Justices Overturn Criminal Verdict in Andersen Case - Nubblies.net Forums

06-01-2005, 06:36 PM

Court Ruling Could Inhibit
Government's Broader Push
Against White-Collar Crime
By JESS BRAVIN
Staff Reporter of THE WALL STREET JOURNAL
June 1, 2005; Page A1

The Supreme Court overturned the 2002 criminal conviction that doomed accounting giant Arthur Andersen LLP, a ruling that won't revive the nearly defunct firm but could hamper the government's broader crackdown on white-collar crime.

In a unanimous opinion by Chief Justice William Rehnquist, the court found that the trial judge erred by granting the government's request to loosen the standard jury instructions -- for instance deleting the requirement that it find Andersen acted "dishonestly" when it shredded tons of documents related to EnronCorp. Prosecutors have argued that executives can be charged for actions that interfere with a federal probe even if it can't be proven they intended to do so.

But yesterday the court struck that standard down. Even if Andersen officials persuaded employees to withhold damaging information from the government, that was not necessarily "inherently malign," the chief justice wrote. To make his point, he said it would be acceptable for a mother to urge her son "against compelled self-incrimination," or a lawyer to advise a client to withhold documents under attorney-client privilege.

For Andersen, the high court's decision is little more than an epilogue. The 89-year-old firm, once an illustrious U.S. company that at its peak employed 28,000, lost its licenses to practice amid the fallout after Enron revealed massive losses and write-downs. Today, Andersen employs just 200 people who mainly handle the remaining lawsuits against the firm. At best, the ruling could help some former partners protect their assets in ongoing civil cases. As with most defendants who see their convictions reversed on appeal, Andersen can't recover from the government for the losses it suffered, a lawyer for the firm said. (See related article.)

But the ruling undid the first major conviction in the wave of corporate-scandal cases following the collapse of Enron in 2001, and could make it harder for the government to pursue future cases alleging obstruction of justice against both individuals and companies. That gave encouragement to some high-profile stars of the 1990s Wall Street boom who have been charged with fraud-related crimes.

The decision was hailed by attorneys for former investment banker Frank Quattrone, who is appealing a conviction for obstruction of justice, and former Enron Chief Executive Jeffrey Skilling, who faces fraud, conspiracy and other charges. Mr. Skilling, whose trial is scheduled to start in January, has pleaded not guilty.

Going forward, the opinion could pose a challenge for the government when it comes to applying the 2002 Sarbanes-Oxley corporate-reform law. That law, passed in the wake of scandals at Enron and other companies, replaced the law used to prosecute Andersen and in part was aimed at preventing the kind of document destruction that occurred there. It imposes stiff criminal penalties on anyone who obstructs or interferes with a government investigation by knowingly altering, destroying or concealing documents, and requires that auditors retain work papers for a period of five years.

Though the court said its ruling affected the earlier statute, the decision "definitely raises some questions about how [Sarbanes-Oxley] provisions are going to be interpreted," said Russell Ryan, a partner at King & Spalding and a former assistant director of enforcement at the Securities and Exchange Commission. Mr. Ryan said the court seemed to recognize that companies need document retention policies and that innocently complying with those policies "is generally a perfectly legal thing to do."

Indeed, the court made clear that lawyers and executives have some latitude in destroying sensitive or outdated documents. " 'Document retention policies,' which are created in part to keep certain information from getting into the hands of others, including the government, are common in business," the court observed. "It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy under ordinary circumstances."

The opinion "doesn't clearly define what's going to be right or wrong in a document retention policy," said Ellen Podgor, a law professor at Georgia State University. But, she said, it does send a warning to prosecutors: "You have to go after the actual charges you were investigating, you can't use obstruction of justice as a shortcut," in the expectation that proving a defendant interfered with an investigation would be easier than proving the underlying criminal allegation.

Andersen's June 2002 conviction in a Houston federal court -- which led to a $500,000 fine and five years of probation -- hinged largely on advice in October 2001 from an in-house attorney, Nancy Temple, to David Duncan, head of Andersen's Enron team. Mr. Duncan had reservations about some of Enron's planned disclosures in its third-quarter earnings release. In response, Ms. Temple instructed him to delete her name from the memo and to delete references to having consulted Andersen's legal team about the matter.

