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News
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No decision in Andersen trial
Jury to resume deliberations Friday morning, asks for copy of Duncan transcript.
June 6, 2002: 8:32 PM EDT
By Luisa Beltran and Jennifer Rogers

NEW YORK (CNN/Money) - Jurors in the Arthur Andersen LLP criminal trial adjourned late Thursday without turning in a verdict, leaving the fate of the 89-year-old accounting firm undecided for yet another day.

The jury of nine men and three women will resume considering the case at 10 a.m. CT Friday after deliberating all Thursday. The jurors in their first day considering the case asked for more highlighters, additional jury instructions and a transcript of fired Andersen auditor David Duncan's testimony.

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While the jurors got the additional instructions and highlighters, Judge Melinda Harmon didn't give them a copy of Duncan's entire testimony. Instead, she told the jurors to get more specific and they would be read that particular testimony.

A not-guilty verdict would only be a moral victory for the Chicago-based accounting firm, which is teetering on collapse. Andersen, once one of the most powerful accounting firms in the world, has laid off 7,000 employees, is in the process of selling its assets and has lost more than 650 of its 2,300 public audit clients this year.

Andersen's lead defense attorney Rusty Hardin told Lou Dobbs Moneyline on CNN Thursday that the accounting firm is fighting for its legacy. "We are very proud of this company and believe they did nothing wrong," he said.

During the trial, Hardin took pains to "put a human face on Andersen" and on Duncan, who testified against the firm as a government witness. Duncan, in the criminal trial, testified that he didn't know he was committing a crime when he initiated the shredding of Enron Corp. documents last year.

"[Duncan] thought what he was doing was right," Hardin said.

The case

Attorneys for both sides finished their closing arguments Wednesday, with the government meticulously laying out events at Andersen to show that the firm destroyed Enron documents with the intent of keeping them away from regulators.

Prosecutors narrowed in on the actions of Andersen in-house counsel Nancy Temple and the firm's legal department. Prosecutor Samuel Buell called the legal department a "driving force" behind the shredding of Enron documents. Buell portrayed Temple as a mastermind of document destruction. "She never says 'stop,' she never says 'retain,' she never says 'hold on to the Enron documents,' because she's interested in document destruction, not retention," he said.

Hardin argued Wednesday that the government rushed to judgment and destroyed a company of 28,000 people. Hardin also claimed that the government's star witness, David Duncan, was innocent of a crime.

Duncan called a meeting Oct. 23, when he was the firm's lead audit partner on the Enron account, and ordered employees to adhere to the firm's guidelines on "document retention," which calls for the destruction of irrelevant documents. Andersen fired Duncan in January and the former executive pled guilty in April to obstruction of justice. The fired auditor also served as a government witness in the Andersen criminal trial.

Andersen is accused of obstructing justice when it destroyed Enron documents last fall while on notice of a federal investigation. If convicted, the firm could lose its license to audit public companies and be subject to a $500,000 fine. Andersen has admitted that employees in its Houston office destroyed Enron documents but claims they were following firm policy and didn't destroy anything relevant.

Intent

For Andersen to be guilty, the government must prove that one person at Andersen "corruptly persuaded" another to shred documents and keep them away from regulators. Andersen employees in Houston started destroying Enron documents Oct. 23 and didn't stop until after Nov. 8, when Andersen received a subpoena from the SEC.

Jurors can consider Duncan's admission of guilt, but that is not enough to find the entire firm liable, said Stan Twardy, a former U.S. attorney for the state of Connecticut and now criminal defense lawyer with Day Berry & Howard.

"The jurors must independently find that Duncan and/or someone else corruptly destroyed documents," he said.

The "corrupt persuader" can be Duncan or anyone else at Andersen, like attorney Nancy Temple, who sent the Oct. 12 e-mail that reminded Andersen executives about the firm's policy on documents. But jurors in the criminal trial never got a chance to hear from Temple, since she chose not to testify and invoked her Fifth Amendment right against self-incrimination.

Duncan, who called the Oct. 23 meeting which spurred employees to destroy documents, testified in the criminal trial that he didn't know he was committing a crime when he initiated the shredding last year. In fact, Duncan said it took months for him to realize that he did commit a crime.

Duncan's reaction is typical of white-collar defendants who often need some time to come to grips with their actions. "I don't know of any white-collar criminal that immediately says, 'Yes, I did commit that crime,'" Twardy said. "Duncan's testimony didn't bother me."

Skeletons

Prosecutors on Wednesday brought out accounting scandals from Andersen's past. Specifically, Buell mentioned the firm's audit work for Waste Management Inc., which landed the firm on probation with the Securities and Exchange Commission.

Andersen knew it would be scrutinized yet again for its auditing of Enron, which filed the biggest bankruptcy in U.S. history Dec. 2 after collapsing under a load of off-the-books debt. Andersen, as Enron's auditor, approved Enron's financial statements.

As part of its agreement with the SEC last summer, Andersen agreed to take part in no future wrongdoing.

But as Enron collapsed last fall, Andersen panicked and began shredding Enron documents to avoid another investigation, Buell said Wednesday.

Even with all its evidence, the government's case is not a slam dunk, legal experts said. "There is a chance that Andersen wins with a hung jury," said Stephen Ryan, a former U.S. attorney now with the law firm Manatt, Phelps & Phillips.

Andersen's Hardin did a good job of trying to show there was an alternate explanation for the destruction of documents and raised doubt about the evidence against Andersen, Twardy said.

But whether this is enough for Andersen to win the day is unclear.

"Any case that goes to a jury, you don't know what is going to happen until they come back," Twardy said.  Top of page






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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.