Andersen guilty
Once grand accounting firm now faces five years probation, $500,000 fine and possibly its own end.
June 16, 2002: 4:43 PM EDT
By Luisa Beltran, Brett Gering and Alice Martin

NEW YORK (CNN/Money) - A jury Saturday found Arthur Andersen guilty of obstructing justice, all but sealing the fate of the once mighty accounting firm.

After a six-week trial and 10 days of deliberations, jurors convicted Andersen for obstructing justice when it destroyed Enron Corp. documents while on notice of a federal investigation. Andersen had claimed that the documents were destroyed as part of its housekeeping duties and not as a ruse to keep Enron documents away from the regulators.

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Andersen now faces up to 5 years probation plus a $500,000 fine.

The 12-member jury reconvened at the Houston court house at 10 a.m. ET and shortly thereafter declared that they had a verdict. Judge Melinda Harmon read the decision at 10:25 a.m. ET. Later, when the jurors were polled, they all individually said "guilty."

Government lawyer Andrew Weissmann said the case sends a signal. "When you expect the police, don't destroy evidence," he said. "For Andersen, the police was the [Securities and Exchange Commission]."

Leslie Caldwell, chief of the criminal division at the U.S. Attorney's office in San Francisco, led the investigation into Andersen and is also head of the Enron task force. She vowed to get to the bottom of the "Enron debacle," but declined to comment on any future indictments.

"We are not finished with Arthur Andersen," she said.

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Altered document convinced jurors of Andersen's guilt

The verdict avoids a major embarrassment for the government, which had been expected to easily win the criminal prosecution of Andersen.

"From very beginning the government always had little to gain and a great deal to lose in proceeding to trial against Andersen," said Robert Mintz, former U.S. prosecutor and expert on white-collar crime and now partner with the law firm of McCarter & English. "The thrust [of their investigation] will now shift to Enron."

The "corrupt persuader"

The verdict comes a day after a crucial ruling from Harmon. Harmon, on Friday, said that the jury does not have to unanimously find that one "corrupt persuader" encouraged other Andersen employees to shred documents and keep them away from regulators.

Instead, the jurors could disagree on who actually acted as the guilty party as long as they agreed that someone acted knowingly and with corrupt intent.

  graphic  Related documents  
Oct. 16, 2001 E-mail from Andersen's Attorney Nancy Temple

Jurors, when questioned by CNNfn afterward, said that they all agreed that Nancy Temple was the "corrupt persuader." Temple is the Andersen attorney who sent the Oct. 12 e-mail that reminded executives about the firm's policy on retaining 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.

Since the jurors agreed on one corrupt agent, the verdict might be able to withstand Andersen's appeal, said Stephen Ryan, a former U.S. attorney now with the law firm Manatt, Phelps & Phillips.

"This last issue was a most interesting issue and will be important focal point," Ryan said. "It will be an interesting appeal."

How successful Andersen will be in their attempt to overturn the verdict is unclear. But government prosecutors will be looking to prosecute other individuals at Andersen, including Temple, Mintz said.

Prosecutors had identified four guilty agents at Andersen, including fired audit partner David Duncan, who testified as a government witness.

"They'd be hard pressed not to seriously consider prosecution against the three other individuals since their conduct was similar to Duncan and he pled guilty," Mintz said.

Andersen's fate

The verdict will likely be a fatal blow for the 89-year-old accounting firm, which is now operating as a shell of its once-powerful self. The firm has laid off 7,000 employees, sold many of its practices in the United States and has lost more than 650 of its 2,300 public audit clients this year. Thousands more employees in the United States and around the world are likely to lose their jobs as the firm shrinks.

The Securities and Exchange Commission said Saturday that the accounting firm Arthur Andersen LLP has agreed to cease practicing before the Commission by Aug. 31, "unless the Commission deems another date is appropriate."

Andersen lead defense attorney Rusty Hardin, in a conference afterward, said that the accounting firm was fighting for its legacy. "The jurors tried to do what they [thought] was right," he said. "Obviously, we are disappointed."

But Andersen is not through fighting and will file an appeal once it is sentenced on Oct. 11, Hardin said.

Andersen partner C.E. Andrews said the accounting firm will not close the doors to its offices just yet. "This was our chance to tell our story," he said. "We respect the process but the process is not over."

Now that the criminal trial is over, Andersen still has a fight on its hands. The Texas state accounting board has filed a motion to revoke Andersen's license in that state because of its role in Enron's collapse. The board is also seeking $1 million in fines.

Hardin warned Saturday that Andersen will fight every single accounting board that takes action against the firm. "Come on down," he said. "We will be there."

Andersen still faces an investigation by the Securities and Exchange Commission. Before the criminal trial in Houston started, Andersen had been on the verge of entering a settlement with the regulator, sources close the situation have said.

But more importantly, the firm is still a defendant in the class-action lawsuit filed by Enron shareholders and employees. Talks between the two sides broke off last month after Andersen offered $300 million to resolve all civil actions against it. The Enron Corp. creditors' committee has also signaled that they may go after the 1,700 partners of the accounting firm.

The bickering

During much of the trial, Hardin bickered with prosecutors and even got into squabbles with Judge Harmon, which led to one memorable shouting match.

Government lawyer Andrew Weissmann declined to comment on Hardin's conduct during the trial. "It didn't' work in this case," was all he said.

The grandstanding was part of Hardin's job, Ryan said. "Hardin has to be strong enough

to believe in what he is doing even when everyone disagrees with him. He nearly pulled it off."  Top of page