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Court to review auditor's conviction

The Supreme Court agreed Friday to review the conviction of the Arthur Andersen accounting firm for destroying Enron Corp.-related documents before the energy giant's collapse.

Justices will review a 5th U.S. Circuit Court of Appeals ruling that upheld the former Big Five accounting firm's June 2002 conviction.

At issue is whether the jury instructions at trial were too vague and broad for jurors to determine correctly whether Andersen obstructed justice.

"This appeal is enormously significant," said Stephen Presser, a business and law professor at Northwestern University, who called the government's prosecution "overkill."

"You had one of the oldest, most venerable accounting firms in the nation, and this indictment destroyed the firm."

The high court's action is a setback for the Bush administration, which made prosecution of white-collar criminals a high priority after 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, which almost never had bad financial news before, revealed massive losses and writedowns.

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

"The evidence showed that, to prevent Enron's and its own financial misdeeds and aggressive accounting from being uncovered . . . (Andersen) instructed its employees to undertake an unprecedented campaign of document destruction," acting Solicitor General Paul Clement argued in his court filing.

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.

"The firm is pleased that the Supreme Court has agreed to consider its case, given the importance of the legal issues and the potential impact on businesses and individuals," said Andersen spokesman Patrick Dorton.

Andersen's appeal is 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 could unfairly punish criminal attorneys who advise their clients to withhold evidence in legal ways.


Eighteen former directors of scandalized Enron Corp. have reached a $168-million settlement, including a $13-million payout out of some of their own pockets, with shareholders burned by the financial shenanigans that culminated in the company's stunning collapse. The agreement announced late Friday requires 10 of the former Enron directors to contribute a combined $13-million from the profits they reaped from selling company stock before Enron revealed it had been grossly exaggerating its sales and profits.