High Court Taking on Andersen Conviction Wednesday

The U.S. Supreme Court is set to hear arguments Wednesday on whether Arthur Andersen's obstruction of justice conviction should be overturned because jury instructions were too broad.

The question centers on whether U.S. District Court Judge Melinda Harmon gave instructions that were so loose that jurors could convict companies that innocently followed their own document-destruction policies rather than those that intentionally hid information from investigators, the Houston Chronicle reported.

The Supreme Court decided earlier this year to take up the case after the 5th U.S. Circuit Court of Appeals upheld the once-mighty accounting firm's 2002 conviction as well as Harmon's jury instructions.

The meaning of the law under which Andersen was prosecuted, and which ultimately led to its collapse, is of keen interest to corporate legal departments and other lawyers around the nation.

Arthur Andersen shredded thousands of documents related to the shady finances of its biggest client, Enron, after an in-house lawyer sent an e-mail reminding colleagues about the company's document retention policy, which called for destroying documents that were “no longer useful” for an audit, the Legal Times reported.

The government has questioned the timing of the e-mail, coming just before the Enron investigation was about the ensnare Andersen.

The National Association of Criminal Defense Lawyers, the American Institute of Certified Public Accountants and other professional organizations have written briefs to urge the Supreme Court not to make it a criminal act to provide routine legal advice.

The National Legal Center for the Public Interest's briefing paper, for example, opened with, “General counsel take note: the Supreme Court's resolution of Arthur Andersen v. United States could have a greater potential effect on your in-house legal operations than any case in recent years."

The government's brief, however, scoffs at the company's claim that its lawyer's advice was legitimate, "as if American corporations routinely find it proper to instruct their employees to lay waste to vast troves of documents when a government investigation is viewed as highly probable."

Both sides disagree, of course, as to when Andersen became aware that a Securities and Exchange Commission investigation was likely. An Andersen attorney, Maureen Mahoney, said the company didn't know the SEC would serve a subpoena until early November 2001. The government says Andersen was aware an investigation was looming at least one month before the October 2001 e-mail.

The specific issue the high court will discuss is the term “corruptly persuades.” The company interprets the phrase to mean that the persuading was done by corrupt or improper means, but the government sought a wider meaning. Harmon agreed, telling the jury that the term “corruptly” means “having an improper purpose to 'subvert, undermine or impede' the fact-gathering mission of an official proceeding, that an 'official proceeding' had to be an investigation but that it did not necessarily have to have been started at the time of the offense, and that Andersen did not have to know that it was doing something illegal to be found guilty,” Medill News Service reported.

"Document retention policies are legitimate," said Steven Lubet, a Northwestern University School of Law expert on lawyers' ethics, "but when they are articulated with a wink-wink and a nudge-nudge, it can be criminal. Legitimate internal policies can be executed illegitimately."

When do lawyers cross the line? "That's why we have juries," Lubet told the Legal Times. "They peer into people's minds. That's why jury instructions are so important, and why this case is so important."

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Upcoming CPE Webinars

Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.
May 1
This material focuses on the principles of accounting for non-profit organizations’ expenses. It will include discussions of functional expense categories, accounting for functional expenses and allocations of joint costs.