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Andersen: For lots of good people, too little, too late.

Discussion in 'BBS Hangout' started by Mulder, May 31, 2005.

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  1. Mulder

    Mulder Contributing Member

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    http://news.yahoo.com/s/ap/20050531/ap_on_go_su_co/scotus_arthur_andersen

    WASHINGTON - The Supreme Court on Tuesday overturned the conviction of the Arthur Andersen accounting firm for destroying Enron Corp.-related documents before the energy giant's collapse.

    In a unanimous opinion, justices said the former Big Five accounting firm's June 2002 conviction was improper. It said the jury instructions at trial were too vague and broad for jurors to determine correctly whether Andersen obstructed justice.

    "The jury instructions here were flawed in important respects," Chief Justice William H. Rehnquist wrote for the court.

    The ruling is a setback for the Bush administration, which made prosecution of white-collar criminals a high priority following accounting scandals at major corporations. After Enron's 2001 collapse, the Justice Department went after Andersen first.

    Enron crashed in December 2001, putting more than 5,000 employees out of work, just six weeks after the energy company revealed massive losses and writedowns.

    Subsequently, as the Securities and Exchange Commission began looking into Enron's convoluted finances, Andersen put in practice a policy calling for destroying unneeded documentation.

    Government attorneys argued that Andersen should be held responsible for instructing its employees to "undertake an unprecedented campaign of document destruction."

    But in his opinion, Rehnquist noted that jurors were instructed to convict Andersen if the accounting firm had an "improper purpose," such as an intent to impede or subvert fact-finding in an "official proceeding." He noted jurors were instructed to convict, even if Andersen mistakenly thought it was acting legally.

    At trial, Andersen argued that employees who shredded tons of documents followed the policy and there was no intent to thwart the SEC investigation.

    The probe into Andersen led to just one guilty plea, from the firm's former top Enron auditor, David Duncan. But the conviction of the Chicago firm forced it to surrender its accounting license and stop conducting public audits. Some 28,000 workers had to find other jobs, and the company was left a shell of its former self.

    A ruling against Andersen would have had onerous consequences for businesses, whose discarding of files is an everyday occurrence. Experts say companies would have to keep all files for fear that any disposal, however innocent, could subject them to potential prosecution.

    According to Andersen attorneys, notes and drafts of documents were thrown away under the firm's document-retention policy in part because they were preliminary and could have been misconstrued.

    Andersen's appeal was backed by the National Association of Criminal Defense Lawyers. It argued in a friend-of-the-court filing that broad characterization of "obstruction" used in the jury instructions would also unfairly punish criminal attorneys who advise their clients to withhold evidence in legal ways.

    Such a broad reading could open defense lawyers and others to prosecution if they merely advise clients of their rights to assert legal privileges or review document retention policies, the criminal defense group said.

    The case is Andersen v. U.S., 04-368.

    **********************************

    For lots of good people, including a family member of mine this comes as small vindication for something they knew was wrong the entire time.
    Andersen executives went straight to the SEC as soon as they saw there were accounting issues at Enron and basicallly said "we think Enron has been telling us lies that made us cook they books unknowingly". The SEC took Anersen's gesture of good faith moved straight away with SEC violations against Andersen instead of working with them, and burned Andersen big time.
     
    #1 Mulder, May 31, 2005
  2. Rocket River

    Rocket River Member

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    So you think the shredding of documents was ok and Andersen did nothing wrong?

    Rocket River
     
    #2 Rocket River, May 31, 2005
  3. Mulder

    Mulder Contributing Member

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    Yes. Shredding of outdated documents is SOP in most businesses.
     
    #3 Mulder, May 31, 2005
  4. Rockets34Legend

    Rockets34Legend Contributing Member

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    Man, that really sucks.
     
    #4 Rockets34Legend, May 31, 2005
  5. droxford

    droxford Member

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    It's SOP at the law firm I work for.
     
    #5 droxford, May 31, 2005
  6. Icehouse

    Icehouse Contributing Member

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    I am not saying the shredding was right. However, the only reason the firm went out of business was because of this ruling.

    I worked in the Houston office during that time, and the majority of the employees hung around until the ruling came out (which meant that the firm could not audit SEC clients anymore). The majority of the people were going to stay, in Houston, and in other offices as well. Most employees did not start to bail until they had no choice.

    Prosecute the individuals who messed up, but don't destroy the whole firm and make thousands of people across the globe that did nothing lose their jobs....
     
    #6 Icehouse, May 31, 2005
  7. JuanValdez

    JuanValdez Contributing Member

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    I'm still glad they're dead. Sorry for your family member. But the people working for Andersen, just like the folks who worked for Enron, are eminently employable people. Has the family member in question found new work and recovered from the mess?
     
