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Supreme Court Overturns Andersen Conviction in Enron Case

The Supreme Court last week unanimously overturned the conviction of former Big Five accounting firm Arthur Andersen LLP, ruling that the jury in the 2002 Enron Corp.-related case was given flawed jury instructions.

The high court ruled that the instructions given by a federal judge in Houston before the jury deliberated the case failed to properly convey the elements of what constitutes conviction for "corrupt persuasion." The ruling does not necessarily mean the case is over, however, it will be up to the Justice Department to decide whether to retry the company.

Andersen, which at one time employed 28,000 employees, had been Enron's longtime auditor. It was convicted on a single count of corruptly persuading its employees to destroy documents in October and November 2001 to prevent federal investigators from getting them (see NGI, June 24, 2002). U.S. District Judge Melinda Harmon handed down the maximum sentence -- five years probation and a $500,000 fine -- which at the time was the harshest allowed under law.

In the high court's opinion last Tuesday, Chief Justice William Rehnquist agreed with Andersen's arguments that jurors should have been told that they needed to find the company had acted "knowingly to subvert an investigation" in order to be found guilty. Under ordinary circumstances, a manager may instruct employees to comply with a valid document retention policy, even if it is created in part to keep certain information from others, including the government, he wrote.

The jury was told by the judge that even if Andersen honestly and sincerely believed its conduct was lawful, the jury could convict, Rehnquist wrote. He added that it was "striking" how little culpability the instructions required, and wrote that the instructions diluted the meaning of "corruptly" so that it also included innocent conduct.

The Justice Department will examine the court's decision and then determine whether to retry the case, according to Acting Assistant Attorney General John Richter. "The Justice Department's decision to charge Arthur Andersen was based at the time on the determination that the substantial destruction of documents in anticipation of an investigation by the Securities and Exchange Commission violated the law," he said. "We remain convinced that even the most powerful corporations have the responsibility of adhering to the rule of law."

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