Enron Accountants’ Case Up for Review

The Supreme Court agreed Friday to consider overturning the criminal conviction of the defunct accounting firm Arthur Andersen for having shredded more than two tons of documents as federal investigators began to look into the collapse of Enron Corp.

Andersen, Enron’s auditor, was one of the fabled Big Five accounting firms before it was fined $500,000 about three years ago and subsequently went out of business. The government’s prosecution and the jury’s guilty verdict sent a message that even a venerable and respected company could be harshly punished if it tried to obstruct an investigation.

The firm’s partners have continued to challenge the conviction as part of their defense against scores of pending civil lawsuits.

In something of a surprise, the justices granted review of the case over the strong objections of Bush administration lawyers. The appeal focuses on the words in federal law making it a crime to “corruptly obstruct” an “official proceeding” by persuading others to lie or hide evidence.

Andersen’s lawyers said it was “perfectly lawful” for their employees to destroy documents because the company had a long-standing policy of shredding paper after a few months. Moreover, they said the company had not been officially notified of a federal investigation when partner David B. Duncan called a meeting and reminded his co-workers to follow Andersen’s “records retention policy.”

In practice, that meant boxes full of drafts and memos were gathered up and trucked away to be shredded. Duncan later pleaded guilty, and his testimony helped lead to the firm’s conviction.

Andersen’s officials said they knew Enron was collapsing, and they knew their firm would come under investigation as the auditor for the energy trading giant. But they also maintained they were free to destroy documents until they received a subpoena from the Securities and Exchange Commission on Nov. 8, 2001.

The government prosecution “unjustly destroyed a proud and venerable American institution: a professional accounting firm that served leading American companies for nearly a century,” Andersen’s lawyers told the court. The justices will hear the case, Arthur Andersen vs. United States, in April.

Meeting on Friday for the first time since they recessed for the Christmas holiday, the justices voted to hear eight other cases, most of them involving technical matters of criminal procedure.

Meanwhile, the court said that Chief Justice William H. Rehnquist, who is being treated for thyroid cancer, will not be back on the bench next week.

“Because of continuing secretions caused by his tracheotomy and radiation therapy,” Rehnquist will remain at home, court spokeswoman Kathleen L. Arberg said.