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Andersen Fined, Receives Probation For Enron Obstruction

Oct 16, 2002 | The Wall Street Journal

A federal judge sentenced Arthur Andersen LLP on Wednesday to five years probation and fined the firm $500,000 for its role in obstructing the investigation into failed energy giant Enron Corp.

Andersen was convicted in June for its role in shredding and altering Enron related documents last year as the Securities and Exchange Commission was probing the energy company's finances. The guilty verdict came after a six-week trial in Houston that included 72 hours of jury deliberations over 10 days.

Last month, a federal judge upheld the verdict, which Andersen is appealing.

Wednesday's sentence was the maximum Andersen could have received.

The firm shut what was left of its crippled auditing practice Aug. 31 and has fewer than 2,000 of 28,000 employees remaining on the payroll.

Jurors said after the trial they dismissed the shredding and convicted the firm because in-house Andersen lawyer Nancy Temple advised David Duncan, Andersen's former top Enron auditor, to remove a sentence and her name from a memo about Andersen's opinion of Enron's Oct. 16, 2001, third-quarter earnings statement.

Andersen disagreed with Enron calling a $618 million third-quarter loss " nonrecurring" in the release when previous transactions from which profits were recorded weren't called one-time revenues. Ms. Temple suggested an Andersen memo not call the release "misleading."

Ms. Temple also told Mr. Duncan her name on the memo might increase "the chances that I might be a witness, which I prefer to avoid."

Mr. Duncan pleaded guilty April 9 to obstruction and is to be sentenced Oct. 25.

Neither Ms. Temple nor anyone else at Andersen has been charged with any crime, but prosecutors say their investigation of the firm isn't finished. Ms. Temple's attorney, Mark Hansen, didn't immediately return a call for comment.

Andersen also faces huge shareholder lawsuits related to Enron's crash, though it is unclear if the company could pay large judgments.

According to Andy Drumheller, an attorney with the law firm which defended Andersen, probation would force the defunct accounting firm to name a partner who would represent Andersen in regular meetings with a probation officer.

"It could still obviously be a considerable obligation for Andersen," she said Tuesday morning.

Former federal prosecutor Robert Mintz, now a lawyer in private practice, said probation means Andersen is on notice that it faces more fines and extended probation if the firm violates terms handed down by the judge.

Lead defense attorney Rusty Hardin said Andersen will file an appeal of the verdict sometime next week.

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