Houston (June 18, 2004) -- Two years after Arthur Andersen's trial and conviction on a single count of obstruction of justice, three circuit court judges unanimously upheld a Houston jury's decision and denied the accounting firm's appeal to reverse the conviction, which effectively put an end to what was once the largest firm in the country.

The firm, once considered the "gold standard" of auditing, was found guilty on June 15, 2002, of destroying documents related to its audits of bankrupt energy giant Enron -- Andersen's largest client -- in an effort to keep them out of the hands of the Securities and Exchange Commission. Andersen ended its audit practice in August of 2002.

Andersen had asked the court to reverse its conviction, urging errors in four evidentiary rulings, misconduct by the prosecutor in his rebuttal jury summation, and two legal contentions regarding required proof.

In a 42-page decision, Circuit Judge Patrick E. Higginbotham wrote, "We are not persuaded that this conviction is flawed by reversible error and we affirm the judgment of conviction.” Higginbotham continued, "Andersen provides no authority to justify reversal of the jury’s verdict, and we find none. To the contrary, Andersen’s various assertions are belied by the underlying events."

According to published reports, a prepared statement by Andersen spokesman Patrick Dorton said, "We are disappointed by the appellate court ruling. However, given the constraints of the appellate process, we were not surprised by this decision."

"We continue to believe strongly that the criminal prosecution of a firm of 28,000 people was unjustified and the ensuing collapse of Arthur Andersen was an undeserved tragedy for its employees, clients and the business community at large," the Houston Chronicle reported Dorton as saying.

Among other things, the judges disagreed with Andersen’s contention that evidence presented by the government of the firm's troubles with the SEC relating to its audits of Sunbeam and Waste Management wasn't relevant to the Enron case. In the decision, Judge Higginbotham wrote, "These 'prior' acts were indisputably relevant to the question of Andersen’s intent in its destruction of Enron-related documents."

The court decision noted that in making its case, the government said that Andersen’s trouble with the SEC related to Waste Management and Sunbeam was the backdrop to the firm's destruction of documents in its internal investigation of its work for Enron. In the Waste Management case, Andersen was hit with a $7 million fine, at the time the largest ever imposed by the SEC upon a Big Five firm, along with censure and an injunction not to mislead in violation of the securities laws. Shortly after, the SEC filed an amended complaint in the Sunbeam suit leveling charges of fraud against Sunbeam officials and the Andersen partner in charge of that account. Andersen's Enron troubles began less than three months later.

Deputy Attorney General James Comey lauded the ruling as "an important victory not only for the Department of Justice and its Enron Task Force, but for all of the investigations being conducted by members of the President’s Corporate Fraud Task Force."

He added, "The Arthur Andersen conviction was a signal event in promoting a re-evaluation in this country of what is expected of corporations and their executives. The public demands that corporations and their managers be honest, law-abiding members of the community, and this prosecution, perhaps more than any other in history, demonstrated that. The old ‘business as usual’ will not be tolerated, and no corporation, no matter how big or how well established, is beyond the reach of the law."

-- Melissa Klein Aguilar

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