Houston Chronicle

Date: Wed 11/23/2005

By JOHN C. ROPER, TOM FOWLER, PURVA PATEL

GOVERNMENT prosecutors have closed the books on Arthur Andersen and decided not to retry the criminal case, which was overturned by the U.S. Supreme Court in May.

The move, detailed in an appellate court filing on Tuesday, essentially paves the way for the U.S. District Court here to entirely dismiss the charges with prejudice, meaning that what's left of the firm can no longer face criminal charges in the case that was tied to the Enron debacle.

It also allowed David Duncan, the only Andersen employee to plead guilty to a crime in the case and the prosecution's star witness, to most likely walk away without prison time.

"When weighing to question whether to retry this case, the question arises: Why would you charge a company that's already defunct?" a Justice Department official said on condition of anonymity. "That and the Supreme Court decision and some other factors weighed very heavily against retrying this case."

The Supreme Court found that U.S. District Judge Melinda Harmon's 2002 jury instructions were so vague that jurors could have convicted the company of obstruction of justice for innocently destroying documents related to the Enron investigation.

The high court ruled unanimously that the trial judge erred when she told jurors they could convict Enron's accountants even if people at the company
didn't know what they did was illegal.

After Andersen was found guilty, Harmon sentenced the Firm to a maximum sentence of a $500,000 fine and five years' probation, essentially handing
the company a death sentence. Some 28,000 Andersen employees were left without jobs. The Chicago-based firm employs about 200 workers whose role is largely to fend off civil suits.

Attorney Rusty Hardin, who represented Andersen in the 2002 trial, said the government's withdrawal signaled "vindication for those thousands and
thousands of employees whose organization was destroyed and who went on with the rest of their lives adamantly believing that the company they had given their careers to did not commit a crime."

Former Andersen employee Brandon Lamb, 30, was happy to see the case finally closed but overall found the news to be of little solace.

"The entire organization was prosecuted for the wrongdoing of a few, and I don't think that's fair," he said, adding he thinks the prosecution
overstepped its bounds. "I'm just glad it's behind us. I don't think dredging it up again is going do it any good. What else can they take? They
already took the whole Firm," said Lamb, who is studying law at the University of Houston.

Hardin said a dismissal of the criminal charges, which Harmon must still rule on, will also help with the dozens of civil cases Andersen still faces.

"Because all along, at every turn in the civil depositions, Andersen people have been asked, `Well, isn't it true that your company was convicted of so
and so crime?' " Hardin said. "They aren't going to be able to say that anymore."

The Justice Department would not comment directly on its decision to drop its fight against Andersen, but after the Supreme Court decision it steadily
maintained that it had a good case against the Firm.

Attorneys for Duncan, the top Enron auditor at Arthur Andersen, jumped at the opportunity to file a motion with Harmon on Tuesday, asking that he be allowed to withdraw his guilty plea.

In the motion, they note that in his plea he did not say he knew he acted illegally when telling employees to comply with the policy, only that he knew telling them to follow the policy would mean destroying documents and making them unavailable to the Securities and Exchange Commission and others.

The Enron Task Force will not oppose Duncan's motion because it does not believe it has the "legal basis" to do so, Justice Department spokesman Bryan Sierra said.

Duncan pleaded guilty to one count of obstruction of justice for telling Andersen staffers working on the Enron account to "comply with the Andersen document policy," which was to destroy all drafts, memos and other work papers as soon as a project was complete. Thousands of Enron documents were shredded by Andersen employees prior to investigators seizing them in late 2001.

Duncan was the government's star witness in the Andersen trial in early 2002, but his lack of emotion on the stand led many observers to question whether he believed he was guilty. He repeatedly answered questions using the same phrase, that he "knew the documents that I destroyed would not be available for others to review."

"We couldn't have paid David Duncan to be this good a witness," Hardin said during the trial. "I believe his testimony shows he did nothing to keep information from investigators."

Andersen released a statement late Tuesday saying it was "very pleased with the decision" that "represents an important step in removing an unjustified cloud over the professionalism and integrity of the people of Arthur Andersen."

While the Andersen chapter is closed for the Enron Task Force, the question observers are asking is how the government's legal team will fare in January in the trial of former Enron executives Rick Causey, Jeff Skilling and Ken Lay.

Houston trial lawyer David Berg didn't believe the failure of the government to get the prosecution of Andersen to stick will have much effect, if any.

Berg said it weakens the prosecutors' image as slayers of corporate wrongdoing, "but in the public's view, I think the public is looking for individual accountability in the form of Causey, Skilling and Lay."

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