Risk & Compliance

Supremes Could Upend Andersen Conviction

Such a ruling, however, would be too little and too late for the thousands of former employees who lost their jobs and the former partners of the d...
Stephen TaubApril 29, 2005

A number of Supreme Court justices reportedly suggested yesterday that they might not have agreed with the Justice Department’s case leading to the conviction of Arthur Andersen, the erstwhile accounting firm, for shredding Enron Corp. documents.

While hearing arguments in Andersen’s appeal, Justice Antonin Scalia at one point described the government’s theory of the case as “weird,” according to The New York Times.

What’s more, the justices “were so clearly sympathetic” to the former Big Five accounting firm, that the only question remaining at the end of the session was how quickly the Court would overturn the conviction, the paper added.

Of course, even if the conviction is overturned, it would not be much help to the thousands of former employees who lost their jobs and the former partners who lost their equity.

At the heart of the conviction was an Andersen attorney’s advice to implement a “document retention” policy, according to The Wall Street Journal. That called for employees to destroy massive amounts of paper records in advance of a Securities and Exchange Commission investigation.

Prosecutors had tried to show that Andersen had “corruptly” persuaded others to impede an “official proceeding,” the paper recounted. During the trial, Andersen argued that that advice was lawful since the firm hadn’t yet received a subpoena.

The paper notes that during oral arguments before the Supreme Court, Andersen attorney Maureen Mahoney said the government’s theory transformed a “polite request” to follow a lawful policy into “witness tampering.”

Justice Anthony Kennedy seemed to agree when he told the government’s lawyer, Deputy Solicitor General Michael Dreeben: “Your definition” of crime amounts to a “sweeping position that will cause problems for every corporation or small business in this country.”

Under the Sarbanes-Oxley Act, companies in similar situations now must retain documents. But, the Andersen-Enron case occurred before the landmark legislation was signed in 2002.