Two Firms Await Results of Document-Destruction Cases

The destruction of documents related to the Enron audit has received the lion's share of media attention. But Andersen is not the only major accounting firm awaiting a decision in a case alleging improper document destruction. It is joined by middle-market specialist Grant Thornton.

On May 31 2002, just a few days before the Houston jury was handed the Andersen obstruction-of-justice case, Special Master Juliet A. Eurich, Esq., a former federal prosecutor, completed the hearing on Grant Thornton's document-destruction case.

Although both firms face similar charges and await their decisions at approximately the same time, there are also some notable differences:

  • Andersen's charges were brought by the government, while Grant Thornton's were brought by a former audit client.
  • Andersen's fate is being decided by a jury in Houston, while Grant Thornton's is being decided by a court-appointed Special Master in Baltimore.
  • Andersen's trial lasted four and half weeks, while Grant Thornton's hearing took two days.
  • Andersen is accused of destroying documents out of fear of a investigation by the Securities and Exchange Commission, while Grant Thornton is accused of destroying papers out of fear of a lawsuit.

The charges against Grant Thornton are part of a $2.1 billion lawsuit filed by Carnegie International Corporation. The lawsuit alleges the accounting firm mishandled Carnegie's financial audit and "willfully, knowingly and intentionally destroyed Carnegie documents with the full understanding that litigation was imminent." According to a Carnegie press release, a senior Grant Thornton partner admitted destroying the documents in a deposition given in July 2001. The press release explains the lawsuit was delayed for several months to allow time for a special investigation after the accounting firm produced a second set of work papers following the filing of the lawsuit. Carnegie says there are more than 150 material differences between the two sets of work papers.

A Grant Thornton spokesperson denied the charges, saying, "There was absolutely no deletion of data or destruction of any paper documents." A limited number of emails were routinely deleted from a partner's computer, but the spokesperson explains, "This occurred more than eight months before any lawsuit was filed against Grant Thornton, and two months before a regulator asked us to voluntarily produce various work papers and related documents in what was then an informal inquiry. Copies of these emails were kept and produced in the litigation." The spokesperson added, "This situation is an example where accountants refused to be intimidated by a client. We found fraud, we took action, we were fired as a result, and we were sued."

Both Andersen and Grant Thornton stood up for their rights and refused to be intimidated. Will the verdict be the same for both firms? That remains to be seen. The report of the Special Master is expected by the end of the month. Andersen's decision could come at any time.

-Rosemary Schlank

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