Defense attorneys who specialize in white collar crime say the Department of Justice (DOJ) chose an unusual approach in indicting Arthur Andersen (AA) without specifying any individual wrongdoing. According to the Wall Street Journal ("Unorthodox Approach to Andersen Leaves Justice With Much to Prove," March 18, 2002), DOJ's prosecutors cannot win the case unless they can prove that:
- Andersen persuaded employees to destroy paperwork related to its audits of Enron before the energy company's collapse into bankruptcy proceedings in December.
- Whoever gave those orders intended to impair "an official proceeding."
- There were criminal actions by individuals highly enough placed to implicate the entire firm.
Andersen's legal analysis indicates DOJ may well find itself on a slippery slope trying to prove these points.
A broken window isn’t vandalism
In effect, Andersen's legal analysis says that admitting to the physical shredding of documents doesn't necessarily make the firm guilty of a crime. It's not unlike admitting the kids were playing ball and broke a window. That doesn't make the family, or even the kid, guilty of vandalism. Highlights from the analysis:
- The documents referred to in the indictment as being part of a "wholesale destruction" effort were actually destroyed before Andersen received a subpoena at a time when Andersen personnel could reasonably have thought that disposing of routine documents was proper.
- The shredding and related activity occurred in broad daylight, without any effort to conceal the conduct. Consistent with usual practice, an administrative staff person reviewed the trunks and boxes before they were shredded to ensure that no workpaper files were destroyed.
- An enormous volume of deleted materials was recovered and is in the government's hands. So far as can be determined, the paper and e-mails destroyed during the week of October 22 were of the type that ordinarily would be discarded at the end of an audit when the workpaper files are completed.
- In late September and early October 2001, some members of Andersen's Professional Standards Group (PSG) in Chicago participated in discussions of Enron accounting matters with Andersen attorney Nancy Temple. In these discussions, Ms. Temple reminded the PSG accountants that, under the Andersen document retention policy, superseded drafts of memos should be discarded. There is absolutely nothing criminal or even suspicious in this.
- The shredding and deletions that occurred are not criminal acts. The offense alleged by DOJ is obstruction of justice under 18 U.S.C. § 1512(b), which makes it a crime for anyone to "corruptly persuade" another person to destroy documents "with intent to impair" the use of documents "in an official proceeding." These elements are not present in AA's case.
Making matters worse, some question whether the indictment will help the injured (investors) recover their losses. In the case of the broken window, the usual remedy is for the parents to offer to pay the losses. But the indictment makes this kind of settlement less rather than more likely, leaving many to wonder if justice will prevail after all.