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Winning one for the shredder


Arthur Andersen has at last been vindicated by the Supreme Court in the Enron case. The justices unanimously ruled that Andersen's obstruction-of-justice conviction in June of 2002 was improper, because the instructions given to the jury were too vague.

Government attorneys argued that Andersen should be held responsible for instructing its employees to "undertake an unprecedented campaign of document destruction."

But in his opinion, Rehnquist noted that jurors were instructed to convict Andersen if the accounting firm had an "improper purpose," such as an intent to impede or subvert fact-finding in an "official proceeding." He noted jurors were instructed to convict, even if Andersen mistakenly thought it was acting legally.

At trial, Andersen argued that employees who shredded tons of documents followed the policy and there was no intent to thwart the SEC investigation.

The probe into Andersen led to just one guilty plea, from the firm's former top Enron auditor, David Duncan. But the conviction of the Chicago firm forced it to surrender its accounting license and stop conducting public audits. Some 28,000 workers had to find other jobs, and the company was left a shell of its former self.

A ruling against Andersen would have had onerous consequences for businesses, whose discarding of files is an everyday occurrence. Experts say companies would have to keep all files for fear that any disposal, however innocent, could subject them to potential prosecution.

According to Andersen attorneys, notes and drafts of documents were thrown away under the firm's document-retention policy in part because they were preliminary and could have been misconstrued.

Andersen's appeal was backed by the National Association of Criminal Defense Lawyers. It argued in a friend-of-the-court filing that broad characterization of "obstruction" used in the jury instructions would also unfairly punish criminal attorneys who advise their clients to withhold evidence in legal ways.

Such a broad reading could open defense lawyers and others to prosecution if they merely advise clients of their rights to assert legal privileges or review document retention policies, the criminal defense group said.

White Collar Crime Prof Blog has more in-depth analysis.

Andersen's vindication comes too late, of course, to save the jobs of the 28,000 employees who were forced to hit the pavement when the firm collapsed.

Let's hope that this ruling causes the Justice Department to think twice before they embark on another witch hunt simply to help prove the Bush administration isn't in the pocket of the corporate "fat cats."

Posted by Rodger on May 31, 2005 at 11:37 AM | Permalink


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