Sparring by both sides in first week of fireworks-studded Andersen trial

Saturday, May 11th 2002, 12:00 am

By: News On 6

HOUSTON (AP) _ The first week of Arthur Andersen LLP's obstruction of justice trial featured verbal warfare, witnesses invoking the Fifth Amendment and the lyrics of an Andersen partner's Enron-inspired parody based on the Eagles' anthem ``Hotel California.''

The jurors hearing evidence on whether the firm intentionally shredded Enron documents to keep them out of the hands of the Securities and Exchange Commission also had heavy eyelids at esoteric testimony on the complicated accounting that fueled Enron's failure.

In the first criminal trial to emerge from the Enron scandal, prosecutors spent the first several days questioning SEC investigators about the agency's role in protecting investors and presenting evidence of Enron's influence over Andersen.

``What does this have to do with shredding documents?'' Andersen's lawyer, Rusty Hardin, asked several times, soliciting exasperated responses from prosecutors.

Hardin had told jurors in his opening statement that the case reminded him of the game ``Where's Waldo?'' and continued that theme throughout the week, asking most witnesses ``Are you Waldo?''

After pleas from prosecutor Andrew Weissmann, U.S. District Judge Melinda Harmon told Hardin to cut it out.

The jury missed two instances of open warfare between Hardin and prosecutors over a reluctant witness and Hardin's method of questioning.

Weissmann told the judge that Kate Agnew, a former Andersen manager on the Enron account, intended to invoke her Fifth Amendment right against self-incrimination.

Hardin said prosecutors only wanted to parade Agnew in court to show other witnesses that ``they had better think long and hard about testifying'' on the firm's behalf.

``You've given your opinion,'' the judge told Hardin before telling the prosecutor to call his witness.

Agnew entered the courtroom, invoked the Fifth and left.

Nancy Temple, an in-house Andersen lawyer at the firm's Chicago headquarters, invoked the Fifth by mail. Temple sent an e-mail on Oct. 12 to Andersen's Houston office reminding partners of the firm's document retention and destruction policy. She told Congress in January that she ``never counseled any shredding or destruction of documents,'' but has remained silent since.

On Friday, Hardin repeatedly questioned Andersen partner Carl Bass about whether he thought an Oct. 10 presentation of the policy at a company meeting was intended to prompt workers to start shredding Enron documents.

Between objections, Bass said no.

Prosecutor Sam Buell complained outside the jury's presence that Hardin was using his questions to inject Andersen's defense that the shredding was routine, ``forcing us to constantly pop up in front of the jury to object. We've got enough work proving our case.''

Hardin called the prosecutors ``whiners'' and ``jumping beans.''

Hardin lost a vehement fight to prevent the jury from seeing lyrics of a scathing song about Enron written by an Andersen partner in 1995 to the tune of ``Hotel California.''

James Hecker, an auditor with Andersen's energy group, testified that he wrote the parody because of his envy at the attention and resources Andersen devoted to Enron.

Lyrics for his composition _ ``Hotel Kenneth Lay-A,'' for former Enron chairman Kenneth Lay _ included:

``They're livin' it up at the Hotel Cram It Down Ya

``When the suits arrive,

``Bring your alibis.''

Hecker insisted it wasn't meant to accurately reflect Enron's influence or ability to bully auditors into approving shady accounting.

``The document was about the arrogance of the Enron culture more than Enron specifics,'' he said.

The most anticipated event in the trial _ the inside view of the shredding from fired Andersen partner David B. Duncan, who pleaded guilty to directing it _ is likely to come next week.