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Supreme Court Reverses Andersen Conviction

The U.S. Supreme Court overturned Arthur Andersen LLP's conviction arising from record destruction in the Enron case. In a unanimous opinion authored by Chief Justice William H. Rehnquist, the court held that the conviction was improper because of vague jury instructions that were too broad to allow jurors to properly determine whether the firm had engaged in a criminal act.

The statute in question applied to any person who knowingly and corruptly persuades another person, with intent to cause or induce any person "to withhold testimony, or withhold a record, document, or other object, from an official proceeding or alter, destroy, mutilate, or conceal an object with intent to impair the object's integrity or availability for use in an official proceeding." The Supreme Court considered the meaning of knowing and corrupt persuasion and an official proceeding.

The chief justice wrote that "the jury instructions here were flawed in important respects." In this instance, stated the court, "the jury instructions at issue simply failed to convey the requisite consciousness of wrongdoing." The chief justice continued that "it is striking how little culpability the instructions required."

The court also found the instructions to be flawed because "they led the jury to believe that it did not have to find any nexus between the 'persua[sion]' to destroy documents and any particular proceeding." In resisting any type of nexus element, the prosecution claimed that under the statute, an official proceeding need not be pending or about to be instituted at the time of the offense. The chief justice disagreed, however, as he stated that "it is one thing to say that a proceeding need not be pending or about to be instituted at the time of the offense, and quite another to say a proceeding need not even be foreseen." A knowingly corrupt persuader "cannot be someone who persuades others to shred documents under a document retention policy when he does not have in contemplation any particular official proceeding in which those documents might be material," stated the court

The chief justice also stated that the instructions allowed the jurors to convict even if the firm "honestly and sincerely believed that its conduct was lawful." At trial, the firm had claimed that employees who shredded documents were simply following firm policy and were not intending to interfere with any SEC investigations.

The 5th Circuit opinion affirming the conviction was reversed, and the matter remanded for further proceedings.