The Supreme Court of the United States overturned accounting firm Arthur Andersen’s conviction in a decision handed down today. The damage was done years ago to the once leviathan sized firm giving up thousands of employees and most of its customers.
The court said in the unanimous decision Chief Justice William Rehnquist wrote the opinion, “The jury instructions here were flawed in important respects.”
The heart of the matter was the destruction of documents by employees during the initial Securities and Exchange Commission (SEC) investigation of Enron. Andersen claimed it was standard procedure because of the shear volume of paperwork they go through. The looming consequence would be that all firms would be forced to hang onto all their documents.
The court said it wasn’t unlawful for managers to instruct employees to destroy documents on a regular basis and it’s assumed that sometimes they may do this to keep facts from the government and others.
“It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy under ordinary circumstances,” Rehnquist went on to say.
The problem critics had with this ruling, is that many felt that the jury made the right decision because, based on the wording of the law, Arthur Andersen broke it. The case centered around the aftermath of the now notorious Enron scandal. The authorities charge that when the accounting firm learned of the Enron investigation began shredding relevant documents with unrivaled vigor. The Supreme Court felt otherwise.
The real losers in this decision are former employees of Arthur Andersen. The once huge accounting firm employed nearly 30,000 people with offices spread throughout the globe before the scandal happened and the company was forced to turn over its licenses. After the scandal and subsequent court decision, the huge Arthur Andersen firm was down to 200 employees.
Arthur Anderson said in a prepared statement:
We are very pleased with the Supreme Court’s decision, which acknowledges the fundamental injustice that has been done to Arthur Andersen and its former personnel and retirees. We pursued an appeal of this case not because we believed Arthur Andersen could be restored to its previous position, but because we had an obligation to set the record straight and clear the good name of the 28,000 innocent people who lost their jobs at the time of the indictment and tens of thousands of Andersen alumni, as well as to help secure a fair resolution of the civil litigation facing the firm. This decision represents an important step in removing an unjustified cloud over the professionalism and integrity of the people of Arthur Andersen.
John Stith is a staff writer for murdok covering technology and business.
