The Arthur Andersen auditor who oversaw Enron's books has pleaded guilty to ordering the shredding of the collapsed US energy giant's documents and agreed to co-operate with prosecutors in a deal that could break the scandal wide open.
Former partner David Duncan admitted obstruction of justice, in trying to thwart an Enron investigation by the Securities and Exchange Commission.
He is believed to be the first person in the Enron case to strike a deal with federal prosecutors.
"Documents were in fact destroyed so that they would not be available to the SEC," he told US District Judge Melinda Harmon, reading from a statement.
The charge carries up to 10 years in prison and hundreds of thousands of dollars in fines. Lawyers did not release details of any agreement on the sentence. Duncan remains free until his sentencing on August 26.
He had no comment as he left the courthouse in Houston, Texas, yesterday. His lawyer, Sam Seymour, said: "He's continuing his co-operation, as we've said all along."
Rusty Hardin, who represents Andersen, said Duncan had denied any criminal wrongdoing until yesterday and the firm was surprised and disappointed at his statement in court.
"Arthur Andersen made the decision to terminate Mr Duncan last January based on his exercise of extremely bad judgment in this matter. We stand by that decision," Hardin said.
Duncan was sacked by Andersen after the accounting firm acknowledged the large-scale destruction of documents and deletion of computer files related to the collapse of the energy giant, whose bankruptcy cost thousands of employees their jobs and, in many cases, their life savings.
Duncan could prove crucial in enabling prosecutors to build a case against Enron. As the senior auditor in charge of the Enron account, he would presumably have knowledge of the complex web of partnerships used by the company to keep millions of dollars in debt off its books.
Under the plea bargain, Duncan is immune to any further prosecution related to the Enron case as long as he fully co-operates with federal authorities - which could include testimony at future trials - and agrees not to sell his story or otherwise profit from the debacle.
In court, Duncan described how he ordered Andersen employees on October 21 last year to destroy certain documents two days after he learned that the SEC was investigating Enron.
"I also personally destroyed such documents," Duncan told the judge. "I accept that my conduct violated federal law."
Prosecutors said the shredding occurred between October 23 and November 9. The SEC notified Andersen on November 8 that it would subpoena documents related the firm's work on Enron.
A grand jury indicted Andersen on March 7 on a charge of obstructing justice, accusing the firm of destroying "tons of paper" at offices worldwide and deleting enormous numbers of computer files on its Enron audits. At times, the government said, the destruction was so frenetic that employees worked overtime and shredding machines could not keep up.
Andersen, which denies the charge and faces trial on May 6.
AP