Verdict A Double-Blow To Andersen

David Duncan headshot, former Arthur Andersen auditor for Enron account, 1-24-02 AP

Andrew Cohen analyzes key cases and rulings for CBSNews.com and CBS News.
After agreeing to convict accounting firm Arthur Andersen of obstruction of justice Saturday morning, the 12 federal jurors in Houston did prosecutors one more big favor. They included in their verdict, and in their post-verdict public comments, word that in the end they had unanimously agreed on a single employee of Andersen that had engaged in the illegal conduct that supported the conviction.

In other words, jurors said with their words and their votes, the big fuss over U.S. District Judge Melinda Harmon's crucial jury instruction Friday may not have been particularly crucial after all. Since jurors came to their conclusion applying the legal position proffered by Andersen — that all jury members had to agree on the same individual's guilt in order to convict the firm — it will be monumentally harder for Andersen's fine attorneys to overturn the verdict on appeal.

Rusty Hardin and his team of defense attorneys still may be able to convince a federal appeals court that Judge Harmon committed a legal error Friday when she ruled that the Andersen jury could convict the firm even if jurors disagreed over the identity of a specific wrongdoer. That's essentially the question jurors posed to the judge earlier in the week when they sent her a note suggesting that while they all agreed that at least one Andersen employee had intentionally order the shredding of documents, they could not agree on who that person was.

Judge Harmon's response late Friday delighted prosecutors and infuriated the defense. Acknowledging that there was no legal precedent to guide her, she ruled anyway for the feds and told jurors it would be okay to convict even if they couldn't agree on a specific culprit. The defense moved for a mistrial and then licked its chops thinking about what a juicy appeal issue they'd have if the jury convicted based upon the judge's ruling.

But the Andersen jury may have effectively "cured" Judge Harmon's potential error by essentially ignoring the judge's broad interpretation of the scope of liability and applying the more conservative standard. That's what prosecutors will undoubtedly argue on appeal, they'll tell the appeals judges that even if Judge Harmon got it wrong, the jury made it right by their unanimous agreement on the culpability of a single Andersen employee. After the verdict itself it's hard to imagine a greater gift jurors could have given beleaguered prosecutors, who were supposed to have wrapped up this case with a conviction over one week ago.

Why did it take this long? Why did such a slam-dunk case turn out to be such a cliff-hanger? The answer is relatively easy. Andersen's lawyers were able during the trial to accomplish three very important things. First, the defense was able to make a reasonable — and reasonably honest — case that document shredding and e-mail deletion is a regular part of corporate life. That allowed them to explain Andersen's conduct in a much less sinister light.

Second, they were able to make a plausible case that the documents that were shredded and the e-mails that were deleted weren't all that important anyway. That allowed them to make an argument lawyers can only make in a case without victims, the "no harm, no foul" argument. Finally, the defense was able to portray Duncan as the exception rather than the rule at Andersen. That allowed them to contend that the government had made a deal with the worst of the firm's shredders at the expense of literally thousands of innocent employees.

All of which means that prosecutors shouldn't come away from this ultimately gratifying experience overly confident about their ability to successfully prosecute these sorts of cases in the future. The length of the deliberations and the many ambiguities that were exposed within the law in this area suggest that it won't always be good news for the feds when a jury comes back. The Justice Department, and the government attorneys on the ground in Houston should instead be thankful that they were able to make such an important point: Don't even think about shredding documents or deleting e-mails when you think your company has even a remote chance of being investigated in such a highly-publicized way.

As for Andersen, the firm still has plenty of other appeal issues available but I'm not sure any are likely to resonate up the judicial ladder. Judge Harmon made plenty of evidentiary rulings that the defense intends to appeal but federal trial judges are afforded great deference on appeal when it comes to in-court rulings. And it may be too late anyway. The brain drain, and the money drain at Andersen are likely to quicken now that the firm, collectively, is a convicted felon. Will there be anything left of the entity years down the road when the appeals are exhausted? Will anyone even care?

The accounting firm has already notified the Securities and Exchange Commission that it intends to halt public auditing on or before August 31 and I suppose one of the pending legal questions has to do with whether Judge Harmon and/or the SEC will seek to push up that date. Andersen can't just halt in mid-audit some of the work it now is performing on behalf of its loyal public clients. Imagine how that would negatively effect those clients. And it's conceivable that Andersen would ask Harmon to delay enforcement of that particular punishment pending appeal. On the other hand, there will be enormous pressure now on prosecutors and the judge to shut down the firm's public work as quickly as possible.

So now it is over, this white-collar case with a blue-collar feel. What a donnybrook it turned out to be. The lawyers didn't get along with each other and sparred with the judge as well. Stuffy accountants on the witness stand were confronted by stuffy attorneys at counsel table in front of jurors who probably never met either a lawyer or an accountant they trusted as far as they could throw. And the "victims," inasmuch as they existed at all in the case, always seemed to be on the side of the defense. If this really means the end of Arthur Andersen, no one will be able to say the firm didn't go down without a fight.
  • Brian Bernbaum

Comments

CBSN Live

pop-out
Live Video

Watch CBSN Live

Watch CBS News anytime, anywhere with the new 24/7 digital news network. Stream CBSN live or on demand for FREE on your TV, computer, tablet, or smartphone.