Evidence grows of Enron cover-up

The inquiry into the Enron collapse, the biggest bankruptcy in US history, focused yesterday on the energy trading firm's auditors, Arthur Andersen, and an October 12 memo ordering the destruction of potentially incriminating documents.

As evidence surfaced of a concerted cover-up of Enron's problems in the months leading up to the bankruptcy on December 2, it also emerged that the Texan company, once worth over $80bn (£55bn), had more intensive contacts with the Bush administration than the White House had previously admitted.

Enron executives were in contact with administration officials 14 times last year, mostly to ask for help, it was reported yesterday. The commerce secretary, Don Evans, said the company's chief executive, Kenneth Lay, called him five times.

"He was looking for all the possible ways he could stabilise his company," Mr Evans said, but he insisted that he did nothing to help the struggling corporation, which was the biggest sponsor of George Bush's career.

Other administration officials contacted by Enron last autumn as the scale of its losses emerged included the treasury secretary, Paul O'Neill, his deputy, Peter Fisher, and the energy secretary, Spencer Abraham. All deny intervening on the company's behalf.

As at least two criminal inquiries and six congressional committee hearings began to delve into Enron's complex business dealings, increasing attention is being paid to the role of Arthur Andersen, one of the world's biggest accounting firms.

According to congressional investigators quoted in the US press, an internal memorandum on October 12 from one of the firm's lawyers ordered Arthur Andersen workers to destroy documents from Enron files.

Time magazine reported that supervisors at Arthur Andersen sent repeated reminders to their auditors about the memo in the weeks leading up to the issue of subpoenas by the federal regulatory agency, the security and exchange commission.

It is thought thousands of emails and files, paper and electronic, were destroyed which could have proved significant in the investigation of Enron's dealings. Destruction of the documents may also have continued after the issue of the subpoenas, in which case those involved could face criminal charges.

The accounting firm yesterday conceded that "a significant but undetermined number" of documents had been destroyed, but it did not confirm the October 12 memo, arguing it would be "inappropriate" to discuss it before the firm had completed its own internal enquiry.

Arthur Andersen only revealed that it had destroyed the documents early last week, just before the arrival of four congressional investigators at the company's Houston offices.

Senator Joseph Lieberman, the Democrats' vice presidential candidate in 2000, who also received some Enron financial backing for his campaign, expressed concern over Arthur Andersen's actions, saying that by October 12, executives at Andersen and at Enron "knew that Enron was in real trouble and the roof was about to collapse on them".

Enron, which traded oil and gas supplies and other commodities, disguised its growing losses in shell companies it set up as partnerships, boosting Enron's apparent profits and its share price. Between 1999 and 2001, 29 of the company's top executives sold off $1.1bn in Enron shares. At the same time, the pensions funds of its rank-and-file employees, over 60% of which were made up of Enron stock, eroded to near worthlessness.

At the weekend, John Dingell, the senior Democrat on the House of Representatives commerce committee, one of the six congressional panels mounting investigations, said: "There's pretty strong evidence of insider trading, there's clear evidence of failure to file honest and correct reports."