    #7 JuanValdez, May 31, 2005
  8. SamFisher

    SamFisher Contributing Member

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    They would have gone under regardless of any corporate criminal verdict - in fact they were dead long before then. The fact is, they were chief auditors for arguably the largest financial fraud in history, and not only failed to blow the whistle, which means they not only failed to blow the whistle but signed off on many of the fraudulent transactions - perception alone would have been enough to put them under.
     
    #8 SamFisher, May 31, 2005
    Last edited: May 31, 2005
  9. Icehouse

    Icehouse Contributing Member

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    No, they wouldn't have. The majority of the public clients and employees stayed around until the verdict came out (which meant the clients could not get an audit done by them and the employees would not have any public clients to work on). After the verdict came out, most of the public clients went to wherever their audit teams went, and vice versa....
     
    #9 Icehouse, May 31, 2005
  10. SamFisher

    SamFisher Contributing Member

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    You think a public company is going to go back to Arthur Andersen after they signed off on the fake statements for Enron?

    Ha.

    Ha ha!

    Ha ha ha ha!


    Also, do you have any idea the ultimate costs of Andersen's civil liability after this mess? Huge.
     
    #10 SamFisher, May 31, 2005
  11. PhiSlammaJamma

    PhiSlammaJamma Member

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    but if those documents haven't been shreaded, and the case is underway, I would think they would knowingly be destroying evidence pertinent to the crime. I guess I would want proof that documents would normally be shredded on this date and that said shredding was on the regular scheduled date to be destroyed, versus irregularities in the document destruction process.
     
    #11 PhiSlammaJamma, May 31, 2005
  12. SamFisher

    SamFisher Contributing Member

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    You're absolutely right, in most states you have an obligation to suspend document destruction policies when litigation becomes likely.
     
    #12 SamFisher, May 31, 2005
  13. Icehouse

    Icehouse Contributing Member

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    I didn't say any public client would go back to AA now. My point is that the majority of the public clients did not leave until this ruling came out, which prohibited AA from giving them an opinion.

    Once again, most of the big clients and employees were still on board until this ruling hit. The firm would have survived if they weren't prohibited from giving opinions on SEC clients.
     
    #13 Icehouse, May 31, 2005
  14. SamFisher

    SamFisher Contributing Member

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    Yeah, Worldcom would have stayed on board, so would Global Crossing, and I bet so would Dynegy -- well, at least for a little while.
     
    #14 SamFisher, May 31, 2005
  15. steddinotayto

    steddinotayto Contributing Member

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    Both of my brothers worked for Andersen before/during the Enron fiasco although they were in the IT side of the company. One jumped shipped when the Enron thing started and the other one stayed hoping that KPMG would bring him aboard after they bought Andersen. Both are with different companies now but I remember how they were happy that they had a high paying job and were pretty financially stable.
     
    #15 steddinotayto, May 31, 2005
  16. Icehouse

    Icehouse Contributing Member

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    Yeah, and all the other clients that didn't bail until the ruling hit as well....
     
    #16 Icehouse, May 31, 2005
  17. SamFisher

    SamFisher Contributing Member

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    yes, like Qwest, Sunbeam, Waste Management Inc, CMS Energy.

    Yup - chief auditing accomplice to fraud is a valuable niche that AA was the acknowledged as the market leader in filling, if only we had let them, they could have maintained a viable business model in this area indefinitely.
     
    #17 SamFisher, May 31, 2005
  18. Rocket River

    Rocket River Member

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    How do we know they were outdated?

    Amazes me . .. a man is shot by the cops. . .
    and people will say . . .if he wasn't guilty he should not have run

    but
    A company does something very suspicious
    like someone states CONVIENENTLY started shredding as
    the Axe was coming . ..
    then they get slapped .. . we scream bloody murder

    I don't know what the files were
    but the timing of the shredding is suspicious to me
    Esp a MASS SHREDDING

    Rocket River
     
    #18 Rocket River, May 31, 2005
  19. Icehouse

    Icehouse Contributing Member

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    Yes, a couple of corrupt individuals dealing with one account makes the enitr firm, and the thousands of other individuals accounting for things correctly corrupt. That makes sense. :rolleyes:
     
    #19 Icehouse, May 31, 2005
  20. Icehouse

    Icehouse Contributing Member

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    Slap the individuals responsbile. However, don't issue a ruling to kill the firm. In this case, the ruling that was issued (which killed the firm) was overturned.
     
    #20 Icehouse, May 31, 2005
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