Court of Appeals Upholds Arthur Andersen's Conviction in Enron Case

A federal appellate court has upheld a jury’s conviction of Arthur Andersen LLP for obstructing a Securities and Exchange Commission investigation of its client Enron.

The former Big Five accounting firm was convicted June 15, 2002, and the 5th U.S. Circuit Court of Appeals, in a 38-page opinion released Wednesday, agreed with the jury, the Houston Chronicle reported.

"The conviction of Arthur Andersen was an important milestone in promoting responsible corporate behavior and respect for the law," said Andrew Weissmann, head of the Justice Department's Enron Task Force and lead prosecutor in the Andersen case.

In late 2001, as the SEC launched an expected investigation into Enron’s accounting practices, Andersen began a program of mass shredding of Enron documents, citing a little-known policy to destroy documents that were not needed.

Andersen had argued during the trial that employees followed the policy and that the firm was not trying to hinder the investigation.

Some jurors told the Houston Chronicle at the time of the verdict that their decision was based not on the shredding, but on an e-mail from a firm lawyer advising a partner to change an internal memo about Enron’s financial disclosures.

Judge Patrick E. Higginbotham discussed the impact of the decision. "Today we decide one of the many cases arising from the rubble of Enron Corporation, which fell from its lofty corporate perch in 2001 wreaking financial ruin upon thousands of investors, creditors, and employees," he wrote. "Like a falling giant redwood, it took down with it many members of its supporting cast. Our present focus is upon one of those, Arthur Andersen, LLP, then one of the largest accounting and consulting firms in the world."

Andersen spokesman Patrick Dorton said Wednesday in a prepared statement that the nearly defunct company was disappointed by the ruling, but "given the constraints of the appellate process, we are not surprised by this decision."

"We continue to believe strongly that the criminal prosecution of a firm of 28,000 people was unjustified and the ensuing collapse of Arthur Andersen was an undeserved tragedy for its employees, clients and the business community at large," Dorton said.

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