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A WALL STREET JOURNAL ONLINE NEWS ROUNDUP, May 31, 2005
Supreme Court Overturns Arthur Andersen Conviction
In a unanimous opinion, justices said the former Big Five accounting firm's June 2002 conviction was improper because the jury instructions at trial were too vague and broad for jurors to determine correctly whether Andersen had obstructed justice.
The jury instructions here were flawed in important respects," Chief Justice William H. Rehnquist wrote for the court.
The ruling, not entirely unexpected given the court's skeptical questioning of the government's case during oral arguments of the appeal in April, is a setback for the Bush administration, which made prosecution of white-collar criminals a priority following accounting scandals at major corporations.
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 write-downs. Several top former executives have pleaded guilty to a range of fraud charges, including former finance chief Andrew Fastow. Criminal and civil cases are pending against others, including former Enron chief Kenneth Lay.
Andersen, which was intimately involved with Enron's management and had signed off on the energy company's books for years, put in practice a policy calling for destroying unneeded documentation, as the Securities and Exchange Commission began looking into Enron's convoluted finances. It subsequently became the first target of the Justice Department's crackdown on the accounting industry.
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
Government attorneys argued in their prosecution that Andersen should be held responsible for instructing its employees to "undertake an unprecedented campaign of document destruction." But in his opinion, Chief Justice 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.
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 Supreme Court's decision doesn't get Andersen off the hook, although it removes a tool from corporate prosecutions that had worried the business community. The reversal sends the case back to lower courts for further litigation, giving the government the chance to pursue new claims against the former accounting firm if it chooses to do so. Today's opinion doesn't offer any guidance on how the case should proceed.
The case now goes back to the Fifth U.S. Circuit
Court of Appeals in
Congress has since toughened document retention policies for both corporations and accounting firms to avoid actions similar to those taken by Andersen ahead of the formal Enron investigation.
Andersen is still reviewing the decision and
hasn't commented. (Andersen v.
Accommodating Inmates' Religious Practices
The high court upheld the constitutionality of a
federal law requiring state prisons to accommodate inmate religions.
Justices unanimously sided with
Justice Ruth Bader Ginsburg said the 2000 law, which was intended to protect the rights of prisoners, isn't an unconstitutional government promotion of religion. "It confers no privileged status on any particular religious sect, and singles out no bona fide faith for disadvantageous treatment," Justice Ginsburg wrote.
The law requires states that receive federal money to accommodate prisoners' religious beliefs unless wardens can show that the accommodation would be disruptive.
Opponents of the law had argued that inmate requests for particular diets, special haircuts or religious symbols could make it harder to manage prisons.
"We do not read [the law] to elevate accommodation of religious observances over an institution's need to maintain order and safety," Justice Ginsburg wrote. "We have no cause to believe that [the law] would not be applied in an appropriately balanced way, without sensitivity to security concerns." Justices left open the door for a future challenge, on grounds that the law as applied overburdens prisons.
The decision overturns a ruling by the Cincinnati-based 6th U.S. Circuit Court of Appeals, which had struck down part of the law, called the Religious Land Use and Institutionalized Persons Act, on grounds it violated the separation of church and state. (Cutter v. Wilkinson)
Also on Tuesday, the high court:
• Agreed
to consider Kansas' appeal of a state Supreme Court ruling that struck down a
1994 law that said if the evidence for and against imposing a sentence of death
is roughly equal, Kansas juries must choose death instead of life in prison.
The --The Associated Press and Mark H. Anderson of Dow Jones Newswires contributed to this article |
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