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By deciding to hear Arthur Andersen’s appeal of its obstruction of justice conviction, the U.S. Supreme Court will give guidance to in-house lawyers wondering how to handle document-retention programs without putting themselves or their companies at risk for criminal charges. On Jan. 7, the Supreme Court announced it would review Andersen’s conviction of obstruction of justice for destroying Enron Corp. documents. Andersen was convicted in 2002 in U.S. District Judge Melinda Harmon’s court in Houston and sentenced to five years of probation and a $500,000 fine. In 2004, the 5th U.S. Circuit Court of Appeals upheld the conviction, with a three-member panel of the court finding no reversible error on Harmon’s part. The issue the Supreme Court will consider is whether employees who reminded others at Andersen about the company’s document-retention policy were “corrupt persuaders” under the federal witness-tampering law, 18 U.S.C. 1512. Andersen alleges in its petition for writ of certiorari that the 5th Circuit’s “expansive interpretation” does not comply with Supreme Court precedent, is rejected by three other circuits and criminalizes conduct that occurred without “any consciousness of wrongdoing.” The National Association of Criminal Defense Lawyers, the Washington Legal Foundation and the Chamber of Commerce of the United States filed amicus curiae briefs in support of Andersen’s petition. The 5th Circuit’s reading of the federal witness-tampering provision presents lawyers with the risk of prosecution and imprisonment for doing their jobs, the NACDL argues in its amicus brief. “In order to pursue ‘zealous’ representation of any kind, a lawyer must know the boundaries between advocacy and obstruction. The Fifth Circuit’s decision blurs these lines and will deter defense attorneys from doing their jobs the way they should,” the association alleges in the brief. The brief notes that the law would put in-house lawyers and outside counsel at risk for prosecution, restrict a lawyer’s ability to represent clients zealously, and chill the attorney-client relationship. Andrew Weissmann, the director of the Enron Task Force, declines comment on the Supreme Court’s decision, but U.S. Department of Justice prosecutors argue in a brief opposing the certiorari that the definition of “corruptly persuades” does not warrant further review. The government alleges in the brief that prosecutors are unlikely in the future to use 1512 because of 18 U.S.C. 1519, a new law enacted in the Sarbanes-Oxley Corporate Fraud and Accountability Act of 2002. According to the government’s brief, 1519 prohibits the knowing destruction of documents in relation to or contemplation of any matter within the federal government. “Most federal prosecutors will henceforth use Section 1519 — which does not require proof that the defendant engaged in corrupt persua[sion] to prosecute document destruction cases, including cases in which the defendant persuaded or otherwise caused or aided and abetted subordinates to destroy documents, as here,” the government alleges in the brief. Rusty Hardin, Andersen’s lead trial lawyer, disagrees that Sarbanes-Oxley makes the Andersen appeal moot. “That’s an insane argument,” Hardin says. “What did they say? Well, what if Andersen was treated unfairly? It doesn’t matter because we came along and made it much clearer later [with Sarbanes-Oxley].” Hardin says a Supreme Court decision in Arthur Andersen LLP v. United States should provide guidance to a general counsel still wondering, even in the wake of Sarbanes-Oxley, how to manage a document-retention program and avoid criminal charges. “General counsel, when they look at that jury charge, they get scared to death. [It's] what they do all the time. If nobody has asked for the document and there was no outstanding request, they could get rid of it,” Hardin says. “The problem is this,” Hardin says. “If you look at that jury charge, there are several pages there that truly would allow very innocent conduct to be punished as criminal conduct.” Houston lawyer David Berg says the Supreme Court’s decision to review the Andersen conviction is a good sign for Andersen’s lawyers. He speculates that the high court took the appeal because of a split between the circuits on the issue. “They [Supreme Court justices] don’t take cases like this to affirm them. They take them to overturn them,” says Berg, a partner in Berg & Androphy. Christopher Bebel, a solo practitioner in Houston who sat through much of the Andersen trial, says a Supreme Court opinion will provide guidance to prosecutors as well as in-house lawyers and outside counsel. “Many attorneys practicing in the corporate sector are struggling to determine what conduct is off limits and what type of activities are permissible, and this should help clarify the situation; and that will be a benefit to general counsel and their outside attorneys as well,” Bebel says. “Ultimately, even if it’s reversed, in a long-term sense, it could even help benefiting the government. … It’s hard to say people knowingly engaged in wrongful conduct when the parameters of the activities that are permitted are so vague.” IN-HOUSER’S ACTION The action of an in-house lawyer was pivotal in the Andersen conviction. Prosecutors had alleged Andersen engaged in a massive destruction of Enron-related documents at a time when it should have known the Securities and Exchange Commission was investigating Enron’s financial reporting. In its defense, Andersen’s lawyers maintained the company’s efforts to follow its document retention policy were not intended to obstruct justice. Andersen was Enron’s accounting firm. Enron filed for bankruptcy in