Andersen Lawyer Alleges Witness Intimidation

A lawyer for Arthur Andersen on Thursday accused federal prosecutors of intimidating potential witnesses who could provide testimony favorable to the accounting giant as it fights an obstruction of justice charge arising from its shredding of Enron Corp. documents.

Rusty Hardin, a former Texas prosecutor now defending the 89-year-old accounting firm, said federal investigators notified a number of potential witnesses that they had been reclassified as “subjects” of the probe.

Hardin said investigators informed lawyers for at least three witnesses that their legal status had changed after they voluntarily submitted to Justice Department interviews.

Hardin said he intended to send a letter to the department Thursday to ask Michael Chertoff, the assistant attorney general overseeing the Enron investigation, to examine the prosecutors’ conduct.

Hardin first took aim at the prosecution team in court, just before one planned witness for the defense, Kate Agnew, an Andersen executive on the team handling Enron’s audit, stepped to the judge’s bench and invoked her right against self-incrimination.

Hardin declined to detail what Agnew might have said on the witness stand, but he said she would have been a “wonderful” witness for Andersen. Hardin said prosecutors intimidated her and brought her to court to scare other potential Andersen witnesses.

Andrew Weissmann, one of three prosecutors representing the government in court, denied that the department intimidated any witnesses.

“It was her decision,” he said of Agnew’s refusal to testify.

Agnew’s attorney could not be reached for comment.

The dispute erupted as prosecutors continued trying to show that senior Andersen executives knew early last year that Enron’s financial condition had become increasingly fragile and later orchestrated a campaign to shred documents possibly relevant to an anticipated Securities and Exchange Commission inquiry.

If convicted of obstruction, Andersen could be prohibited from auditing public companies--a likely death blow to the firm.

Under questioning from prosecutors Thursday, an Andersen accounting specialist testified that he destroyed a substantial portion of his Enron-related e-mail after his boss forwarded him a copy of Andersen’s document retention policy in October.

But Benjamin Neuhausen, a 17-year veteran of Andersen’s Professional Standards Group, said he had no inkling at the time that regulators might demand the records in their investigation of the Enron collapse.

Neuhausen, called to testify by federal prosecutors, told jurors the e-mail he received containing the document policy made no mention of Enron but also said he deleted only the Enron-related e-mail in his files. Prosecutors didn’t ask him why.

“In my mind, I was doing normal cleanup,” Neuhausen testified. “I was not trying to hide the documents” from regulators.

Prosecutors have called Neuhausen and other witnesses in a effort to portray Enron as a corporate behemoth that prodded its auditor to stretch accounting rules in order to bolster its financial statements.

Government lawyers questioned Neuhausen and another Andersen specialist, Carl Bass, to illustrate disputes that erupted within Andersen between technical experts and the partners overseeing the Enron audit.

Neuhausen said David B. Duncan, the lead Andersen partner dealing with Enron, “pushed to excess on aggressive interpretations” of accounting rules.

Bass and Neuhausen said they clashed with partners working on the Enron account about the propriety of Enron’s proposed restructuring of four Enron-financed investment vehicles known as the Raptors, which Enron used to conceal debt.