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Japan Today - News - U.S. Supreme Court overturns Arthur Andersen conviction - Japan's Leading International News NetworkU.S. Supreme Court overturns Arthur Andersen conviction

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Wednesday, June 1, 2005 at 07:50 JST
WASHINGTON — The U.S. Supreme Court on Tuesday dealt a blow to the government's corporate fraud crackdown, overturning the criminal conviction of Arthur Andersen, the accounting giant put out of business for its role in the Enron scandal.

Chief Justice William Rehnquist wrote for a unanimous Supreme Court that the case against the former Big Five accounting firm was "flawed" because of the instructions given to the jury telling them what was needed for a conviction.

The chief justice said the jury instructions "simply failed to convey the requisite consciousness of wrongdoing. Indeed, it is striking how little culpability the instructions required."

The Chicago-based accounting firm was shut down after its 2002 conviction on criminal obstruction of justice charges for the destruction of documents for its client, Enron, as a regulatory probe was underway.

While the court ruling appeared to be based on technical factors, the opinion suggested the government would have to show a stronger finding of criminal intent for a similar conviction.

Andersen was convicted in June 2002 after a jury found that lawyers for the company "corruptly" persuaded employees to destroy documents that could have been relevant to a then looming investigation by the Securities and Exchange Commission.

Enron was Andersen's largest client and relied on the firm for auditing, accounting and consulting advice. Andersen also overlooked some of the accounting schemes that hid the energy firm's massive debts.

But Rehnquist wrote that the interpretation given to the jury for a guilty verdict was too broad and vague.

"Consider, for instance, a mother who suggests to her son that he invoke his right against compelled self-incrimination ... or a wife who persuades her husband not to disclose marital confidences," the justice wrote.

"It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy under ordinary circumstances."

Prosecutors said they would review the ruling before deciding on whether to seek a new trial.

"The Department of Justice is disappointed in today's decision by the Supreme Court regarding jury instructions given in the case, but of course we respect the Court's decision," said acting Assistant Attorney General John Richter.

"We remain convinced that even the most powerful corporations have the responsibility of adhering to the rule of law."

Andersen, a partnership that still faces civil litigation in a number of cases, said it was "very pleased" with the ruling, "which acknowledges the fundamental injustice that has been done to Arthur Andersen and its former personnel and retirees."

The statement said the former audit firm appealed "not because we believed Arthur Andersen could be restored to its previous position, but because we had an obligation to set the record straight and clear the good name of the 28,000 innocent people who lost their jobs at the time of the indictment and tens of thousands of Andersen alumni, as well as to help secure a fair resolution of the civil litigation facing the firm."

Some experts doubted the government would retry the case, with Andersen out of business.

"It's unfortunate for Andersen, because they are out of business," said Texas lawyer Tom Ajamie, who represents people who lost money in Enron and other corporate fraud cases.

"But let's not forget that Andersen was the auditor for WorldCom, which collapsed, and for Sunbeam, which was found to be fraudulent and for many of the telecom companies that collapsed. And of course they were the auditors for Enron before its collapse ... the auditors are supposed to be the front line of protection" against fraud. (Wire reports)