That email exchange was seen as encouraging document destruction. Jurors used it and other messages urging compliance with Andersen's document-destruction policy as the basis of their finding that obstruction of justice had been committed.

The advice came amid escalating news accounts of Enron's problems and the likelihood that an SEC probe would follow. After SEC subpoenas arrived on Nov. 8, 2001, an Andersen official sent an email saying, "No more shredding...we have been officially served." Prosecutors argued that in such a context, Andersen had, in the weeks leading up to that email, broken a law against "knowingly...corruptly persuading" others to destroy evidence.

Andersen countered that there was nothing inherently illegal about the document destruction policy and that since it would have been lawful for Ms. Temple herself to destroy the records, there was no crime in her advising others to do so.

At trial, jurors accepted the government's expansive reading of the statute and the Fifth U.S. Circuit Court of Appeals in New Orleans upheld the conviction.

But it was not a close call for the Supreme Court, which heard the case five weeks ago, on its last day of oral arguments, and rendered its opinion well ahead of other cases argued months earlier. At argument, the justices were uniformly skeptical of the government's position, which Justice Antonin Scalia called "weird."

"It doesn't make any sense to make unlawful the asking of somebody to do something which is, itself, not unlawful," he said during the April 27 hearing.

Yesterday, the Justice Department said it would consider refiling charges against Andersen. Prosecutors believed "the substantial destruction of documents in anticipation of an investigation by the Securities and Exchange Commission violated the law," acting Assistant Attorney General John Ritcher said in a statement. "We remain convinced that even the most powerful corporations have the responsibility of adhering to the rule of law."

Andersen's attorney, Maureen Mahoney of the law firm Latham & Watkins in Washington, a former Rehnquist clerk, said in an interview that she would ask the Fifth Circuit to order an acquittal for the firm. An acquittal would preclude the government from retrying the case.

It also would help protect the former Andersen partners from more than 100 civil lawsuits filed by investors who lost money in the Enron affair. "There are plaintiffs across the country who have been filing pleadings referring to Arthur Andersen as a convicted felon, and they can no longer do that," Ms. Mahoney said.

The current white-collar case with the closest similarities to the Andersen charges seems to be that of Mr. Quattrone, who is appealing his conviction last year on charges he obstructed a government investigation into how initial public stock offerings were handed out. Mr. Quattrone endorsed an email advising the technology bankers to "clean up" their files. The email was sent two days after Mr. Quattrone learned there was a grand-jury probe into the brokerage firm's practices.

"The fact that the court decided the case the way it did and did so unanimously gives Quattrone a real boost," said Mr. Quattrone's appellate lawyer, Mark Pomerantz of Paul Weiss Rifkind Wharton & Garrison.

Mr. Quattrone was convicted of three counts, including the witness tampering statute at issue in the Andersen case. In papers filed with the federal appeals court in New York, his lawyers objected to the jury instructions given by the trial judge, who told the jury, "You do not have to find, and there is no requirement that you find, that the defendant knew that a proceeding was in fact pending or was even about to be initiated at the time of the corrupt persuasion or misleading conduct." The lawyers argued the instruction "permitted the jury improperly to convict without finding any connection between the defendant's conduct and a pending proceeding."

Some attorneys for Enron executives said the ruling would make it harder for the government to win convictions for their clients. Daniel Petrocelli of O'Melveny & Myers, the attorney for Mr. Skilling, said the Supreme Court concluded that the jury in the 2002 Andersen trial had convicted the accounting firm of criminal conduct "absent any showing of criminal intent." He said the matter of criminal intent would be a key issue in the coming trial of the former Enron executives.

But there are also limits on how far yesterday's decision will help the constellation of fallen business stars charged and convicted in recent years.

William M. Sullivan Jr., a former federal prosecutor and now a white-collar defense attorney at Winston & Strawn in Washington said that with the exception of Mr. Quattrone, few high-profile defendants of recent years are likely to benefit directly from the Andersen ruling.

