Arthur Andersen Sentenced For Shredding Enron Documents. Former Enron Corp. auditor Arthur Andersen LLP shut its audit practice and closed offices across the country after it became a convicted felon in June.
Four months later, the shriveled accounting firm will be sentenced Wednesday for its role in shredding and altering Enron-related documents last year as the Securities and Exchange Commission began probing the energy company’s finances.
C.E. Andrews, global audit practice director at Andersen’s Chicago headquarters, will represent the firm at the sentencing, said Andersen’s lawyer, Rusty Hardin.
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.
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. Spokesman Patrick Dorton would say only, “The firm is an ongoing business entity.”
Andersen faces probation for five years and as much as $500,000 in fines. It also could be fined up to twice any gains or damages the court determined were caused by the firm’s action.
criminal sentence is just another bruise
But given the punishment Andersen received from the marketplace, a criminal sentence is just another bruise, said Arthur Bowman, editor of Bowman’s Accounting Report in Atlanta.
“Who would want to do business with them?” Bowman said. “Their name has no value. The only thing accounting firms have to sell is their own integrity.”
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 press release.
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. Temple suggested an Andersen memo not call the release”misleading.”
Temple also told Duncan her name on the memo might increase “the chances that I might be a witness, which I prefer to avoid.”
Duncan pleaded guilty April 9 to obstruction and is slated to be sentenced Oct. 25.
Neither Temple nor anyone else at Andersen has been charged with any crime, but prosecutors say their investigation of the firm isn’t finished. 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. The firm needs to avoid bankruptcy for at least a year after selling entire offices to other firms so those deals can’t be undone by a judge, Bowman said.