Other firms closely watch Andersen at high court

Clarity wanted on limits of company, legal actions

April 26, 2005|By Ameet Sachdev | Ameet Sachdev,CHICAGO TRIBUNE

As Arthur Andersen LLP goes before the Supreme Court tomorrow, aiming to overturn a criminal conviction that led to the collapse of the once venerable accounting firm, corporate America is holding its breath.

The case has broad consequences for companies and the lawyers who represent them. They hope the high court clears up some of the questions that the Andersen prosecution raised in 2002.

Among them: When is it proper for a company to enforce policies that allow for the destruction of e-mail and other documents? When do a lawyer's actions cross the line?

The answers to these questions are critical to companies and their employees in this new, get-tough era on corporate crime spurred by accounting fraud at Enron Corp., once one of Andersen's top clients.

But exoneration is critical to Andersen.

Yesterday, the company settled a separate lawsuit, agreeing to pay $65 million to WorldCom Inc. investors who claimed the auditors failed to protect them from the communications company's historic $11 billion accounting fraud.

Andersen was the last remaining defendant in the case; others had already settled.

When Chicago-based Andersen - once one of the largest and most respected accounting firms - revealed it had destroyed thousands of documents related to its Enron audits, the company became a pariah and lost its blue-chip clients.

Now, in its struggle for redemption, Andersen has some newfound supporters that have filed briefs on its behalf.

"We're here to get some clarity on the law with respect to document-retention policies and other issues," said Robin Conrad, senior vice president of National Chamber Litigation Center, the legal arm of the U.S. Chamber of Commerce.

At issue before the Supreme Court is a subtle legal question: Whether an e-mail from an in-house Andersen attorney reminding colleagues about the company's document-retention policy amounts to witness tampering as the federal government expanded inquiries into Enron. The answer hinges on the intent of the employees who directed the document destruction.

The chamber of commerce and other professional groups, such as the National Association of Criminal Defense Attorneys, urge the Supreme Court to narrowly interpret the law under which Andersen was prosecuted. Otherwise, the lower courts' judgments would make criminal a broad range of conduct that lawyers consider fair means of self-defense.

"Lawyers are in a Catch-22," Robert Weiner, a Washington attorney, said last week in a panel discussion on the Andersen case.

"You're supposed to zealously represent your clients," Weiner said. "But you're at risk if the government thinks your representation is too zealous."

A former U.S. attorney said he doesn't believe lawyers will be at greater risk of prosecution. Appearing on the same panel, Mark Calloway of Alston & Bird, a Charlotte, N.C., law firm, said there is nothing improper in the routine and regular destruction of documents. Lawyers will be at risk, he said, if the destruction is haphazard, as the government alleged in the Andersen case.

The government said widespread destruction of documents began after Oct. 12, 2001, when Andersen attorney Nancy Temple e-mailed a partner in Andersen's Houston office, which handled Enron's audits. The message came after Temple had determined that a Securities and Exchange Commission investigation of Enron's financial statements was "highly probable."

The destruction stopped only after Andersen received an SEC subpoena Nov. 8, 2001.

Four months later, the Department of Justice indicted Andersen on charges of obstruction of justice in destroying nearly two tons of paper and tens of thousands of e-mail messages.

But what had seemed like a slam-dunk for prosecutors took jurors 10 days to convict, and that after once having declared themselves deadlocked.

In its appeal, Andersen argues that the federal judge's jury instructions were so vague that it made it easier for the panel to convict the company.

The 5th U.S. Circuit Court of Appeals upheld those instructions and Andersen's conviction, calling the firm a member of Enron's "supporting cast."

Now the Supreme Court will decide if those instructions were proper.

The New York Times contributed to this article. The Chicago Tribune is a Tribune Publishing newspaper.

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