Justices Examine Andersen Verdict

The Supreme Court poked through the rubble of the Enron Corp. financial scandal Wednesday, questioning whether accounting firm Arthur Andersen, which came crashing down with the energy giant, got a fair criminal trial.

At issue are the jury instructions that led to the prosecution of what was once the fifth-largest accounting firm in the country. A lawyer representing Andersen argued that the instructions were stacked against the firm.

Chicago-based Andersen directed its employees in Houston to shred Enron records, the corporate equivalent of “wiping down the crime scene before the police get there,” Deputy Solicitor Gen. Michael Dreeben told the justices.

Dreeben said companies must preserve documents when there was a reasonable possibility that government regulators would want them.

Justices Antonin Scalia and Anthony M. Kennedy were skeptical about the feasibility of such file-keeping.

“You want criminal liability to attach to that?” Scalia asked, a touch of incredulity in his voice. “You want somebody to go to jail?”

The corporate practice of discarding files is an everyday occurrence and the government’s “sweeping finding” about preserving them will cause problems for every company and small business, Kennedy said. He told Dreeben that the Justice Department’s position “is like the Army: Make two copies of everything you’re going to throw out!”

Chief Justice William H. Rehnquist asked for a definition of documents as it related to the destruction of tons of records that went on at Andersen.

Notes and drafts of documents were thrown away under the firm’s document retention policy, in part because they were preliminary and also because they could be misconstrued, said lawyer Maureen Mahoney, representing Andersen.

Mahoney pointed out that FBI agents threw away their interview notes and that defendants in criminal cases “would love to have” them. Typewritten reports generated from FBI agents’ notes are retained.

To convict Andersen, the jury had to find that the firm corruptly impeded the fact-finding ability of an official proceeding. That threshold, Andersen contended, was set far too low.

“You are getting pretty thin as far as the knowledge of wrongdoing,” Justice David H. Souter said.