Enron Corp. - University of California | Office of The President

connection with an SEC investigation into a massive accounting scandal at Waste Management, the
commission found that Andersen's internal documents revealed that Andersen not only knew of the
accounting fraud, but was deeply involved in its coverup.
964. What happened with the Enron client documents is a classic example of Andersen's
"scorched earth" document destruction directive in action. During the Summer and Fall of 01, a
series of serious developments led Andersen to believe that civil litigation and government
investigation was imminent against Enron and, as a consequence, Andersen's deep involvement
would undoubtedly implicate it in any litigation or investigation. In 8/01, Enron Vice President
Sherron Watkins detailed specific examples of Enron's long-running fraudulent financial reporting
to Andersen. By mid-9/01, Andersen's top audit specialists in the Chicago office, including Stewart,
began to review their old e-mail and Enron memos, and in doing so, concluded that many
memoranda that Andersen partners had written approving certain Enron accounting decisions were
obviously improper and terribly wrong. Just as in the Waste Management debacle, Andersen's own
memoranda and e-mail from the Houston and Chicago offices documented that Andersen's Chicago
office had approved the improper accounting at the client and once again evidenced the national
office's complicity. Immediately, Chicago office partners, including audit partners and in-house
lawyers and "risk-management experts," began debating in almost daily conference calls with
Houston partners about how to alter the original memos or create new memos to mitigate the
potential damage. They were joined by Nancy Temple, an in-house lawyer at the firm, who
reminded everyone about Andersen's policy on destroying "unnecessary" records. The e-mail sent
by Temple reminding personnel to comply with firm policy on document retention was an
occurrence used by Andersen almost exclusively when litigation was envisioned. Such "reminders"
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