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.

You may like these other stories...

Treasury prepares options to address tax inversionsDamian Paletta of the Wall Street Journal reported on Monday that US Treasury Department officials are assembling a list of administrative options for Treasury Secretary...
Deloitte CEO Joe Echevarria to retire to pursue public serviceMichael Rapoport of the Wall Street Journal reported that Deloitte LLP CEO Joe Echevarria plans to retire later this month to pursue his interest in public...
If your clients include retailers, pending federal legislation allowing states to tax Internet sales could mean big changes in the way they process and account for their sales and use taxes.In July, the Marketplace and...

Already a member? log in here.

Upcoming CPE Webinars

Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.
Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.