WASHINGTON — The Supreme Court overturned the criminal conviction of the Arthur Andersen accounting firm Tuesday, ruling unanimously that its shredding of two tons of Enron-related documents did not prove its intent to obstruct justice.
The ruling comes too late to save Andersen, which employed 28,000 people until it was driven out of business because of the 2002 conviction. But the justices' decision was welcomed by the business community, because the court issued a warning to prosecutors to tread cautiously in such cases.
Still, the government isn't expected to retreat from pursuing alleged executive wrongdoing because of the Andersen case.
The Sarbanes-Oxley corporate reform law, passed by Congress in 2002, imposed a host of new rules on businesses and made it easier for prosecutors to attack fraudulent conduct.
The Andersen ruling is "more of a symbolic setback than a practical one" for the government, said former federal prosecutor Robert A. Mintz, a partner at the Newark, N.J., law firm of McCarter & English.
The Enron Corp. memos, notes and drafts were destroyed in October 2001 as the firm was collapsing, but before the government launched an official investigation of Enron or Andersen, its auditor.
A jury in Houston debated 10 days before finding Andersen guilty. But the Supreme Court said prosecutors had not been forced to prove that Andersen's staff knew it was breaking the law by destroying old files -- that there had been criminal intent.
Tuesday's decision throws out the Bush administration's largest prosecution to date growing out of the Enron debacle. Though the administration moved quickly to prosecute Enron's Chicago-based auditor, it was slow to bring charges against top officials of the bankrupt energy trader in Houston.
"The wrongful jury instructions that the [government] insisted on using in the Andersen case was an attempt to criminalize noncriminal conduct," said Daniel Petrocelli, attorney for Enron Chief Executive Jeffrey K. Skilling. "While that attempt failed, 28,000 people and one of the top accounting firms in the world is now gone. That's how dangerous these prosecutions are. They do not belong in a criminal courthouse."
The court's opinion, by Chief Justice William H. Rehnquist, warned against charging someone with a crime for failing to assist the government in a pending investigation. In Andersen's case, the firm's partners were not charged with willfully ignoring Enron's actions or with lying to investigators. Instead, they were prosecuted for routinely destroying documents when a federal investigation was looming.