Former Enron Chairman Kenneth Lay, for example, faces trial in January on securities fraud and insider-trading charges, not the witness-tampering count brought against Andersen. Mr. Lay has pleaded not guilty.

There also are limits on how widely the ruling might be used to challenge Sarbanes-Oxley. Randy Mastro, a partner with Gibson Dunn & Crutcher and a former federal prosecutor, said he thought that it still will be hard for executives to challenge the main Sarbanes-Oxley provision that imposes a much greater onus on management to be aware of their legal obligations.

06-01-2005, 06:38 PM

If you don't feel like reading the article, basically Arthur Andersen (who ran Enron's books) isn't technically 'guilty' of the major accounting frauds, but I have a feeling this case is far from done.

Edit: If you aren't familiar with the case, bascially Arthur Andersen was one of the 5 major accounting firms in the US, since the scandal at Enron, Andersen has been demolished. It's once illustrious standing was eliminated almost overnight. While the company will never come back together (it's too late for that now), the former employees would like some vindication to boost what may be left of their careers (ex-Arthur Andersen employees weren't exactly in high demand for a while).

[ June 01, 2005, 04:45 PM: Message edited by: DJ FC ]

MAGICLIT · 06-01-2005, 07:11 PM

wow, thats B.S., so a guy who runs the Gambino's books isn't doing anything illegal either? this fucking country, I'm still not over the Martha Stewart thing.

06-01-2005, 07:18 PM

Well what Andersen did was illegal, think of this more as a "mistrial."

[ June 01, 2005, 05:40 PM: Message edited by: DJ FC ]

THEINCREDIBLEdork · 06-02-2005, 04:02 AM

Quote:

Originally posted by DJ FC:
Well what Andersen did was illegal, think of this more as a "mistrial."

Just like creating this thread was a "mistake."

<font size="4">baahahahahaha PWNZORS!!</font>

06-02-2005, 12:02 PM

Ha. It's not over yet. And this is one of the biggest news stories yet this year.

Ironic Mustache · 06-02-2005, 12:14 PM

Quote:

Originally posted by MAGICLIT:
wow, thats B.S., so a guy who runs the Gambino's books isn't doing anything illegal either? this fucking country, I'm still not over the Martha Stewart thing.

Martha Stewart has had to toss many o' salads for what she did though.

MAGICLIT · 06-02-2005, 01:41 PM

yeah, but what i meant was that they are giving her a T.V. show sorta like the apprentice, where dumbfucks compete to work for her company or some B.S., FC posted the article in some thread.

Ironic Mustache · 06-02-2005, 02:05 PM

What? Are you serious.... I must have missed that.

Beebs · 06-02-2005, 02:17 PM

Martha Stewart really didn't do much wrong, she was more used as an example.

MAGICLIT · 06-02-2005, 02:23 PM

well they sure picked a cold blooded criminal to make an example out of, didn't they? Puh-leeze.

06-02-2005, 02:26 PM

An example?

A broker (yes, she has her license) who sells all her stocks before the company tanks, then gets a couple months in a minimum security camp, sounds like your typical punishment to me.

She wasn't used as an example, the case just happened to be high-profile.

Ironic Mustache · 06-02-2005, 02:33 PM

Quote:

Originally posted by DJ FC:
An example?

A broker (yes, she has her license) who sells all her stocks before the company tanks, then gets a couple months in a minimum security camp, sounds like your typical punishment to me.

She wasn't used as an example, the case just happened to be high-profile.

I agree. She broke the law and got the regular punishment, there was no example made.

Beebs · 06-02-2005, 09:00 PM

Quote:

Originally posted by DJ FC:
An example?

A broker (yes, she has her license) who sells all her stocks before the company tanks, then gets a couple months in a minimum security camp, sounds like your typical punishment to me.

She wasn't used as an example, the case just happened to be high-profile.

