Enron audit supervisor may not do time


David Duncan, the former Arthur Andersen partner who cooperated with the federal government after pleading guilty to obstruction of justice in the investigation of Enron Corp., will most likely walk away without serving any prison time.

A federal judge is expected to dismiss the felony charge against Duncan after the government did not oppose his motion, filed Tuesday in Houston federal court, to withdraw his guilty plea. Duncan has been awaiting sentencing since his plea agreement in 2002.

Duncan's change of fortunes is tied to the vindication of his former employer by the Supreme Court, which in May overturned the accounting firm's conviction for obstruction of justice in the Enron debacle.

The high court ruled unanimously that Andersen was wrongly convicted of obstruction after it reminded employees to follow company policies and destroy documents in the weeks before it received a government subpoena for records in the financial scandal involving Enron.

The justices agreed with Andersen's argument that the trial judge had not properly instructed the jury on the law. The jury should have been told it had to find that Andersen knowingly committed wrongdoing when its lawyers advised its employees to comply with its standard document retention policy, the high court ruled.

On Tuesday, the Justice Department said it would not retry the criminal case against Andersen, acknowledging that it did not make much sense to prosecute a firm that is now nearly defunct.

Now, the high court's interpretation of the obstruction-of-justice law likely will clear the name of Duncan, the Andersen partner in charge of auditing Enron, the Houston-based energy trading firm.

Duncan never acknowledged in his plea deal "that he knew he was acting wrongfully" in directing the document shredding and destroying documents himself, his lawyers said in the motion, pointing out the Supreme Court's decision.

In other words, the Supreme Court has said that Duncan's actions in 2002 are no longer considered a crime, said Anton Valukas, a former U.S. attorney in Chicago.

Justice Department spokesman Bryan Sierra acknowledged as much when he said the agency does not feel it has the "legal basis" to oppose Duncan's plea-withdrawal motion. The department, though, has not granted Duncan immunity from prosecution in the Enron matter under different charges, Sierra added.

Still, the government's decision on Duncan is "extremely unusual," Valukas said. "I cannot recall another instance in my career where a person has pled guilty, testified at trial and then the government allows him to withdraw the plea afterward," said Valukas, a partner at Chicago law firm Jenner & Block.

Barry Flynn, Duncan's Houston lawyer, declined to comment.

Duncan's guilty plea was considered a huge victory for prosecutors at the time, because he had contended for months that he had no intent to commit a crime in telling employees to destroy documents. Andersen had maintained the same stance and had relied on Duncan in setting up its defense to the single charge of obstruction against the Chicago-based firm.

Andersen's indictment and the subsequent conviction helped lead to the downfall of the company - once one of the leading and most respected accounting firms in the world. About 28,000 people in the United States lost their jobs when Andersen went under in 2002. It now has a staff of about 200, many of them left to handle shareholder lawsuits against Andersen related to its work for Enron and other clients.

Many legal experts say the reversal of the conviction and the pending dismissal of the charge will help Andersen's defense in those cases.

By cooperating with the government, Duncan hoped to avoid the maximum penalty of 10 years in prison and a fine of up to $250,000 on the obstruction-of-justice charge.

Duncan was the key witness in Andersen's 2002 criminal trial, providing a detailed account of Andersen's auditing of Enron and the circumstances surrounding the shredding of documents.

He remained free and his sentencing had been postponed numerous times while he cooperated with prosecutors. He was the only Andersen employee to plead guilty to a crime in the investigation of Enron's collapse.

Even if the court allows Duncan to withdraw his guilty plea, he may not be finished with the Enron matter. Given his extensive knowledge of the company's accounting practices, he may be called as a witness in the January trial of former Enron executives Rick Causey, Jeffrey Skilling and Kenneth Lay.

Ameet Sachdev writes for the Chicago Tribune.

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