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The Arthur Andersen trial shows that it’s important for corporate insiders to think about how their conduct in risky situations will appear to the public — not just whether it’s technically legal. That’s a conclusion drawn by several prominent lawyers interviewed about the conviction of the accounting firm. They draw broad lessons from the trial, in which jurors said they focused on the acts not of the accountants at Andersen but of an in-house attorney. “The real lesson of the Andersen trial,” says Thomas Gottschalk, executive vice president and general counsel of General Motors Corp., “is that major calamities can occur from what at the time seem to be relatively routine tasks which lawyers perform. The great challenge for the inside lawyer is to always step back and use some far-sighted perspective on what they’re doing and saying — and what they’re advising their client to do and say.” Lawyers should provide objective advice, not assume that auditors are doing what’s appropriate, he says. “Had lawyers at either Andersen or Enron played more of that role,” he says, “perhaps some of these questionable accounting practices would not have been adopted.” Several lawyers echo his sentiment on the need to attend to the spirit as well as the letter of the law. “Whether you’re a lawyer or an accountant or a business person, your actions are at risk of being reviewed after the fact by people that are going to put a different lens on it than mere technicality,” says William Lytton, GC of International Paper Co. and chairman of the American Corporate Council Association. Charles Elson, a law professor at the University of Delaware and director of its Center for Corporate Governance, says: “Everything one does should be viewed as potentially ending up on the front page of the newspaper.” Nearly everything that Andersen lawyers did seems to have landed there. After a six-week criminal trial in Houston, on June 15 a federal jury convicted the firm of obstruction of justice for impeding an investigation by securities regulators into the collapse of Enron. Four jurors described their 10 days of deliberations, explaining that their decision was based not on Andersen’s massive shredding of documents but on a single e-mail that Andersen lawyer Nancy Temple sent to David Duncan, the firm’s lead partner on its Enron audit team. Joel Seligman, dean of the Washington University School of Law, says the significance of the trial is that it’s likely to encourage more Enron-related charges. “There’s a temptation to focus on some remarks that were made by jurors about what led to their guilty verdict and miss the real point to the story,” he says. More important is the confidence the government has gained, which will “increase the likelihood that the Justice Department will be confident in bringing additional prosecutions.” He likens the trial to the prosecution of Dennis Levine during the insider trading scandals of the 1980s. Levine’s conviction isn’t one everybody remembers, he says, but it gave prosecutors the momentum they needed to go after bigger fish like Ivan Boesky and Michael Milken. Leslie Caldwell, who heads the Justice Department’s Enron task force, hasn’t said who’s next. She hasn’t ruled out additional prosecutions of Andersen employees. John Olson, a partner at Los Angeles’ Gibson, Dunn & Crutcher and chair of the American Bar Association’s corporate governance committee, says he doubts that will happen. The government would risk “looking like a bully” if it went after Nancy Temple and is more likely to turn to Enron now, he says. Former Chief Financial Officer Andrew Fastow and possibly former chief executives Kenneth Lay and Jeffrey Skilling are the likely targets, he says. Several lawyers voiced concern that Temple was singled out and regret that Andersen was prosecuted at all. TARNISHED PAST It wouldn’t have been, Seligman says, had it not been for a series of audits that failed to catch fraud and led to regulatory investigations. The Securities and Exchange Commission fined the firm for its audit of Waste Management, and Andersen pledged not to repeat its mistakes. “I still remain uncertain as to the wisdom of bringing the case in the first place,” he says. Others are more emphatic. “The Department of Justice never should have brought this indictment,” says William Ide, a former ABA president and Monsanto GC, now of counsel at McKenna Long & Aldridge. “Too many innocent lives were harmed. Too much economic harm was done. There had to be a better way to find the cancer and cut it out.” As counsel to the U.S. Olympic Committee during the scandal-ridden Salt Lake City games, he advised it to hire an independent investigator to conduct a public inquiry. It worked, he says, and if Andersen had done likewise and dismissed those at fault, it might have survived. “The jury did what it had to do,” says Ide, “but it’s just inconceivable to me that a lawyer’s decision on one sentence determines whether Andersen is in business or out of business.” Columbia University law professor John Coffee believes the jury’s decision went deeper. “What’s fairly unique,” he says, “is that a jury that doesn’t believe the principal theory offered by the government is sufficiently disturbed by the relationship between Andersen and Enron that they work hard for 10 days as a kind of roving commission of inquiry until they find a theory under which they can convict.” But it only happens, he says, “when you have a jury that believes something is fundamentally wrong.” Coffee, who teaches courses on white-collar crime, says there’s a lesson in the frequency with which people “think that they can talk their way out of” trouble or “fix the problem.” More than half of all white-collar convictions involve behavior that occurred after an investigation had been launched, he says. The message that lawyers need to convey to their clients, says Ide, is that “the court of public opinion ultimately decides the fate of a public company. Your fate can be decided in the newspapers and in the halls of regulators before you ever get into a courtroom.”

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