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The testimony of former Enron auditor David Duncan helped a federal jury in Houston convict Arthur Andersen of obstruction of justice, but the same jury said it didn’t believe in Duncan’s guilt, even though he entered a guilty plea earlier this year. On the witness stand, Duncan denied any overt efforts to destroy documents related to now-bankrupt energy-trader Enron, shed little light on Enron’s accounting, and defended his maligned work checking Enron’s books. “We couldn’t have paid him to be a better witness,” lead Andersen attorney Rusty Hardin said after Duncan finished testifying last month. Yet a small segment of Duncan’s testimony, which had little to do with his own actions, swayed the jury toward a verdict of guilty Saturday. The conviction means Andersen — which must soon cease auditing public companies — faces probation and fines of at least $500,000 when the sentence is delivered Oct. 11. According to jurors, the knockout blow came May 14 when Duncan testified that in-house attorney Nancy Temple told him to remove a sentence and her name from a memo regarding Andersen’s take on Enron’s Oct. 16 earnings release, which was rife with bad news. “I believed it was misleading from a personal standpoint,” Duncan said. The same day, the first of four full days he spent on the witness stand during the six-week trial, Duncan recounted how he ordered employees on Oct. 23 to comply with the firm’s document retention policy, which calls for organization of important documents and destruction of extraneous material. Duncan said he knew compliance would mean items that might be of interest to a budding Securities and Exchange Commission investigation into Enron Corp. would be eliminated. He pleaded guilty to obstruction of justice April 9 and agreed to cooperate with the government in exchange for immunity for other possible crimes and the recommendation of a light sentence. But if this jury had tried him, panelist Jack Gallo said, Duncan wouldn’t have been convicted. “We had five (names) up there and crossed them through with a line as we got down to one,” Gallo said. One of the names crossed out was Duncan’s, despite his own admission and a guilty plea that was spelled out painstakingly for jurors. Jury foreman Oscar Criner, who was the last holdout before the panel delivered the verdict after 10 days of deliberations, called all the evidence regarding mass shredding and e-mail deletion “largely superficial and largely circumstantial.” Instead, the jury focused on the suggestion that Temple, based at Andersen’s headquarters in Chicago, gave Duncan regarding a memo he was writing about a conversation he had with Enron chief accounting officer Rick Causey. Temple asked Duncan to remove a sentence and to eliminate her as an addressee because it might increase “the chances that I might be a witness, which I prefer to avoid,” according to testimony and court documents. She also suggested Duncan delete “language that might suggest we have concluded the (Enron earnings) release was misleading.” Her attorney, Mark Hansen, said Sunday that Temple had only been doing her job. “It appears that the jury agreed to convict only because it came up with its own theory of liability that wasn’t even argued by the government,” Hansen said. “Ms. Temple’s edits to the memo were to make it accurate and preserve attorney-client privilege and couldn’t possibly be construed as obstruction of justice, and the government didn’t argue it was.” Temple still works for Andersen and has not been charged with a crime. Duncan is to be sentenced Aug. 26. Andersen, meanwhile, has lost more than one-third of its 2,300 public clients, and its rivals in what were once the Big Five accounting firms are scooping up clients. But the remaining Big Four — KPMG, Ernst & Young, Deloitte Touche Tohmatsu and PricewaterhouseCoopers — are keenly aware of what happened to Andersen, said Randolph Beatty, dean of the Leventhal School of Accounting at the Marshall School of Business at the University of Southern California. “If you were a partner and you observed this verdict, you would surely increase the steps in every audit you were involved in, spend more time on the documentation, be very careful about … what was written down,” Beatty said. “All of that leads to very severe increases in the time and fees for doing auditing.” Itzhak Sharav, an accounting professor at Columbia University, said that could also have a positive impact on business. “There should be an improvement in the quality of auditions, which means an improvement in the financial reporting by companies,” he said. Copyright 2002 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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