The broker was the one with the insider info, I would venture to say the broker didn't tell her "Their newest drug didn't pass FDA testing, oh and you aren't supposed to know that." He probably just told her "Their newest drug didn't pass FDA testing." Most people assume their broker isn't trading on insider info. I don't know the exact legal liability one has on info from their broker, but morally what she did was reasonable.

06-01-2005, 06:36 PM	#1 (permalink)
DJ FC Guest Posts: n/a	Court Ruling Could Inhibit Government's Broader Push Against White-Collar Crime By JESS BRAVIN Staff Reporter of THE WALL STREET JOURNAL June 1, 2005; Page A1 The Supreme Court overturned the 2002 criminal conviction that doomed accounting giant Arthur Andersen LLP, a ruling that won't revive the nearly defunct firm but could hamper the government's broader crackdown on white-collar crime. In a unanimous opinion by Chief Justice William Rehnquist, the court found that the trial judge erred by granting the government's request to loosen the standard jury instructions -- for instance deleting the requirement that it find Andersen acted "dishonestly" when it shredded tons of documents related to EnronCorp. Prosecutors have argued that executives can be charged for actions that interfere with a federal probe even if it can't be proven they intended to do so. But yesterday the court struck that standard down. Even if Andersen officials persuaded employees to withhold damaging information from the government, that was not necessarily "inherently malign," the chief justice wrote. To make his point, he said it would be acceptable for a mother to urge her son "against compelled self-incrimination," or a lawyer to advise a client to withhold documents under attorney-client privilege. For Andersen, the high court's decision is little more than an epilogue. The 89-year-old firm, once an illustrious U.S. company that at its peak employed 28,000, lost its licenses to practice amid the fallout after Enron revealed massive losses and write-downs. Today, Andersen employs just 200 people who mainly handle the remaining lawsuits against the firm. At best, the ruling could help some former partners protect their assets in ongoing civil cases. As with most defendants who see their convictions reversed on appeal, Andersen can't recover from the government for the losses it suffered, a lawyer for the firm said. (See related article.) But the ruling undid the first major conviction in the wave of corporate-scandal cases following the collapse of Enron in 2001, and could make it harder for the government to pursue future cases alleging obstruction of justice against both individuals and companies. That gave encouragement to some high-profile stars of the 1990s Wall Street boom who have been charged with fraud-related crimes. The decision was hailed by attorneys for former investment banker Frank Quattrone, who is appealing a conviction for obstruction of justice, and former Enron Chief Executive Jeffrey Skilling, who faces fraud, conspiracy and other charges. Mr. Skilling, whose trial is scheduled to start in January, has pleaded not guilty. Going forward, the opinion could pose a challenge for the government when it comes to applying the 2002 Sarbanes-Oxley corporate-reform law. That law, passed in the wake of scandals at Enron and other companies, replaced the law used to prosecute Andersen and in part was aimed at preventing the kind of document destruction that occurred there. It imposes stiff criminal penalties on anyone who obstructs or interferes with a government investigation by knowingly altering, destroying or concealing documents, and requires that auditors retain work papers for a period of five years. Though the court said its ruling affected the earlier statute, the decision "definitely raises some questions about how [Sarbanes-Oxley] provisions are going to be interpreted," said Russell Ryan, a partner at King & Spalding and a former assistant director of enforcement at the Securities and Exchange Commission. Mr. Ryan said the court seemed to recognize that companies need document retention policies and that innocently complying with those policies "is generally a perfectly legal thing to do." Indeed, the court made clear that lawyers and executives have some latitude in destroying sensitive or outdated documents. " 'Document retention policies,' which are created in part to keep certain information from getting into the hands of others, including the government, are common in business," the court observed. "It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy under ordinary circumstances." The opinion "doesn't clearly define what's going to be right or wrong in a document retention policy," said Ellen Podgor, a law professor at Georgia State University. But, she said, it does send a warning to prosecutors: "You have to go after the actual charges you were investigating, you can't use obstruction of justice as a shortcut," in the expectation that proving a defendant interfered with an investigation would be easier than proving the underlying criminal allegation. Andersen's June 2002 conviction in a Houston federal court -- which led to a $500,000 fine and five years of probation -- hinged largely on advice in October 2001 from an in-house attorney, Nancy Temple, to David Duncan, head of Andersen's Enron team. Mr. Duncan had reservations about some of Enron's planned disclosures in its third-quarter earnings release. In response, Ms. Temple instructed him to delete