Andersen Gets Five Years, Fined $500,000
Wed Oct 16, 6:09 PM ET
story.news.yahoo.com.
By C. Bryson Hull
HOUSTON (Reuters) - A federal judge fined accounting firm Andersen $500,000
on Wednesday and sentenced it to five years probation for obstructing justice in
a probe of client Enron, a hollow punishment as the auditor is all but defunct.
C.E. Andrews, an Andersen director, represented the
company that once was considered the paragon of
accounting integrity before its disintegration.
Andersen paid the fine, and said it would appeal the
obstruction of justice conviction next week.
"We will go to our grave saying we are not guilty,"
said lawyer Rusty Hardin, who represented the
company in the federal trial.
The jury heard five weeks of testimony and
deliberated for nine days before rendering its verdict
on June 15. The company now employs less than
1,000 people, down from 85,000 worldwide before its
rapid demise earlier this year.
The sentencing comes exactly a year after Enron
Corp. (ENRNQ.PK) released a dismal third-quarter
earnings report that sparked its rapid spiral into
bankruptcy and harsh scrutiny of U.S. corporate
accounting practices.
Though Andersen (ANDR.UL) was charged after admitting it shredded hundreds
of Enron audits records, jurors decided the 90-year-old Chicago firm was guilty
because in-house lawyer Nancy Temple suggested removing her name from a
memo recounting internal discussions of the flawed earnings report.
Judge Melinda Harmon on Wednesday handed down the maximum sentence.
"I believe a message must be sent to the auditing community that the
destruction of documents will not be tolerated while an investigation is ongoing,"
Harmon said.
The judge made note of the fact that just a few months before the events
involving Enron, Andersen had signed an agreement with federal regulators that
it would not participate in accounting fraud again. She was referred to massive
fraud at trash hauler Waste Management Inc. (NYSE:WMI - news)
Since it is a corporate conviction, no one will serve jail time. But the firm, which
keeps a minimal corporate structure primarily to settle about 90 lawsuits, was
forced to pay the fine.
The conviction meant Andersen could no longer audit publicly traded
companies, but it was by then a moot point since the indictment had caused
nearly all of the firm's publicly traded clients to leave.
Andersen lawyers have said the appeal will focus on Harmon's jury instructions
that appeared to break a lengthy deadlock. It would also focus on Harmon's
admission of prosecution evidence about Andersen's problems with the SEC
involving clients Waste Management and appliance maker Sunbeam Corp.
In January, Andersen admitted it shredded or otherwise destroyed thousands of
records involving its work for Enron. Andersen fired lead Enron audit partner
David Duncan and began trying cut a deal with the SEC and the U.S. Justice
Department (news - web sites).
The talks subsequently fell apart, and Andersen was indicted in March. The firm
called the indictment a death sentence, and that prophesy rang true as more
than 700 clients abandoned it in the ensuing months.
Duncan in April pleaded guilty to obstruction of justice and agreed to serve as
the prosecution's key witness in the trial, effectively cutting off a second round
of plea talks. He still awaits sentencing.
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