Powering up the shredders

Even given the extensive media coverage, it was difficult to capture the breathless pace of Enron's collapse.

October 23 2001 was a relatively quiet day throughout most of Houston. For Ken Lay, it was the beginning of the end. He spent much of the morning on a conference call with investors and analysts, trying to explain some recent troubles. As the call began, the participants asked what Lay was going to do about the fact that the stock price, which months earlier had fallen from $90 to a plateau of $35, was now falling off a cliff.

Lay admitted that having a chief financial officer run partnerships that did business with Enron was an "inherent conflict of interest". But he defended Enron, saying the company had set up procedures to ensure that shareholder interests were not compromised.

Meanwhile, at the Houston offices of accounting firm Arthur Andersen, October 23 was even more frantic. Enron was Andersen's most important client in Houston, and had paid Andersen $52m in fees in 2000 alone - more than half of which was for consulting, not audit. The ties between the firms were very close, and many Enron employees had spent time working at Andersen.

While Ken Lay was spinning a tangled web during his conference call, employees at Andersen had powered-up the shredders. David Duncan, the lead Andersen partner on Enron's audits, called a meeting to organise an "expedited effort to dispose of Enron-related documents". The document destruction continued until November 9.

Andersen later would attempt to distance itself from Duncan, issuing a statement that the shredding "was undertaken without any consultation with others in the firm".

Duncan must have anticipated that he would be left without friends in upper management, because he took at least six boxes of documents home before Andersen fired him on January 15, 2002. Those boxes contained documents investigators otherwise might not have seen. Prosecutors offered Duncan a deal: if he agreed to testify against Andersen, he could plead guilty to obstruction of justice, and prosecutors would recommend leniency. A Houston jury convicted Andersen of obstructing justice, in part based on Duncan's testimony.

On November 28 credit rating agencies downgraded Enron's debt. Enron's proposed partner Dynergy immediately terminated the merger. On December 2 Enron filed for bankruptcy protection, fired 4,000 employees (and) sued Dynergy for $10bn.

The derivatives profits lingered at Enron even after bankruptcy, when all of its derivatives traders were gone. By July 2002, the bankrupt company was awash with $6bn in cash, according to one source - a reminder that although the company had died, its heart had been healthy throughout.