Arthur Andersen conviction overturned
Jury instructions too vague in Enron document-shredding case
By Bill Mears
CNN Washington Bureau
WASHINGTON (CNN) -- The Supreme Court on Tuesday overturned the conviction of accounting firm Arthur Andersen, a symbolic victory for a nearly defunct company torn apart in a document-shredding case involving onetime energy giant Enron.
The ruling represents a major defeat for the federal government's aggressive efforts to fight corporate wrongdoing.
In a unanimous opinion, the nine justices on the high court concluded "jury instructions at issue simply failed to convey the requisite consciousness of wrongdoing." Chief Justice William Rehnquist wrote the opinion, saying, "Indeed, it is striking how little culpability the instructions required."
The opinion came unusually quickly after oral arguments in the case were held April 27. Lawyers for the Justice Department faced tough questioning from the bench during the arguments.
The ruling threw the case back to lower federal courts to sort out, but it gave no indication whether Arthur Andersen would be granted a new trial.
Andersen officials were convicted in June 2002 of obstruction of justice over the massive document destruction relating to its work for Enron, the energy services giant which a year before was facing a government probe of its complex finances.
The government likened Andersen's actions to "shredding its smoking guns." Deputy Solicitor General David Dreeben told the court, "It is the equivalent of sending someone to a crime scene, and wiping up the evidence before police get there with the yellow tape."
At issue for the court was whether the wording of jury instructions were improperly vague. Maureen Mahoney, attorney for Andersen, told the justices the government used improper legal definitions that made it impossible for the defendants to get a fair verdict.
The disagreement hinged on whether the term "corruptly persuading," contained in federal criminal statutes, in this case means "having an improper purpose ... to subvert, undermine, or impede" when it relates to obstruction of justice and witness tampering. The various legal standards of "criminal intent" were at the heart of Andersen's appeal.
In the ruling, Rehnquist noted prosecutors should have been more careful in its pursuit of Andersen.
"Such restraint is particularly appropriate here, where the act underlying the conviction -- 'persuasion' -- is by itself innocuous. Indeed, 'persuading' a person 'to withhold' testimony from a government proceeding, or government official is not inherently malign," Rehnquist wrote.
Several jurors said after their verdict in the criminal trial that they had concluded Andersen officials in October 2001 had suddenly ramped up a dormant document destruction policy, shredding tens of thousands of Enron-related papers. It was done at a time when Andersen executives acknowledged in memos they were aware of a probable investigation into Enron's accounting practices.
Andersen handled a large part of the financial accounting for Enron. The Houston-based energy company collapsed in late 2001, following allegations of widespread financial mismanagement. Corporate leaders were accused of exaggerating profits to stockholders and investors while hiding financial losses and debt.
Andersen itself is now nearly defunct, with only about 200 employees left, mostly handling pending legal matters. The company was once one of the top accounting companies in the United States, with 28,000 employees in the United States handling hundreds of top corporate auditing accounts.
The company defended its document retention policy as necessary financial housekeeping, and denied shredding files to block a future investigation.
The case is Arthur Andersen LLP v. U.S. case no. 04-0368.