Associated Press William Lerach, an attorney representing shareholders suing 29 current and former Enron Corp. executives and directors, carries a box of shredded documents into federal court in Houston yesterday. He claims employees of the fallen energy trading giant were destroying records through at least mid-January. He was prepared to ask the judge to ban any shredding by Enron or its former auditor, Arthur Andersen.

WASHINGTON - FBI agents and federal prosecutors showed up at Enron's Houston headquarters yesterday to investigate allegations that financial documents were shredded in the face of a federal probe, the company said.

As soon as the shredding allegations were made Monday night by an employee and lawyers suing Enron, the bankrupt energy company immediately preserved "the integrity of the site," said Enron Corp. spokesman Mark Palmer.

A federal judge in Houston encouraged all parties to work out a plan to ensure more documents are not destroyed.

The hearing by U.S. District Judge Melinda Harmon dealt mostly with the earlier disclosure that Enron-related papers were destroyed by the Houston office of the accounting firm Arthur Andersen.

Another hearing was set for today.

Meantime, authorities went to Enron's Houston headquarters - at Enron's request, Palmer said.

"We can confirm the Department of Justice and FBI personnel are on site conducting an investigation of the allegation raised," Palmer said.

The lawyers representing aggrieved investors said documents were openly destroyed at the headquarters after federal officials opened an investigation into the company's troubles. The lawyers welcomed the arrival of authorities.

"I'd be surprised if there's any more shredding after that," said attorney William Lerach. He said he was satisfied "the FBI can watch over them."

Earlier on NBC, Lerach alleged Enron had been "caught destroying the evidence" and added, "I'd say they've got trouble on their hands."

Robert Bennett, a Washington lawyer representing Enron, said the company told employees after coming under investigation that they were not to destroy relevant documents. He said the company is looking into charges papers were destroyed despite that directive.

Bennett contacted the Justice Department, which is pursuing a criminal investigation of Enron, yesterday morning, Palmer said. "We proactively offered our full cooperation in any investigation."

Enron's slide into the biggest bankruptcy in U.S. history on Dec. 2 left thousands of employees out of work and stripped of their retirement savings after Enron barred them from selling company stock from their Enron-heavy 401(k) accounts.

President Bush disclosed that his mother-in-law, Jenna Welch, had invested in the company.

"What I'm outraged about is that employees didn't know all the facts about Enron," said Bush, who was a friend of Enron Chairman Kenneth Lay. "My own mother-in-law bought stock last summer and it's not worth anything now."

Bush did not say how much stock she bought but said "she did not know all the facts" about Enron's financial situation.

Lerach told The Associated Press the shredding was "open and notorious and widespread," consuming "hundreds of thousands of documents" and taking place even on Christmas Day.

Former Enron executive Maureen Castaneda said on morning talk shows that the shredding began after Thanksgiving on the 19th floor accounting office of the company's Houston headquarters and continued at least until the middle of this month.

The reported shredding follows revelations over the past two weeks about document destruction at Arthur Andersen LLP, Enron's auditor.

Another attorney in the lawsuit, G. Paul Howes, said in court papers that some of the papers destroyed at Enron headquarters were marked Jedi II and Chewco - partnerships through which the energy giant concealed hundreds of millions of dollars in debts.

The partnerships, described by lawmakers as slick financial gimmicks, helped drive the company into the largest bankruptcy in U.S. history.

The Securities and Exchange Commission began looking into Enron's accounting practices in mid-October, after the company reported more than $600 million in third-quarter losses, and a congressional committee began asking for documents in mid-December. The SEC opened a formal investigation at the end of October, including demands for financial documents from Enron and Andersen.

Enron said in a statement late Monday that it had sent four e-mails from Oct. 25 to Jan. 14 warning employees against destroying documents, specifically those related to Enron's complex web of partnerships.

"We are investigating the circumstances of the reported destruction of documents," Bennett said.

Bennett said anyone who violated directives against destroying documents "will be dealt with appropriately."

Castaneda, who was laid off last week, said she did not know who ordered employees to do the shredding. "I think they were just doing what they were told," she said.

She said she brought shredded paper home to use as packing material.

The Justice Department announced on Jan. 9 that it was pursuing a criminal investigation of Enron.

Andersen last week fired its lead Enron auditor for destroying Enron-related documents. The auditor, David Duncan, has told congressional investigators he was just following the advice of Andersen's legal department when he directed the shredding