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Collateral damage

Once a nearly century-old Big Five accounting firm with 28,000 employees in this country and some 85,000 around the globe, Arthur Andersen LLP collapsed in the wake of its 2002 criminal conviction for shredding documents related to Enron Corp.
Today, all that’s left of Andersen is a Chicago office with a few hundred employees on cleanup duty-and, thanks to the U.S. Supreme Court, a bit of its former reputation.
The justices, in a unanimous decision, overturned Andersen’s obstruction-of-justice conviction. Writing for the court, Chief Justice William Rehnquist said the trial judge erred by adopting the government’s position that proof of intent was not necessary to convict.
“The jury instructions at issue simply failed to convey the requisite consciousness of wrongdoing,” the chief justice wrote. “It is striking how little culpability the instructions required.”
Many companies have what euphemistically are known as “document retention policies”-guidelines for destroying old or sensitive papers. Telling subordinates to comply with such a policy in itself is not wrongful behavior, the court ruled.
But the justices did not stop there. Even ordering or persuading someone to withhold testimony or documents from a government official or proceeding “is not inherently malign,” wrote Chief Justice Rehnquist, citing as an example a mother who persuades her child to invoke his right against compelled self-incrimination.
Without evidence of dishonesty, the “requisite intent to obstruct” is absent.
This decision is not a finding of innocence, and no one should doubt that top partners at Andersen-which previously had settled fraud-related cases involving financial statements by Waste Management Inc. and Sunbeam Corp.-had created an environment that invited trouble.
But by prosecuting the company instead of responsible individuals, many of whom landed on their feet at other top accounting firms, the government caused harm to thousands of Andersen employees who did not deserve it.
Andersen was prosecuted under a law superseded by the Sarbanes-Oxley corporate reform act, which has even tougher standards. One hopes prosecutors will be more judicious in applying it.

06/03/05 (C) Rochester Business Journal


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