Auditing

Andersen Appeal Reaches Supreme Court

If the former accounting giant wins its appeal, it will be a victory in name only, but regulators seemed to have learned a hard lesson from the And...
Stephen TaubJanuary 10, 2005

The Supreme Court announced on Friday that it will review a lower-court ruling that upheld Andersen’s June 2002 conviction for destroying and altering documents related to its work with Enron Corp., according to the Associated Press.

The former Big Five accounting firm was charged with obstruction of justice for encouraging its employees to destroy a large number of documents related to Enron — which filed for bankruptcy in December 2001 — even as the Securities and Exchange Commission began investigating the energy company’s finances.

Andersen’s defense at trial, according to the AP, was that employees who shredded documents were simply following the company’s document retention policy — which called for destroying unneeded documentation to streamline needlessly fat files — and not trying to stymie the SEC’s probe.

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The critical issue before the Supreme Court will be whether the jury instructions were too vague and broad for jurors to determine correctly what constituted obstruction of justice, the wire service explained.

Of course, if Andersen wins its appeal, it will be a victory in name only. In the wake of Andersen’s conviction, the accounting firm was dismantled, many individuals lost their jobs, and many more saw their retirement savings vaporize.

Regulators seemed to have learned a hard lesson from the Andersen collapse. As we pointed out last week, a growing number of companies settling charges of accounting fraud have agreed to a form of corporate probation that enables them to avoid criminal prosecution in exchange for good behavior.