Judge Hits Andersen With Maximum Sentence

Federal District Judge Melinda Harmon hammered her gavel for Arthur Andersen LLP for the last time yesterday, sentencing the firm to five years' probation and a $500,000 fine as a penalty for obstructing justice in regard to the firm's audit of Enron Corp. The sentence is the maximum allowable by law.

"Andersen's conduct in obstructing the Securities and Exchange Commission investigation of Enron, we submit, contributed to - contributed to significantly - the historic shaking of the foundation of our markets," prosecutor Sam Buell told the Court.

Earlier this year Andersen was found guilty of obstruction of justice. The jury relied heavily on an internal memo from Andersen in-house counsel Nancy Temple in arriving at its decision. Ms. Temple, who refused to testify at the trial, authored a controversial memo in which she documented a conference call in which Mr. Duncan challenged Enron's reporting of a loss as "nonrecurring." In a preliminary draft, Mr. Duncan described the reporting as "misleading." Ms. Temple suggested "aggressive" instead. She also asked that he remove her name from the final copy.

Andersen is expected to appeal on grounds that some of Judge Harmon's rulings regarding what evidence the jury heard and the instructions given the jury were improper. Another ground for appeal is the judge's decision to allow testimony about Andersen's controversial relationship with former clients Sunbeam and Waste Management.

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