Partner says Duncan stretched rules to excess

David Duncan, the former Arthur Andersen partner who ran the Enron account, was yesterday described as someone who stretched accounting rules "to excess".

As the criminal trial, in which Andersen is charged with obstruction of justice, moved toward the end of its first week in Houston, federal prosecutors continued to portray a firm that had repeatedly bent the rules.

Andersen is charged with destroying "literally tons" of Enron documents to keep them from the hands of federal investigators. Mr Duncan pleaded guilty to the charge last month and his testimony will be pivotal to the outcome of the case.

Ben Neuhausen, an Andersen partner for the past 17 years, told the court of clashes between the accounting firm's Chicago head office and the team that worked on Enron in Houston. He said Enron was "very aggressive. They were always probing the limits of any given transaction or issue".

Mr Duncan, he said, also "pushed for aggressive interpretations of accounting standards". Prosecutors believe they only need to prove that one member of staff broke the law to convict the entire firm. The aim appears to be to build motive for the document destruction. Mr Neuhausen said Mr Duncan had lobbied to allow Enron to account for its four Raptor entities together, allowing the profits of two to cover the losses of the other two.

Carl Bass, a member of the Andersen standards group, said the Raptors were separate entities and needed to be treated as such - something that would have led to Enron recording a loss. They ignored the advice and had Mr Bass removed from the account. It was only later when the Chicago Andersen offices realised what had happened that Enron had to restate its earnings.

Mr Neuhausen also said Mr Duncan had broken with an approach agreed by Andersen on the treatment of the $1bn charge disclosed by Enron last year. The standards group said the sum should not be referred to as "non-recurring" but the phrase did appear.