by John M. Curtis
(310) 204-8700

Copyright June 13, 2002
All Rights Reserved.

tretching plausible deniability to the breaking point, Andersen attorney Rusty Hardin proved that there's no limit to farfetched explanations. At question is Andersen's culpability in shredding essential documents connected with Enron's colossal failure last fall. Andersen's lead Enron auditor David B. Duncan already plead guilty to a single count of obstruction of justice for his role in ordering Andersen personnel to destroy files in response to a Securities and Exchange Commission subpoena. While looking like a slam-dunk, Hardin skillfully convinced jurors that Duncan was a rogue employee, conducting a secret operation for his own nefarious purposes. Only the jury seemed confused, since Andersen's key accounts have long abandoned ship, the once 5th-ranked accounting firm. Jurors seemed confused about who at Andersen was responsible for the obstruction of justice. Hiding behind the corporate umbrella, Hardin fingered Duncan as the lone culprit, excusing all Andersen's executive management, including in-house attorney Nancy Temple and Houston-based partners Thomas Bauer and Michael Odom.

      Jurors seem to have lost sight over the fact both Temple and Bauer refused to testify, invoking their 5th amendment rights against self-incrimination. In criminal cases, legal experts acknowledge presumed flight from crime scenes as proof of guilt. With key players refusing to testify and taking the 5th, it's reasonable for jurors to draw similar inferences. Rightly or wrongly, Duncan came clean early on, plea-bargaining and agreeing to serve as the government's star witness. Since that time, Hardin fingered Duncan as a rogue employee, acting independent of Andersen management. It was, after all, Temple's encrypted order to "follow the policy" that instructed Duncan to begin purging files. Hardin insisted that Temple's e-mail to Duncan was nothing more than a routine company order to clean up files—to "follow the policy." On Oct. 10, Odom told about 80 auditors and executives to comply with Andersen's "document retention policy," calling for disposal of non-essential files.

      Confused over who's responsible, jurors should remind themselves who took the 5th Amendment. Temple's refusal to testify under oath suggests that she's still protecting Andersen's senior partners. When senior executives called an urgent conference call on Oct. 20 to discuss Enron's SEC subpoena, Andersen partner Amy Ripepi admitted that Temple instructed executives to "follow the policy." Hardin insists that "the policy" simply involved routine purging extraneous files. But any reasonable interpretation of Temple's order clearly links the destruction of files to the SEC audit. Duncan admitted to discussing with Enron's Chief Accounting Officer Richard Causey the company's third-quarter losses. On Oct. 23, Duncan held a conference call with Enron executives to discuss a restatement of past earnings—nearly two months before Enron filed for bankruptcy on Dec. 12. Hardin insists that none of these events holds any significance, other than his incredulous explanation that Andersen simply decided to implement its "document retention policy."

      After eight days of deliberation and getting deadlocked, it's clear that Hardin induced some reasonable doubt. "We are not able to reach and unanimous decision,'" the jury told U.S. District Court Judge Melinda Harmon. Unwilling to throw in the towel, she invoked the "Allen Rule," asking jurors to continue deliberating. "I'm going to ask you to continue deliberations," said Harmon, telling jurors that the case still required more work. But invoking the "Allen Rule" raises the possibility of appeal, in effect, pushing the jury to reach a different verdict. Jurors needed to conclude that any "one or more" executives "corruptly persuaded" Enron personnel to destroy files with the intent to thwart an SEC investigation. Confusing matters, star prosecution witness Duncan testified under cross examination that he didn't believe he broke any laws, denying knowing about the SEC inquiry. Jurors must also bear in mind that Duncan reluctantly plea-bargained, taking the advice of his counsel to cut a deal. With the jury deadlocked, Duncan probably has second thoughts about taking the government's offer.

      No matter how overwhelming the evidence, jurors must still rely on common sense. Corporations—like individuals—must pay the price for criminal behavior of its employees. Finding easy scapegoats doesn't absolve corporate officers from taking full responsibility. While the jury must decide whether criminal wrongdoing occurred, that doesn't excuse the nation's 5th largest accounting firm from using its prestige and expertise to dupe investors while corporate officers unloaded their holdings. Corporations also aren't above the laws that protect shareholders from the kind of blinding piracy that liquidated the life savings of investors. Blaming David B. Duncan doesn't get the corporation off the hook simply because the company denies any knowledge. Former Andersen CEO James F. Berardino was dead wrong when he said the company would survive its current mess. Whether Hardin wins an acquittal, the public knows that Andersen is finished. There's no forgiveness when it comes violating the public's trust.

      Hardin's done a masterful job of confusing the jury and introducing reasonable doubt. "This jury, unlike everyone else, listened to the facts," Hardin said, rebuking Judge Harmon for invoking the "Allen Rule" and sending the jury back into deliberation. Arguing that Andersen officials lacked criminal intent and simply followed the company's little used "document retention policy
defies logic. Jurors must surely know the real motive behind Andersen's attempt to obstruct justice. Fearing SEC sanctions, Andersen sought to cover its tracks after egregious violations of ethical accounting standards. Cooking Enron's books deceived shareholders and bought enough time for insiders to liquidate holdings before filing bankruptcy on Dec. 12. Technicalities may win Andersen a temporary reprieve, but they won't stave off the endless litigation for the biggest corporate fraud in U.S. history. Whatever the jury eventually decides, Andersen's days are numbered.

About the Author

John M. Curtis is editor of OnlineColumnist.com and columnist for the Los Angeles Daily Journal. He's director of a Los Angeles think tank specializing in corporate consulting and strategic communication. He's author of Dodging The Bullet and Operation Charisma.

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