Posted on 06/25/2002 1:12:28 AM PDT by sarcasm
The Arthur Andersen conviction was more than just bad news for the troubled accounting firm.
Lawyers, too, are alarmed that what they consider routine legal advice a jury saw as a federal crime.
The jury found the firm guilty on the basis of a single memo written by Andersen lawyer Nancy Temple, advising a partner on how to edit an internal memo about Enron's financial disclosures.
The June 15 verdict was so upsetting to lawyers that when news of it reached a legal conference in Austin, all other discussion temporarily ground to a halt, said Pat Allison, a Houston attorney and chair of the Corporate Counsel Section of the State Bar of Texas.
"Attorneys don't know what they can and can't do anymore," Allison said. "People are saying they're afraid to put anything in writing again until they check it exhaustively."
And at a panel discussion Friday at the South Texas College of Law, John Herbert, general counsel for Dynegy Marketing and Trade, called the verdict "extremely troubling, a terrifying development."
"I really have to think long and hard about each suggestion I make on any memo now," he told the audience.
The jurors paid little heed to the many examples of document shredding that prosecutors had focused on in the trial. Instead, they based their decision on the Oct. 16 e-mail from Temple to lead Enron auditor David Duncan.
In it, she told Duncan to make changes to a memo he was writing for the company's records, outlining how he and his team handled a disagreement with Enron over the use of the term "non-recurring" to describe losses in a third quarter 2001 press release.
She said he should remove any reference to consulting with Andersen's in-house legal team, specifically her own name, saying it could be considered a waiver of attorney-client privilege and expose those communications to lawsuits.
Temple also suggested removing language "that might suggest we have concluded the release is misleading." She said she would look into whether the company needed to protect itself from a Securities and Exchange Commission rule requiring accounting firms to report wrongdoing by their clients.
Jurors said they saw Temple's directions to Duncan to remove her name and information that indicated the company thought Enron's release was "misleading" as a clear obstruction of justice.
"We wanted to find Andersen not guilty and find that they stood up to Enron," juror Jack Gallo said. "But it's clear she knew investigators were coming and was telling them to alter the evidence. We didn't think that had attorney-client privilege."
Temple's lawyer, Mark Hansen, said his client was giving bona fide legal advice.
"She suggested that he not put in conclusionary language that didn't support the firm's position on Enron, which is valid," Hansen said. "He was writing the memo at her suggestion, so as far as we're concerned it's just another example of Ms. Temple trying to do the right thing."
Others were less certain.
"It looks like legal advice to me, but slightly suspicious legal advice," said David A. Skeel, a University of Pennsylvania law school professor. "It's clear Andersen was skating close to the line in this, but it's a toss-up as to whether she really is advocating breaking the law."
For Lawrence Mitchell, a law professor at George Washington University and author of Corporate Irresponsibility, America's Newest Export, the e-mail is more damning.
He points to where Temple tells Duncan to take out any mention that Enron's press release might be misleading.
"It's damning inasmuch as she knows the legal standard for financial reports is they not be misleading," Mitchell said. "So the very fact she has them delete the information seems to be an attempt to conceal information the SEC would investigate."
Stanford University law professor Robert Weisberg agrees, saying that while some of the advice may appear to fall under the protection of attorney-client privilege, the e-mail treads very close to the line.
"If the legal department at Andersen was aware of some ongoing skullduggery with their client, then they have to report it," Weisberg said.
The e-mail, however, did not need to be seen as a specific example of obstruction of justice for the jury to believe Temple was acting with criminal intent, said Neil McCabe, a professor at the South Texas College of Law in Houston.
"They could also use it to convince themselves she was acting with corrupt motive, that she knew there was something to hide," McCabe said.
Even though the charge of obstruction of justice specifically exempts normal legal advice given to a client, the e-mail could also be used as an indicator of another crime, said John Coffee, a securities law professor at Columbia University.
"It could be used to produce a possible charge of failing to pursue Section 10A," Coffee said, referring to SEC rules about auditors reporting wrongdoing by their clients. "If it were proven there was a sense of wrongdoing at Enron that they were aware of, this memo might be seen as a failure to follow their responsibilities."
Andersen attorneys are likely to cite the jury's interpretation of the e-mail when they ask U.S. District Judge Melinda Harmon to overturn the verdict. That argument is unlikely to prevail, even before the 5th U.S. Circuit Court of Appeals, says Robert Mintz, a New Jersey lawyer and former federal prosecutor.
"The appeals courts will look to see if the government provided ample proof for a jury to reach that verdict," Mintz said. "But they are reluctant to delve into a jury's deliberative process."
Isn't that what they are supposed to do and what they are getting paid for? Maybe they will have to start working for a liiving now.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.