCann, about the message, which he said was from Clint Carlin, a member of the Enron audit team in Houston.
He said Mr. McCann consulted with Rich McCune, audit-practice director for the Pacific Northwest, and advised Mr. Philpot that the policy "is a document-retention policy, not a document-destruction policy."
Mr. Philpot was the fifth witness to testify for the defense, which began presenting its case Monday in the fourth week of the trial. He was among 62 potential prosecution witness, but prosecutors never called him to testify.
Earlier yesterday, two Andersen accountants in Houston testified that they didn't consider an instruction to comply with the policy as a code to shred documents.
John Boudreaux and Jennifer Stevenson, both accountants on Andersen's Enron audit team, said they heard two partners urge compliance with the policy while informing workers Oct. 23 of an informal SEC inquiry into some of the energy company's transactions.
Their immediate boss, partner Thomas Bauer, mentioned both issues in a morning meeting, they said. Then Mr. Duncan announced the inquiry and instructed his team to comply with the policy at a bigger meeting that afternoon.
Both testified that they didn't link the two issues as a code to destroy documents to keep them out of the hands of the SEC.
Mr. Boudreaux said he spent 90 minutes that day going through files for similar extraneous documents, throwing out old drafts and deleting personal e-mails, like messages pertaining to a fantasy football league.
"I don't recall any sense of urgency," Mr. Boudreaux said.
Andersen's lead attorney, Rusty Hardin, complained to U.S. District Judge Melinda Harmon out of the jury's presence yesterday that prosecutors improperly were asking questions about their own treatment of witnesses during pretrial interviews.
Judge Harmon had sustained previous objections from prosecutors when Mr. Hardin asked similar questions.
Mr. Hardin accused prosecutors of advertising for the jury "how wonderful they are." Prosecutor Andrew Weissmann responded that Mr. Hardin was trying to create the impression "that the government is so bent on getting a conviction," prosecutors will "challenge people until they say what we want."
Judge Harmon issued no rulings on the issue.

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