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Arthur Andersen’s obstruction of justice trial wasn’t about shredding or David Duncan after all. Jurors who returned a verdict Saturday in Houston say they found the 89-year-old accounting firm guilty of obstruction of justice because an in-house lawyer wanted to alter an internal document about Enron Corp.’s third-quarter earnings report. That gave the jury a reason to find Andersen acted with the intent to keep information from the Securities and Exchange Commission. “By altering, then they had the intent,” jury foreman Oscar Criner, a computer science professor at Texas Southern University in Houston, said in an interview with reporters just minutes after the verdict was returned Saturday. “It’s against the law, altering that document with the intent to impair the fact-finding ability of an investigation,” he said. The verdict in the jury’s 10th day of deliberation ended a six-week trial in U.S. District Judge Melinda Harmon’s court in Houston. Andersen, formerly Enron’s accounting firm, was indicted in March for obstruction of justice for destroying Enron documents at a time when the SEC was investigating the energy trading company of Houston. The beleaguered accounting firm, which notified the SEC after the verdict that it will end auditing public companies by Aug. 31, will appeal after it is sentenced Oct. 11. The maximum sentence is five years’ probation and a $500,000 fine. While Duncan, the lead auditor on the Enron engagement, spent five days on the witness stand and prosecutors devoted considerable time to evidence and testimony about the document destruction, it all came down to that single e-mail from in-house lawyer Nancy Temple to Duncan about Enron’s earning release. In an e-mail Oct. 16, 2001, Temple asked Duncan to remove her name from an Andersen internal memo about Enron’s earnings release detailing the disagreement between Andersen and Enron over the use of “non-recurring” to describe a $1 billion charge. According to trial evidence, Andersen advised against it, but Enron used the word anyway. Temple suggested in the e-mail that any reference to her and the legal group would waive attorney-client privilege, and she raised the issue of what the firm should do to protect itself from a securities investigation. “I suggested deleting some language that might suggest we have concluded the release is misleading,” Temple wrote in the e-mail to Duncan. Duncan did revise the internal memo, which was dated Oct. 15, and deleted reference to Temple. He also deleted a sentence that said he had informed Rick Causey, Enron’s chief accounting officer, that Andersen was aware of situations where the SEC had taken an enforcement action against a company when it believed press releases were materially misleading. Criner said it was that memo that convinced him that Temple intended to keep information from the SEC. “Enron used the phrase ‘non-recurring’ to describe things that were happening in that earnings release. Arthur Andersen did not approve of that, but Enron went ahead anyway,” Criner said. “Then Arthur Andersen went ahead to change things, to alter to keep things from the SEC.” The jury agreed on Temple as the Andersen agent who had the intent of corruptly impeding an official investigation. Defense attorneys, who argued all along that government witness Duncan did not commit a crime, were stunned that the jury didn’t consider the shredding in its guilty verdict, but instead decided Temple was the “corrupt persuader” who acted to keep information from the SEC. “It is utterly shocking,” says Charles Rothfeld, a partner in Chicago-based Mayer, Brown, Rowe & Maw. “It’s editing on an internal memo?” Rothfeld said in disbelief after hearing four of the jurors talk Saturday about their deliberations. But Rothfeld, who argued many legal points during the trial, said the fact that the jury found Andersen guilty on a point that has nothing to do with shredding doesn’t necessarily open an avenue of appeal. “Ordinarily you can’t appeal what a jury says outside the jury room,” he said. “The more important point immediately is this is a repudiation of what the government said took place” and a vindication of Andersen’s account, he said. Andersen was charged with obstruction for destroying documents from Oct. 10 through Nov. 9, 2001, in its Houston, Portland, Ore., London and Chicago offices. But prosecutor Andrew Weissmann, an Assistant U.S. Attorney, said it was “entirely appropriate” for the jury to focus on that “terrific document.” He said the two versions of the memo and Temple’s e-mail to Duncan, which the government introduced as evidence, show that a draft version of the memo was more truthful than the final document. He said Temple “sanitized” the draft until it would be acceptable. “When you expect the police, don’t destroy evidence,” Weissman said Saturday shortly after the verdict. Weissmann prosecuted the case against Andersen along with Samuel Buell and Matthew Friedrich, also Assistant U.S. Attorneys. Leslie Caldwell, a prosecutor who heads the Enron Task Force, said the guilty verdict sends a strong message that the task force will vigorously pursue Enron. “We will get to the bottom of the Enron debacle,” said Caldwell, an Assistant U.S. Attorney in San Francisco who sat in Harmon’s courtroom for much of the trial. Andersen’s lead defense attorney, Russell “Rusty” Hardin Jr. of Houston, suggested Saturday that the Department of Justice “foolishly” decided to devote its resources to going after Andersen instead of Enron. “Justice looked for a scalp they could hold up,” Hardin, of Rusty Hardin & Associates, said. “This does nothing to help investors.” Temple did nothing wrong, says her lawyer, Mark C. Hansen, a partner in Kellogg, Huber, Hansen, Todd & Evans in Washington, D.C. “What Nancy Temple suggested to make the memo accurate and to preserve the privilege was entirely appropriate and sound legal advice, and if what she did was a problem, then every lawyer who advises clients in America better find another line of work,” Hansen says. The jury of nine men and three women was instructed to determine beyond a reasonable doubt that at least one Andersen agent acted with improper purpose to subvert, undermine or impede an official investigation. While Duncan was touted as the key witness — he pleaded guilty in April to obstruction of justice and agreed to testify for the government — Buell told jurors in his closing argument the firm’s legal department directed the document destruction to protect the firm from civil suits and regulatory actions. “Indeed, ladies and gentlemen, Andersen’s legal department was the driving force behind this, and they were in the best position to know the law and the risks to Andersen. And they were on the phone almost every day to Andersen’s top managing partners,” Buell said June 5. “They knew the SEC was coming,” Buell told the panel of 12 jurors and four alternates. “It was the legal people. They were brought in early to get on top of this. You know why, ladies and gentlemen, you know why? You know that Warren Zevon song ‘Lawyers, Guns & Money’? They knew what would go wrong legally for the firm.” The four jurors who talked about their deliberations immediately after the verdict say they put five individuals on a list of potential corrupt persuaders, but gradually crossed them off until unanimously agreeing that Temple was the corrupt Andersen agent. They said the list included Duncan and Thomas Bauer, another Andersen partner on the Enron audit, and Michael Odom, an Andersen practice director in Houston who told others at Andersen at a training session to follow the firm’s document retention and destruction policy. Criner said he discredited Duncan’s testimony because of his guilty plea, and another juror, David Schwab, an executive pastry chef at The Woodlands Conference Center in The Woodlands, located north of Houston, said “it became clear we all weren’t going to agree on David Duncan.” “It’s just clear he had a lot of baggage,” Criner said. Juror Jack Gallo of Kingwood, Texas, a general manager for an airline, said Duncan “got way too close to Enron.” Criner said the jury was initially evenly split between an acquittal and a guilty verdict. The next vote was 9-3, and then at the end, Criner was the final holdout before the jury decided unanimously to find Andersen guilty of obstruction. He said, “Changing my mind was a long process of study of the evidence [and] testimony.” Brenda Sapino Jeffreys is a senior reporter with Texas Lawyer , a division of American Lawyer Media and an affiliate of law.com.

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