Former partner David B. Duncan pleaded guilty Tuesday to obstruction of justice, admitting he tried to thwart an Enron investigation by the Securities and Exchange Commission.
He is believed to be the first person in the Enron case to strike a deal with federal prosecutors.
"Documents were in fact destroyed so that they would not be available to the SEC," he told U.S. District Judge Melinda Harmon, reading from a statement.
The charge carries up to 10 years in prison and hundreds of thousands of dollars in fines. Attorneys did not release details of any agreement on the sentence. Duncan remains free until his sentencing on Aug. 26.
He had no comment as he left the courthouse. His attorney, Sam Seymour, said: "He's continuing his cooperation, as we've said all along."
Attorney Rusty Hardin, who represents Andersen, said Duncan had denied any criminal wrongdoing until Tuesday and the firm was surprised and disappointed at his statement in court.
"Arthur Andersen made the decision to terminate Mr. Duncan last January based on his exercise of extremely bad judgment in this matter. We stand by that decision," Hardin said.
the obstruction of justice charges against Duncan.
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the Notice of Related Cases against Duncan.
Duncan was fired by Andersen after the accounting firm acknowledged the large-scale destruction of documents and deletion of computer files related to the collapse of the energy giant, whose bankruptcy cost thousands of employees their jobs and, in many cases, their life savings.
Duncan could prove crucial in enabling prosecutors to build a case against Enron. As the senior auditor in charge of the Enron account, he would presumably have knowledge of the complex web of partnerships used by the company to keep millions of dollars in debt off its books.
Under the plea bargain, Duncan is immune to any further prosecution related to the Enron case as long as he fully cooperates with federal authorities — which could include testimony at future trials — and agrees not to sell his story or otherwise profit from the debacle.
In court, Duncan described how he ordered Andersen employees on Oct. 21 to destroy certain documents two days after he learned that the SEC was investigating Enron.
"I also personally destroyed such documents," Duncan told the judge. "I accept that my conduct violated federal law."
Prosecutors said the shredding occurred between Oct. 23 and Nov. 9. The SEC notified Andersen on Nov. 8 that it would subpoena documents related the firm's work on Enron.
A grand jury indicted Andersen on March 7 on a charge of obstructing justice, accusing the firm of destroying "tons of paper" at offices worldwide and deleting enormous numbers of computer files on its Enron audits. At times, the government said, the destruction was so frenetic that employees worked overtime and shredding machines could not keep up.
The indictment was unsealed March 14. Andersen has pleaded innocent, and a trial is set for May 6. In the meantime, Andersen is struggling to save itself as large numbers of its clients are dropping the firm. Walgreen Co., International Paper Co. and Oracle Corp. were among 11 public companies to dump Andersen on Tuesday.
Robert Mintz, a former federal prosecutor and an expert on white-collar crime, said Duncan's plea significantly weakens Andersen's hand in trying to work out a settlement of the criminal case.
"His defection represents the first thread in the unraveling of the defense," Mintz said. "Andersen's best defense was the presentation of a unified front, categorically denying any intentional wrongdoing by any employees."