High Court Overturns Andersen Conviction | AccountingWEB

High Court Overturns Andersen Conviction

Calling jury instructions too vague, the U.S. Supreme Court unanimously overturned the 2002 obstruction of justice conviction of the once-mighty Arthur Andersen LLP.

The accounting firm, which shredded documents connected to the fallen Enron Corp., was convicted after jurors were told that Andersen could be found guilty even if they determined that the accounting firm "honestly and sincerely believed that its conduct was lawful,” the New York Times reported. The justices, however, said the jury instructions were “striking for how little culpability” was required to convict Andersen.

Prosecutors had argued that Enron's auditor shredded documents to hinder an investigation about to start by the Securities and Exchange Commission. The indictment said that Andersen "did knowingly, intentionally and corruptly persuade" its employees to keep documents from investigators.

The court ruled that the jury instructions did not properly outline what constitutes a conviction for corrupt persuasion. The ruling cited an early Supreme Court decision that "a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed,” the Times reported.

Shredding documents is routine, as is legal advice that a person or company resist turning over documents, the justices said, saying that such resistance "is not inherently malign."

The Tuesday ruling was closely watched by business leaders concerned about document-retention policies and attorneys who questioned whether they could advise clients to destroy documents.

The Washington Legal Foundation filed a brief on behalf of itself and the United States Chamber of Commerce. Paul Kamenar, senior executive counsel of the legal foundation, said, "If the court had upheld the conviction, it would basically put in jeopardy all the document-retention policies that businesses have around the country.”

An Andersen spokesman said the ruling acknowledged a "fundamental injustice," Reuters reported.

"We pursued an appeal of this case not because we believed Arthur Andersen could be restored to its previous position, but because we had an obligation to set the record straight and clear the good name of the 28,000 innocent people who lost their jobs at the time of the indictment," said spokesman Patrick Dorton.

The Justice Department will now decide whether to retry the company.

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