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. Last Updated: 07/27/2016

Former Exec: Enron Shredded Documents

HOUSTON -- Enron Corp. shredded documents after the company came under a U.S. federal investigation, attorneys for shareholders said Monday, and the energy company said it would review the allegations.

The claim that shredding took place in Enron's accounting offices were made Monday night by a former Enron executive who was laid off from the company this month.

The executive, Maureen Castaneda, collected some of the shredded documents and will be a witness for plaintiffs suing over stock losses in the Enron collapse, said attorney William Lerach, who represents a group of shareholders.

"Evidentiary destruction on this scale is unprecedented," Lerach said. "Not just one document was destroyed, but it looks like hundreds of thousands were destroyed."

Lerach said he intended to raise the issue at a federal court hearing here Tuesday.

Castaneda, a director in Enron's foreign investments section, said in an interview with ABC News that she witnessed the shredding of documents, which began around Thanksgiving and continued at least until she left the company in the second week of January.

Enron's accounting firm, Andersen, previously acknowledged that thousands of documents related to Enron were shredded by its Houston office. But Castaneda is the first to publicly claim that Enron itself destroyed relevant papers.

According to Paul Howes, an attorney working with Lerach, some of the shredded documents included references to controversial partnerships such as Jedi II and Chewco. Losses by such off-the-book partnerships played a key role in triggering Enron's collapse.

"We are investigating the circumstances of the reported destruction of documents," Robert Bennett, a Washington attorney who is representing Enron, said in a statement issued Monday.

Bennett said Enron had issued "several directives" in October 2001 to all employees instructing that "all relevant documents should be preserved in light of pending litigation."

"If anyone violated those directives," Bennett said, "they will be dealt with appropriately."

Ken Johnson, a spokesman for the House of Representatives Energy and Commerce Committee, said congressional investigators will look into the allegations.

"This whole sorry affair keeps getting uglier by the minute," he said. "It's one thing to make bad business decisions. It's something else entirely to try to cover up bad business decisions."

Howes said fired Enron employees were told to gather their work papers in boxes and turn them over to company officials, who went through them and ended up shredding numerous documents.

He said the shredding began with the layoffs triggered by Enron's Dec. 2 declaration of bankruptcy and accelerated during the Christmas and New Year's holidays. He said the shredded documents were dated from at least 1994 through Dec. 20, 2001.

"It is the smoking gun, absolutely a smoking gun, in the face of three directives not to do it, personnel were directed to do it," he said. "There were mounds of this stuff. The shredding increased in the last several weeks."

Enron spokesman Mark Palmer said the company does not "have any knowledge of the material that the plaintiffs' attorneys are parading in front of the media."

But he stressed that if the allegations prove true, the people responsible would be fired.

The company sent four e-mails to employees on Oct. 25, Oct. 26, Oct. 31 and Jan. 14 instructing them to retain all documents dealing with "related-party transactions, SEC requests or any Enron transactions or accounting for those transactions," he said.

Phil Schiliro, chief of staff to Representative Henry Waxman, Democrat-California, a senior Democrat on the House Energy and Commerce Committee, said that if documents were destroyed, it "raises the real possibility of obstruction of justice. We need to know if Enron is destroying documents, and if they are, learn what Enron is trying to hide."