Andersen convicted of obstructing justice
Posted on 06/15/2002 9:56:31 AM PDT by MeekOneGOP
Andersen convicted of obstructing justice
06/15/2002
HOUSTON - Arthur Andersen was convicted Saturday of obstructing justice by shredding Enron-related documents in a verdict that could be the death knell for the shattered accounting firm and one that boosts prosecutors' efforts to get to the bottom of the Enron scandal.
The jury took 72 hours over 10 days to decide that the destruction of paper and computer files was not routine housekeeping, as Andersen contended, but an attempt to thwart federal regulators investigating Enron.
Andersen faces up to five years of probation and a fine of up to $500,000.
It also could be fined up to twice any gains or damages the court determines were caused by the firm's action and barred from auditing publicly traded companies likely putting the crippled firm out of business.
The verdict did not come easy; the jury said Wednesday that they were deadlocked and were ordered back to work. On Friday, the judge gave jurors greater flexibility to reach a guilty verdict by ruling they didn't have to agree on who committed a crime as long as they all believed someone at the firm "acted knowingly and with corrupt intent."
U.S. District Judge Melinda Harmon will determine the firm's sentence. There was no immediate word from the defense team.
Andersen had lost hundreds of clients and partners even before the felony conviction in the first criminal trial to emerge from the Enron scandal. The firm and its employees are likely to face more prosecutions.
The verdict is also a potential boon for prosecutors trying to unravel the Enron debacle. They have argued that Andersen had intimate knowledge of the complex off-the-book partnerships Enron used to boost its image of financial health before its collapse into bankruptcy last December.
The energy trader is under a grand jury investigation, as well as scrutiny from Wall Street regulators and Congress.
Prosecutors spent a month presenting testimony from employees, federal regulators and FBI agents. They also showed jurors mounds of documents, e-mails and handwritten notes they said proved Andersen had covered up a scandal.
Their key argument was that Andersen just before regulators began investigating Enron suddenly promoted a little-used document policy as a signal to its Enron audit team to begin destroying files.
The star prosecution witness was David Duncan, the former Andersen partner who was in charge of the Enron audit team.
He pleaded guilty to obstructing justice in April and spent nearly a week on the witness stand, telling jurors that he had signed an agreement with Andersen to present a united front that neither did anything wrong.
He said he reneged on the agreement after a lot of "soul searching."
"I obstructed justice," he testified. "I instructed people on the (Enron audit) team to follow the document retention policy, which I knew would result in the destruction of documents."
The jury was also shown an Oct. 10 video of Andersen partner Michael Odom telling colleagues including a dozen on the Enron audit team that the document policy should be followed. He said anything destroyed before litigation is filed was "great" because "whatever might have been of interest to anybody is gone and irretrievable."
Nancy Temple, an in-house Andersen lawyer, also sent an e-mail to Odom on Oct. 12 that said it "might be useful to consider" reminding the Enron audit team "of our documentation and retention policy. It will be helpful to make sure that we have complied with the policy."
Five days later, the Securities and Exchange Commission told Enron it was under an informal inquiry after the company announced a $618 million third-quarter loss and a $1.2 billion writedown in its own value.
Duncan testified that he told his staff during an Oct. 23 "pep talk" to comply with the document policy, but said he didn't explicitly order any shredding.
Other evidence included an Oct. 24 e-mail from Shannon Adlong, an assistant to Duncan, who wrote: "AARRGGH. Send more shredding bags. Just kidding, we ordered some."
The shredding continued through Nov. 9, when the audit team learned that the SEC had sent a subpoena for Enron documents to the firm the day before.
Andersen argued that workers simply were weeding out unneeded documents.
Defense lawyer Rusty Hardin said a number of important documents survived the shredding, suggesting there was no conspiracy to cover up Andersen's work on Enron's books. He got Duncan to testify that he preserved several potentially embarrassing records, including one labeled "Smoking guns you can't extinguish."
The memo detailed Enron vice president Sherron Watkins' fears about d rumors of secret side deals and the accounting of so-called Raptor entities, which were backed by Enron stock but reported as separate from the company in financial statements. The Raptors enabled Enron to keep hundreds of millions of dollars in debt off its books.
Hardin also noted that Duncan didn't decide he had committed a crime until after several meetings with prosecutors.
Andersen was indicted for obstruction of justice in March after talks to settle allegations of wrongdoing broke down. The firm has lost more than 650 of its 2,300 public clients.
Duncan could get up to 10 years in prison at sentencing Aug. 26, though prosecutors are expected to seek a lesser sentence.
looks like maybe their defense should've been "let's move on." It worked before.
Did you KILL the bird? I will be ruthless until I discover if the bird is still alive. Don't make me call PETA....
(somewhat) LOL
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