- The Washington Times - Sunday, June 16, 2002

HOUSTON A jury yesterday convicted Arthur Andersen LLP of obstruction of justice, dealing the company a potentially fatal blow and giving prosecutors investigating Enron's collapse their first victory.
The conviction could put the battered accounting firm out of business, though an Andersen lawyer promised a legal fight to keep the company alive. Government lawyers hailed the verdict as a major step toward unraveling the Enron scandal.
After deliberating 72 hours over 10 days, jurors decided that Andersen's destruction of paper and computer files was an attempt to thwart federal regulators investigating energy trader Enron Corp.
In interviews after the verdict, the jurors said they based their decision on evidence that an Andersen in-house lawyer sought to doctor a memo about the Enron case.
Four jurors downplayed the government's assertions that the destruction of the files was an attempt to hinder the investigation into Enron.
"All this business about telling people to shred documents was largely superficial and largely circumstantial," jury foreman Oscar Criner said.
Prosecutor Andrew Weissman said the case boiled down to a simple principle: "When you expect the police, you don't destroy evidence."
The outcome is expected to bolster the federal inquiry into what led to Enron's collapse late last year.
"It sends a strong message that we are going to get to the bottom of the Enron debacle, and those people responsible will be prosecuted," said Leslie Caldwell, head of the criminal division of the Justice Department's San Francisco office and chief of its national Enron Task Force.
She said authorities were "still looking at all aspects of the case. We're not finished with Arthur Andersen."
In Washington, Deputy Attorney General Larry Thompson said prosecutors will seek more indictments. He said the verdict showed Andersen intentionally interfered with the Enron investigation.
"This verdict confirms that Andersen knew full well that these documents were relevant to the inquiries into Enron's collapse, and that Andersen partners and employees personally directed these efforts to destroy evidence," Mr. Thompson said.
Prosecutors had argued that Andersen had intimate knowledge of the complex off-the-book partnerships that Enron used to boost the image of its financial health and mask debt before its collapse into bankruptcy last December.
The energy trader is under a grand jury investigation, as well as scrutiny from Wall Street regulators and Congress.
Andersen faces up to five years' probation and a fine of up to $500,000. U.S. District Judge Melinda Harmon will decide the sentence Oct. 11.
The company also could be fined up to twice any gains or damages the court determines were caused by the firm's action. A Securities and Exchange Commission (SEC) rule bars any firm convicted of a felony from auditing publicly traded companies, and experts said that could put the crippled firm out of business. Andersen has lost more than 650 of its 2,300 public clients.
Ripple effects from the verdict could seal Andersen's demise, said Itzhak Sharav, an accounting professor at Columbia University's business school.
He said more companies are likely to fire Andersen as their auditor, state accounting boards are likely to revoke Andersen's license to do business, and the company could be hit with a flood of civil lawsuits.
"Andersen is history, no matter what," Mr. Sharav said.
Defense attorney Rusty Hardin said an appeal would be filed after sentencing, declaring: "This company did not commit a crime." He said states that try to take away Andersen's business licenses would face litigation.
Andersen partner C.E. Andrews said it was too early for the company to talk about its future, adding that it will continue doing business.
"We don't have to rush out today and close our offices," he said. "Don't expect that. We will assess the outcome of this and make our decision. We're not going to stand here today on the courthouse steps and re-evaluate our business."
The jurors said they agreed unanimously that a single person was responsible for the wrongdoing at Andersen. That person was not identified in court, but they later said it was Nancy Temple, an in-house lawyer at the firm. She was one of three witnesses who refused to testify for either side.
"We had to make sure someone corruptly persuaded someone else to do something that would result in the impairment of the fact-finding capability of an official proceeding," Mr. Criner said.
The jurors said Miss Temple emerged during the deliberations as the "corrupt persuader" who orchestrated the effort to impede the SEC probe into Enron that eventually encompassed Andersen.
Miss Temple wrote lead Enron auditor David Duncan, asking him to remove her name from a memo because it would increase "the chances that I might be a witness, which I prefer to avoid."
The memo was Duncan's summary of a conference call about an Oct. 16 earnings release by Enron that revealed accounting problems. The energy company characterized some issues as "nonrecurring" when, Duncan said, the opposite was true.
"It was a perfect illustration of Nancy Temple and others getting rid of drafts and sanitizing the record," Mr. Weissmann said. "That document was devastating."
Prosecutors spent a month presenting testimony from employees, federal regulators and FBI agents. They also showed the jurors mounds of documents, e-mails and handwritten notes they said proved Andersen had covered up a scandal.
Their key argument was that Andersen, just before regulators began investigating Enron, suddenly promoted a little-used document policy as a signal to its Enron audit team to begin destroying files.
The star prosecution witness was Duncan.
Duncan pleaded guilty in April to obstructing justice and spent nearly a week on the witness stand, telling the jurors that he had signed an agreement with Andersen to present a united front that neither did anything wrong.
He said he reneged on the agreement after a lot of "soul-searching."
"I obstructed justice," he testified. "I instructed people on the [Enron audit] team to follow the document retention policy, which I knew would result in the destruction of documents."

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