December 2001 after its stock took a nosedive, and Andersen withdrew from the accounting business in the wake of its indictment and conviction. Several jurors interviewed after the trial, which lasted for six weeks in May and June 2002, said at the time they agreed that Nancy Temple, an in-house lawyer at Andersen, acted with the corrupt intent to obstruct justice by keeping information away from the SEC. The jury foreman said it was Temple’s e-mail advice to former Andersen partner David Duncan, the lead accountant on the Enron account, suggesting he revise a note to the files about Enron’s third-quarter earnings statement, that convinced him Temple was the “corrupt persuader.” Temple was never charged. But in its petition for a writ of certiorari, Andersen alleges that the 5th Circuit should not have adopted the federal prosecutor’s contention that Temple’s behavior was “corrupt” simply because she tried to persuade others to engage in the “perfectly lawful conduct” of following Andersen’s document-retention policy. That’s despite the fact that one of the results of the persuasion was to frustrate the fact-finding ability in a future government proceeding, Andersen alleges. “Although it was perfectly lawful for Andersen to have a document retention policy that preserved only the final audit work papers, and perfectly lawful for Andersen’s employees and professionals to follow that policy, the United States argued that it was somehow a serious felony for Andersen’s in-house attorney and supervisors to remind its employees of the policy — even if they honestly and sincerely believed that their own speech was entirely lawful, and even if there was not the slightest hint of coercion, intimidation, or bribery in their persuasive speech,” Andersen alleges in the petition. Andersen alleges that the 5th Circuit’s holding creates a serious risk of prosecution for every company that has a document-retention policy. PROCEEDING WITH CAUTION If the Supreme Court overturns the Andersen conviction, it would be helpful to white-collar crime defendants and a little sobering to prosecutors, says Dan Cogdell, the criminal-defense lawyer in Houston who won an acquittal for former Enron employee Sheila K. Kahanak in her criminal trial last fall. Ever since the Enron Task Force won the Andersen conviction, Cogdell says he has told his clients to be particularly careful and cautious in how they approach document-retention programs and e-mail communication. “Ever since the Enron-like indictments have been falling like rain, I’ve been giving very, very cautious advice. It’s a very aggressive climate for business prosecutions,” Cogdell says. “You just can’t be too careful.” In November 2004, a jury in U.S. District Judge Ewing Werlein’s court in Houston found Kahanek not guilty of charges of conspiracy to commit wire fraud and to falsify books and records. Five other defendants, including one former Enron employee and four former employees of Merrill Lynch, were found guilty of those charges and will be sentenced in March. In United States v. Daniel Bayly, et al., the government brought criminal charges in connection with a December 1999 deal in which Merrill Lynch bought some electricity-producing Nigerian barges from Enron. The indictment alleged Enron parked the barge assets with Merrill, promising to buy them back within six months at a profit for Merrill, to “enhance fraudulently” its 1999 financial reports. Berg also says he is telling clients to “play it safe” because of the Andersen decision. “You tell your people that they shouldn’t destroy documents if they have even the vaguest notion that the SEC is sniffing around, or the FBI,” Berg says. Berg says that a Supreme Court opinion in the appeal would answer the question of whether the Andersen jury charge applies to people who innocently ordered document destruction or destruction of e-mails under a retention policy. “What bothers me is the Nancy Temple-type who has a document-retention policy [and] knows that there is an investigation going on. Who knows whether she did it corruptly or not?” he says. The National Association of Criminal Defense Lawyers says in its brief that the 5th Circuit’s reading of the Andersen decision “presents lawyers with the risk of prosecution and imprisonment for doing their jobs.” The group argues in its brief that a lawyer representing a client in connection with a potential criminal investigation — in-house counsel or outside counsel — who has a goal of preventing the government from developing evidence, could risk prosecution for having an improper goal with a corrupt purpose. “The result is that counsel may well be hindered from zealously protecting their clients’ interests for fear that their advocacy could create liability for themselves. This would staunch the essential flow of information between attorney and client,” the association alleges in its brief. In their amicus curiae brief, the Washington Legal Foundation and the Chamber of Commerce of the United States allege the Supreme Court should be reviewing the Andersen decision because of the conflict between the circuits on the interpretation of the witness-tampering statute. “The price of allowing case-by-case evolution of the interpretation of section 1512(b) is painfully high for the individuals and businesses affected,” the groups allege in the brief. The groups allege in the brief that the 5th Circuit decision criminalizes conduct that Andersen employees believed was lawful. “This Court should clarify the reach of section 1512(b), so that individuals and businesses know what they must do to comply with the law on the obstruction of justice,” the groups argue in the brief.

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