her name from the memo and to delete references to having consulted Andersen's legal team about the matter. That email exchange was seen as encouraging document destruction. Jurors used it and other messages urging compliance with Andersen's document-destruction policy as the basis of their finding that obstruction of justice had been committed. The advice came amid escalating news accounts of Enron's problems and the likelihood that an SEC probe would follow. After SEC subpoenas arrived on Nov. 8, 2001, an Andersen official sent an email saying, "No more shredding...we have been officially served." Prosecutors argued that in such a context, Andersen had, in the weeks leading up to that email, broken a law against "knowingly...corruptly persuading" others to destroy evidence. Andersen countered that there was nothing inherently illegal about the document destruction policy and that since it would have been lawful for Ms. Temple herself to destroy the records, there was no crime in her advising others to do so. At trial, jurors accepted the government's expansive reading of the statute and the Fifth U.S. Circuit Court of Appeals in New Orleans upheld the conviction. But it was not a close call for the Supreme Court, which heard the case five weeks ago, on its last day of oral arguments, and rendered its opinion well ahead of other cases argued months earlier. At argument, the justices were uniformly skeptical of the government's position, which Justice Antonin Scalia called "weird." "It doesn't make any sense to make unlawful the asking of somebody to do something which is, itself, not unlawful," he said during the April 27 hearing. Yesterday, the Justice Department said it would consider refiling charges against Andersen. Prosecutors believed "the substantial destruction of documents in anticipation of an investigation by the Securities and Exchange Commission violated the law," acting Assistant Attorney General John Ritcher said in a statement. "We remain convinced that even the most powerful corporations have the responsibility of adhering to the rule of law." Andersen's attorney, Maureen Mahoney of the law firm Latham & Watkins in Washington, a former Rehnquist clerk, said in an interview that she would ask the Fifth Circuit to order an acquittal for the firm. An acquittal would preclude the government from retrying the case. It also would help protect the former Andersen partners from more than 100 civil lawsuits filed by investors who lost money in the Enron affair. "There are plaintiffs across the country who have been filing pleadings referring to Arthur Andersen as a convicted felon, and they can no longer do that," Ms. Mahoney said. The current white-collar case with the closest similarities to the Andersen charges seems to be that of Mr. Quattrone, who is appealing his conviction last year on charges he obstructed a government investigation into how initial public stock offerings were handed out. Mr. Quattrone endorsed an email advising the technology bankers to "clean up" their files. The email was sent two days after Mr. Quattrone learned there was a grand-jury probe into the brokerage firm's practices. "The fact that the court decided the case the way it did and did so unanimously gives Quattrone a real boost," said Mr. Quattrone's appellate lawyer, Mark Pomerantz of Paul Weiss Rifkind Wharton & Garrison. Mr. Quattrone was convicted of three counts, including the witness tampering statute at issue in the Andersen case. In papers filed with the federal appeals court in New York, his lawyers objected to the jury instructions given by the trial judge, who told the jury, "You do not have to find, and there is no requirement that you find, that the defendant knew that a proceeding was in fact pending or was even about to be initiated at the time of the corrupt persuasion or misleading conduct." The lawyers argued the instruction "permitted the jury improperly to convict without finding any connection between the defendant's conduct and a pending proceeding." Some attorneys for Enron executives said the ruling would make it harder for the government to win convictions for their clients. Daniel Petrocelli of O'Melveny & Myers, the attorney for Mr. Skilling, said the Supreme Court concluded that the jury in the 2002 Andersen trial had convicted the accounting firm of criminal conduct "absent any showing of criminal intent." He said the matter of criminal intent would be a key issue in the coming trial of the former Enron executives. But there are also limits on how far yesterday's decision will help the constellation of fallen business stars charged and convicted in recent years. William M. Sullivan Jr., a former federal prosecutor and now a white-collar defense attorney at Winston & Strawn in Washington said that with the exception of Mr. Quattrone, few high-profile defendants of recent years are likely to benefit directly from the Andersen ruling. Former Enron Chairman Kenneth Lay, for example, faces trial in January on securities fraud and insider-trading charges, not the witness-tampering count brought against Andersen. Mr. Lay has pleaded not guilty. There also are limits on how widely the ruling might be used to challenge Sarbanes-Oxley. Randy Mastro, a partner with Gibson Dunn & Crutcher and a former federal prosecutor, said he thought that it still will be hard for executives to challenge the main Sarbanes-Oxley provision that imposes a much greater onus on management to be aware of their legal obligations.
DJ FC Guest Posts: n/a

