Andersen Conviction Botched
WASHINGTON -- The Supreme Court on Tuesday overturned the conviction of the Arthur Andersen accounting firm for destroying Enron Corp.-related documents before the energy giant's collapse.
In a unanimous opinion, justices said the former Big Five accounting firm's June 2002 obstruction-of-justice conviction _ which virtually destroyed Andersen _ was improper. The decision said jury instructions at trial were too vague and broad for jurors to determine correctly whether Andersen obstructed justice.
"The jury instructions here were flawed in important respects," Chief Justice William H. Rehnquist wrote for the court.
The ruling is a setback for the Bush administration, which made prosecution of white-collar criminals a high priority following accounting scandals at major corporations. After 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 revealed massive losses and writedowns.
Subsequently, as the Securities and Exchange Commission began looking into Enron's convoluted finances, Andersen put in practice a policy calling for destroying unneeded documentation.
Government attorneys argued that Andersen should be held responsible for instructing its employees to "undertake an unprecedented campaign of document destruction."
But in his opinion, Rehnquist noted that jurors were instructed to convict Andersen if the accounting firm had an "improper purpose," such as an intent to impede or subvert fact-finding in an "official proceeding." He noted jurors were instructed to convict, even if Andersen mistakenly thought it was acting legally.
Arthur Andersen is, of course, still guilty as sin, but the ruling is the correct one. The precedent set by the original conviction could possibly have put a terrible burden on any business which destroys business records. It could have made these businesses liable for civil lawsuits and/or criminal charges should they destroy records during the normal course of business which could have been used later as part of an investigation, etc.
The Justice Department is going to have to convict Arthur Andersen again (deservedly so) and it will cost the taxpayers another couple of million dollars. Too bad they couldn't have done it right the first time.
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