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It may be cold comfort for decimated Arthur Andersen, but the Supreme Court ruled unanimously Tuesday that the accounting firm had been wrongly convicted for advising employees to abide by its document-retention policies in the face of impending investigations into its role in the Enron scandal. In so doing, the Court gave a surprisingly strong blessing to document policies that are common throughout corporate America, and to the advice that lawyers give to clients every day about how helpful they need to be to government investigators. “This is a very important decision for any lawyer who advises clients,” said Georgia State University School of Law professor Ellen Podgor, a white-collar crime specialist. “It’s a very strong message to the government that document-retention policies deserve respect.” She and others said the Court’s disapproval of the jury instructions at issue in Tuesday’s decision in Arthur Andersen v. United Statesmay even undermine parts of the Sarbanes-Oxley law that largely replaced the law involved in the Andersen case. Nonetheless, the Justice Department reacted to the decision by defending its case against Andersen and suggesting it might try to prosecute the firm again. “The Justice Department’s decision to charge Arthur Andersen was based at the time on the determination that the substantial destruction of documents in anticipation of an investigation by the Securities and Exchange Commission violated the law,” said acting Assistant Attorney General John Richter in a statement issued Tuesday. “We will carefully examine today’s decision and determine whether to re-try the case.” Because Andersen’s in-house lawyers advised employees to abide by its document policies just days before an SEC investigation began-and massive document shredding ensued-the firm was convicted in 2002 of corruptly persuading its employees to withhold documents. The conviction carried a $500,000 fine, but led to the collapse of the firm’s business, shrinking it from 85,000 employees to about 200 caretaker staffers at its Chicago offices. Overturning that conviction is symbolically important, some legal experts said Tuesday, but may not change real-world practices. “The world has changed forever since Enron. Nobody is going to send out a memo like that anymore, no matter what the Supreme Court ruled today,” said Brian Cogan, a litigation partner at New York’s Stroock & Stroock & Lavan who advises accounting firms. “But this does give comfort to in-house counsel that if they act in good faith in the advice that they give, they are not likely to be prosecuted.” Chief Justice William Rehnquist, writing for a unanimous Court, said the jury in Andersen’s case had been improperly instructed about the meaning of the law under which it was prosecuted: 18 U.S.C. �1512, which makes it a crime to “knowingly . . . corruptly persuade” others to withhold documents from an official proceeding. That wording, Rehnquist insisted, covers “only persons conscious of wrongdoing,” not company lawyers who merely advise employees to withhold documents. That kind of advice is “not inherently malign,” he said, using as an example a mother who advises her son to invoke his Fifth Amendment right against compelled self-incrimination. “Nor is it necessarily corrupt for an attorney to persuade a client ‘with intent to . . . cause’ that client to withhold documents from the government,” Rehnquist continued. He cited the 1981 case Upjohn v. United States, in which the Court said Upjohn was justified in withholding attorney-client documents from the Internal Revenue Service. “No one would suggest that an attorney who persuaded Upjohn to take that step acted wrongfully.” Rehnquist also said, “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 attacked the jury instructions, which said Andersen could be found guilty even if it “honestly and sincerely believed that its conduct was lawful.” The chief justice said, “It is striking how little culpability the instructions required.” Another element of the crime, in the government’s view, was that Andersen knew investigations were looming when it advised employees of the document policies. Rehnquist said no one can be guilty of the law “when he does not have in contemplation any particular official proceeding in which those documents might be material.” Paul Kamenar, senior executive counsel at the Washington Legal Foundation, said this aspect of the ruling could have an impact on future cases involving Sarbanes-Oxley, because that law covers corporate activities that occur in advance of any proceeding, whether or not the employees had the proceeding in mind. “Out of due process concerns, the Court might limit that scope,” said Kamenar, who participated in a brief in the case for the foundation and the U.S. Chamber of Commerce. Andersen issued a statement that combined a tone of satisfaction with resignation: “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.” The statement also suggested the ruling could aid former Andersen officials who face civil lawsuits stemming from their Enron-related activities. The ruling Tuesday was also a sign of Rehnquist’s continued active role in the work of the Court despite his battle with thyroid cancer. The Andersen case was argued April 27, the last day of arguments in the current term. Rehnquist wrote a 12-page opinion that won unanimous support, and he summarized it with a strong voice from the bench. “The swiftness and unanimity of the ruling not only underscores the symbolic importance of the Andersendecision, but that the chief justice remains the model of judicial efficiency,” said Gregory Garre, head of Hogan & Hartson’s appellate practice and a former Rehnquist law clerk. The ruling also displayed Rehnquist’s dry wit. The government had argued that in the sentence of the statute at issue, the word “knowingly” could not possibly modify the phrase “corruptly persuades” that appears later in the sentence, because the resulting combination of adverbs is an “inelegant formulation.” “Our experience has not taught us to share the government’s doubts on this score,” Rehnquist wrote, “and we must simply interpret the statute as written.” Tony Mauro can be contacted at [email protected].

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