- The Washington Times - Thursday, October 17, 2002

HOUSTON (AP) Arthur Andersen LLP was sentenced yesterday to five years of probation and fined $500,000 for obstruction of justice for its handling of Enron Corp.-related documents to thwart a federal probe of the fallen energy-trading company's finances.
The punishment was the maximum allowed under law. Lawyers for the firm, a shadow of the $4 billion entity it was a year ago, have said they will appeal.
Prosecutors and the Securities and Exchange Commission had asked for the harshest possible penalty to make an example of the firm.
"Andersen's conduct in obstructing the Securities and Exchange Commission investigation of Enron, we submit, contributed to contributed to significantly the historic shaking of the foundations of our markets," prosecutor Sam Buell told the judge before sentencing.
Former federal prosecutor Robert Mintz, now a partner with McCarter & English in Newark, N.J., said probation means Andersen is on notice that it faces more fines and extended probation if the firm violates terms handed down by U.S. District Judge Melinda Harmon.
"We are pleased with the sentence handed down today in the Arthur Andersen case," said Deputy Attorney General Larry D. Thompson. "When a business organization breeds a culture of deceit and contempt for the law, the organization itself must be held accountable."
Probation seems a hollow threat for a firm that shuttered its audit practice and closed offices across the country after its conviction in June at the end of a six-week trial. Andersen, once a revered member of the Big Five accounting firms, has fewer than 1,000 of 28,000 workers left on the payroll after most bolted to other firms.
Andersen's criminal trial was the first to emerge from last year's dizzying collapse of the once-giant energy trader.
Andersen was accused of shredding Enron-related documents last year to thwart an SEC probe.
According to jurors, the knockout blow for the firm came May 14 when David Duncan, the former auditor in charge of the Enron account, testified that in-house attorney Nancy Temple told him to remove a sentence and her name from a memo regarding Andersen's take on Enron's Oct. 16 earnings release, which was rife with bad news.
"I believed it was misleading from a personal standpoint," Duncan said.
Andersen fired Duncan in January shortly after he publicly acknowledged that Enron documents had been shredded. He later pleaded guilty to obstruction of justice and agreed to cooperate with the government in exchange for immunity for other possible crimes and the recommendation of a light sentence. His sentencing is set for Jan. 3.
No one else at Andersen has been charged.
The firm and many of its former partners face lawsuits from shareholders left with near-worthless stock after the failures of Enron and WorldCom Inc.
Outside court, Andersen attorney Rusty Hardin said the company still believes its employees committed no crimes, despite the verdict.
"Our company should not have been destroyed because of the conduct of some individuals the government disagrees with," Mr. Hardin said. "Regardless of that, it has happened now and [Andersen] has to live with that."
Andersen's sentencing comes exactly a year after the firm battled with Enron executives about how to report the company's third-quarter earnings in an Oct. 16, 2001, news release. The disclosure of a $618 million loss sent Enron shares tumbling. Enron filed for bankruptcy six weeks later.


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