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January 07, 2005
SCOTUS grants cert in Arthur Andersen appeal
The U.S. Supreme Court granted certiorari on Friday on Arthur Andersen's appeal of its conviction of felony criminal charges in connection with allegedly destroying and altering Enron Corp.-related documents.
The Supreme Court will review this Fifth Circuit Court of Appeals ruling that upheld the former Big Five accounting firm's June 2002 conviction by a jury in a Houston federal court. The key issue in the case will be whether the jury instructions that U.S. District Judge Melinda Harmon approved during the trial were too vague and broad for jurors to determine whether Andersen's actions constituted obstruction of justice. The specific issue to be addressed is this: "Must Arthur Andersen's conviction for witness tampering under 18 U.S.C. 1512(b) be reversed because the jury instructions misinterpreted the 'corrupt persuasion' and 'official proceeding' elements of the offense?"
The Justice Departent charged Andersen with obstruction of justice for its mass destruction of Enron-related documents in late 2001 as the Securities and Exchange Commission and Congressional Committees began investigating Enron's complicated financial structure. As we all know, Enron catapulted into bankruptcy in early December 2001 amid revelations of accounting schemes to mask debt and inflate profits.
As Enron's auditor, Andersen contended that it was only implementing its document-retention policy that called for destroying unneeded documentation to streamline files. Andersen argued during trial that employees who shredded thousands of documents simply followed the policy and had no intent to undermine any investigation of Enron.
Although an Andersen victory at the Supreme Court would be a Pyrrhic victory for the now defunct firm, this is a positive development for the Enron case in general. The Justice Department's heavy-handed prosecution of Andersen reflected an egregious lack of prosecutorial discretion -- the prosecution of Andersen ultimately caused the loss of thousands of jobs, most of which never had anything to do with Enron. Moreover, as noted here awhile back, the accounting industry has still not recovered from the Andersen fallout, and big business is finding it difficult to find enough auditors to fulfill the new Enron-era regulatory obligations.
Thus, a Supreme Court reversal will not help Andersen much, but it just might send the right message to a Justice Department that increasingly appears oblivious to the negative economic impact that results from criminalizing merely questionable business practices.
Posted by Tom at January 7, 2005 07:22 PM
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Tracked on January 8, 2005 09:02 AM
Comments
=="it just might send the right message to a Justice Department that increasingly appears oblivious to the negative economic impact that results from using criminal prosecutions to regulate customary business practices."==
I guess they don't like the free market system?
By the way, I'm surprised you haven't touched on the Safe Clear fiasco by now. Any thoughts?
Posted by: Dubya at January 7, 2005 11:40 PM
Dubya, my sense is that the Justice Department lawyers wouldn't know a market if it slapped them in the face. My real worry is that the Bush Administration leaders don't have any faith in markets, either.
As for Safe Clear, I defer to Ann Linehan, who has been all over the fiasco over at blogHouston.net. I could not improve on her coverage of that delicious debacle.
Looks like Mayor White has the wrecker drivers locked up for the next election, eh? ;^)
Posted by: Tom Kirkendall at January 8, 2005 05:07 AM
Good post, Tom. And I agree entirely that the Bush Administration has a lot less faith in markets than I would hope. If we have to put up with the social conservatives, at least we should get some manly de-regulation along with it, instead of all this pointless criminalization of business.
Posted by: Jack at January 9, 2005 07:34 PM
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