Enron: Arthur Andersen Guilty of Obstructing Justice Via NY Transfer News * All the News That Doesn't Fit Reuters via Yahoo - June 15, 2002 Andersen Guilty in Obstruction of Justice Trial by C. Bryson Hull HOUSTON (Reuters) - A federal jury on Saturday found accounting firm Andersen guilty of obstructing justice in an investigation of its client, Enron Corp., pushing the once-venerated auditor a step closer to almost certain demise. The 12-member jury, which heard nearly five weeks of testimony before U.S. District Judge Melinda Harmon, found Andersen criminally intended to keep Enron audit records away from a U.S. Securities and Exchange Commission inquiry. Andersen said in a statement that it planned an appeal "based on flawed jury instructions and erroneous evidentiary rulings that precluded Andersen from presenting its entire defense." The head of the U.S. Justice Department's Enron task force, prosecutor Leslie Caldwell, applauded the verdict and said it gives the government's sprawling Enron investigation forward momentum. "It sends a strong message that we will get to the bottom of the Enron debacle and find those people responsible," Caldwell said. A key ruling by the judge on Friday appeared to break a logjam that kept the jury from delivering a verdict for nine long days. Siding with prosecutors, Harmon ruled the 12 jurors need not agree the same Andersen employee illegally persuaded others to shred Enron records in order to find the entire partnership guilty. Ultimately, the ruling mattered little: the jury said it agreed Andersen lawyer Nancy Temple had a criminal intent when she suggested changes to a memo recounting problems with how Enron classified certain third-quarter earnings in a press release. "Arthur Andersen did not approve that (press release), and Enron went along anyway and did it," said jury foreman Oscar Criner. "Then Arthur Andersen set about to change things, to alter documents to keep that away from the SEC." Among the changes Temple asked for was to have her name and that of another Andersen lawyer removed from the memo so they would not be called as witnesses in any legal proceeding. She has not been charged with a crime and did not testify at the trial. SHREDDING IGNORED The voluminous shredding of Enron audit files that Andersen undertook in late October was "superficial" evidence and had nothing to do with the verdict, Criner said. Nor did the four days of testimony from star prosecution witness David Duncan, Andersen's fired lead Enron audit partner. "We, to start with, discounted David Duncan's testimony," he said. Duncan's agreement to testify in exchange for a lighter sentence recommendation figured in that decision. The jury was split 6-6 at the start of deliberations, and 9-3 in favor of conviction when the deadlock was announced on Wednesday, the seventh day of deliberations, Criner said. The verdict means Andersen can no longer audit publicly traded companies without an SEC waiver, and could now face fines of up to twice the amount of the economic harm the judge determines its actions caused. Harmon set sentencing for Oct. 11, and lead defense attorney Rusty Hardin said the appeal could not come until then. Hardin, who often tangled vociferously with the judge and accused her of exhibiting an overwhelming pro-prosecution bias, criticized her ruling on jury unanimity as unfair. "We think that is a system out of balance, quite frankly, but it is something we have to live with," Hardin said. Although no one will go to jail, Andersen still faces a mountain of lawsuits, potential actions by state accountancy boards and possible civil punishment from the SEC. Few expect the partnership to survive in any real form. FUTURE UNCERTAIN Top Andersen partner C. E. Andrews said the firm has no regrets about going to trial and said it was too early to decide how the partnership would move forward. "The indictment substantially crippled our organization," Andrews said. "But we'll regroup and reassess based on today's outcome and do that in orderly fashion and not jump to any quick decisions." Chicago-based Andersen admitted destroying thousands of Enron records in a two-week period starting Oct. 23, as the SEC began looking into Enron's murky accounting of off-balance sheet partnerships that hid billions in debt. Prosecutors Andrew Weissmann and Sam Buell contended that the firm, which had run afoul of the SEC in earlier accounting scandals involving trash hauler Waste Management Inc. and appliance maker Sunbeam Corp., knew the SEC was likely to investigate its Enron work. Destroying records was Andersen's motive to avoid punishment, they argued. Enron, Andersen's second-largest client, spiraled into the biggest-ever U.S. bankruptcy filing on Dec. 2, forcing thousands out of work and wiping out billions in shareholder dollars and employee pensions. Andersen has lost more than 670 clients and seen its U.S. staff shrink from 26,000 to about 10,000 since its role in the mess became public. The high-stakes court battle went to trial just two months after the firm's March 7 indictment. ================================================================= NY Transfer News Collective * A Service of Blythe Systems Since 1985 - Information for the Rest of Us 339 Lafayette St., New York, NY 10012 http://www.blythe.org e-mail: nyt@blythe.org ================================================================= nytlab-06.15.02-19:39:50-24364