The Supreme Court agreed yesterday to consider overturning the conviction of the Arthur Andersen accounting firm for destroying Enron-related documents before the energy giant's...
WASHINGTON — The Supreme Court agreed yesterday to consider overturning the conviction of the Arthur Andersen accounting firm for destroying Enron-related documents before the energy giant’s collapse.
Justices will review a 5th U.S. Circuit Court of Appeals ruling that upheld the former Big Five accounting firm’s June 2002 conviction. At issue is whether the jury instructions at trial were too vague and broad for jurors to determine correctly whether Andersen obstructed justice.
“This appeal is enormously significant,” said Stephen Presser, a business and law professor at Northwestern University, who called the government’s prosecution “overkill.” “You had one of the oldest, most venerable accounting firms in the nation, and this indictment destroyed the firm.”
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The high court’s action is a setback for the Bush administration, which made prosecution of white-collar criminals a high priority following accounting scandals at major corporations. Following Enron’s 2001 collapse, the Justice Department went after Andersen first.
Enron crashed in December 2001, putting more than 5,000 employees out of work, just six weeks after the energy company, which almost never had bad financial news before, revealed massive losses and write-downs.
Subsequently, Andersen put in practice a document-retention policy that called for destroying unneeded documentation as the Securities and Exchange Commission (SEC) began looking into Enron’s convoluted finances.
“The evidence showed that, to prevent Enron’s and its own financial misdeeds and aggressive accounting from being uncovered … [Andersen] instructed its employees to undertake an unprecedented campaign of document destruction,” acting Solicitor General Paul Clement argued in his court filing.
At trial, Andersen argued that employees who shredded tons of documents followed the policy and there was no intent to thwart the SEC investigation.
The probe into Andersen led to just one guilty plea, from the firm’s former top Enron auditor, David Duncan. But the conviction of the Chicago firm forced it to surrender its accounting license and stop conducting public audits. Some 28,000 workers had to find other jobs, and the company was left a shell of its former self.