06-01-2005, 06:38 PM	#2 (permalink)
DJ FC Guest Posts: n/a	If you don't feel like reading the article, basically Arthur Andersen (who ran Enron's books) isn't technically 'guilty' of the major accounting frauds, but I have a feeling this case is far from done. Edit: If you aren't familiar with the case, bascially Arthur Andersen was one of the 5 major accounting firms in the US, since the scandal at Enron, Andersen has been demolished. It's once illustrious standing was eliminated almost overnight. While the company will never come back together (it's too late for that now), the former employees would like some vindication to boost what may be left of their careers (ex-Arthur Andersen employees weren't exactly in high demand for a while). [ June 01, 2005, 04:45 PM: Message edited by: DJ FC ]
DJ FC Guest Posts: n/a

06-01-2005, 07:11 PM	#3 (permalink)
MAGICLIT Senior Member Join Date: Feb 2005 Location: city of sin Posts: 2,753 Internets: 10	wow, thats B.S., so a guy who runs the Gambino's books isn't doing anything illegal either? this fucking country, I'm still not over the Martha Stewart thing.
	I am all in favor of a ruling class, especially since I rule.

06-01-2005, 07:18 PM	#4 (permalink)
DJ FC Guest Posts: n/a	Well what Andersen did was illegal, think of this more as a "mistrial." [ June 01, 2005, 05:40 PM: Message edited by: DJ FC ]
DJ FC Guest Posts: n/a

06-02-2005, 12:02 PM	#6 (permalink)
DJ FC Guest Posts: n/a	Ha. It's not over yet. And this is one of the biggest news stories yet this year.
DJ FC Guest Posts: n/a

06-02-2005, 01:41 PM	#8 (permalink)
MAGICLIT Senior Member Join Date: Feb 2005 Location: city of sin Posts: 2,753 Internets: 10	yeah, but what i meant was that they are giving her a T.V. show sorta like the apprentice, where dumbfucks compete to work for her company or some B.S., FC posted the article in some thread.
	I am all in favor of a ruling class, especially since I rule.

06-02-2005, 02:05 PM	#9 (permalink)
Ironic Mustache G'd up from the feet up. Join Date: Jan 2005 Location: Cali Posts: 7,146 Supreme Emperor of the Jiu Jitsu Shit Forum?: Yes Internets: 114735	What? Are you serious.... I must have missed that.
	Creeping around as I please nonchalantly like any other Supreme Emperor might.

06-02-2005, 02:17 PM	#10 (permalink)
Beebs Poor Sport Join Date: Feb 2004 Location: Indianapolis / Middlebury / Long Lake Posts: 5,306 Internets: 127341	Martha Stewart really didn't do much wrong, she was more used as an example.

06-02-2005, 02:23 PM	#11 (permalink)
MAGICLIT Senior Member Join Date: Feb 2005 Location: city of sin Posts: 2,753 Internets: 10	well they sure picked a cold blooded criminal to make an example out of, didn't they? Puh-leeze.
	I am all in favor of a ruling class, especially since I rule.

06-02-2005, 02:26 PM	#12 (permalink)
DJ FC Guest Posts: n/a	An example? A broker (yes, she has her license) who sells all her stocks before the company tanks, then gets a couple months in a minimum security camp, sounds like your typical punishment to me. She wasn't used as an example, the case just happened to be high-profile.
DJ FC Guest Posts: n/a