Arthur Andersen LLP v. United States
Encyclopedia
Arthur Andersen LLP v. United States, 544 U.S. 696 (2005) was a United States Supreme Court
case in which the Court unanimously overturned accounting firm Arthur Andersen
's conviction of obstruction of justice
on the basis that the jury instructions
did not properly portray the law Andersen was charged with breaking.
, Arthur Andersen, Enron's accounting firm, instructed its employees to destroy documents relating to Enron after Andersen officials learned they would soon be investigated by the Securities and Exchange Commission. On May 6, 2002, a charge of obstructing an official proceeding of the Securities and Exchange Commission was filed against Arthur Andersen LLP in the United States District Court for the Southern District of Texas
. The indictment was served by Michael Chertoff
, who was subsequently appointed Secretary of Homeland Security by President George W. Bush
. The jury found Arthur Andersen guilty on June 15. Since federal regulations do not allow convicted felons to audit public companies, Andersen surrendered its CPA
license on August 31, effectively putting the firm out of business in the United States.
Andersen appealed to the United States Court of Appeals for the Fifth Circuit
. The Fifth Circuit affirmed the district court's decision. Andersen petitioned for a writ of certiorari to the Supreme Court, which was granted.
wrote the opinion for the court, and was joined by all associate justices.
In the court's view, the instructions allowed the jury to convict Andersen without proving that the firm knew it had broken the law or that there had been a link to any official proceeding that prohibited the destruction of documents. The instructions were so vague that they "simply failed to convey the requisite consciousness of wrongdoing," Rehnquist wrote. "Indeed, it is striking how little culpability the instructions required." Rehnquist's opinion also expressed grave skepticism at the government's definition of "corrupt persuasion"—persuasion with an improper purpose even without knowing an act is unlawful. "Only persons conscious of wrongdoing can be said to 'knowingly corruptly persuade,' " he wrote.
Although the decision vacated Andersen's felony conviction, Andersen has not returned as a viable business even on a limited scale.
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
case in which the Court unanimously overturned accounting firm Arthur Andersen
Arthur Andersen
Arthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations...
's conviction of obstruction of justice
Obstruction of justice
The crime of obstruction of justice, in United States jurisdictions, refers to the crime of interfering with the work of police, investigators, regulatory agencies, prosecutors, or other officials...
on the basis that the jury instructions
Jury instructions
Jury instructions are the set of legal rules that jurors should follow when the jury is deciding a civil or criminal case. Jury instructions are given to the jury by the jury instructor, who usually reads them aloud to the jury...
did not properly portray the law Andersen was charged with breaking.
Background
During the fall of EnronEnron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
, Arthur Andersen, Enron's accounting firm, instructed its employees to destroy documents relating to Enron after Andersen officials learned they would soon be investigated by the Securities and Exchange Commission. On May 6, 2002, a charge of obstructing an official proceeding of the Securities and Exchange Commission was filed against Arthur Andersen LLP in the United States District Court for the Southern District of Texas
United States District Court for the Southern District of Texas
The United States District Court for the Southern District of Texas is the Federal district court with jurisdiction over the southern part of Texas...
. The indictment was served by Michael Chertoff
Michael Chertoff
Michael Chertoff was the second United States Secretary of Homeland Security under President George W. Bush and co-author of the USA PATRIOT Act. He previously served as a judge on the United States Court of Appeals for the Third Circuit, as a federal prosecutor, and as assistant U.S. Attorney...
, who was subsequently appointed Secretary of Homeland Security by President George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....
. The jury found Arthur Andersen guilty on June 15. Since federal regulations do not allow convicted felons to audit public companies, Andersen surrendered its CPA
Certified Public Accountant
Certified Public Accountant is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA...
license on August 31, effectively putting the firm out of business in the United States.
Andersen appealed to the United States Court of Appeals for the Fifth Circuit
United States Court of Appeals for the Fifth Circuit
The United States Court of Appeals for the Fifth Circuit is a federal court with appellate jurisdiction over the district courts in the following districts:* Eastern District of Louisiana* Middle District of Louisiana...
. The Fifth Circuit affirmed the district court's decision. Andersen petitioned for a writ of certiorari to the Supreme Court, which was granted.
The issue
The issue was whether the jury had been properly communicated the law which Andersen was charged with violating. They were charged under (b)(2)(A) and (B), which made it a crime to “knowingly … corruptly persuad[e] another person … with intent to … cause” that person to “withhold” documents from, or “alter” documents for use in, an “official proceeding.” Arthur Andersen believed the instructions given to the jury were not proper. The jury was reportedly told "even if petitioner honestly and sincerely believed its conduct was lawful, the jury could convict." This is not true, held the Supreme Court. The statute they were being charged under used the language "knowingly ... corruptly persuade". Arthur Andersen managers did instruct their employees to delete Enron-related files, but those actions were within their document retention policy. If the document retention policy was constructed to keep certain information private, even from the government, Arthur Andersen was still not corruptly persuading their employees to keep said information private.The decision
In a unanimous decision by the Supreme Court, Arthur Andersen's conviction was overturned. Chief Justice William RehnquistWilliam Rehnquist
William Hubbs Rehnquist was an American lawyer, jurist, and political figure who served as an Associate Justice on the Supreme Court of the United States and later as the 16th Chief Justice of the United States...
wrote the opinion for the court, and was joined by all associate justices.
In the court's view, the instructions allowed the jury to convict Andersen without proving that the firm knew it had broken the law or that there had been a link to any official proceeding that prohibited the destruction of documents. The instructions were so vague that they "simply failed to convey the requisite consciousness of wrongdoing," Rehnquist wrote. "Indeed, it is striking how little culpability the instructions required." Rehnquist's opinion also expressed grave skepticism at the government's definition of "corrupt persuasion"—persuasion with an improper purpose even without knowing an act is unlawful. "Only persons conscious of wrongdoing can be said to 'knowingly corruptly persuade,' " he wrote.
Although the decision vacated Andersen's felony conviction, Andersen has not returned as a viable business even on a limited scale.
See also
External links
- Summary of case from FindLaw
- Summary of case from OYEZ
- Arthur Andersen, LLP v. United States, 544 U.S. 696 (2005) from Cornell UniversityCornell UniversityCornell University is an Ivy League university located in Ithaca, New York, United States. It is a private land-grant university, receiving annual funding from the State of New York for certain educational missions...
's Legal Information InstituteLegal Information InstituteThe Legal Information Institute is a non-profit, public service of Cornell Law School that provides no-cost access to current American and international legal research sources online at . The organization is a pioneer in the delivery of legal information online. Founded in 1992 by Peter Martin and...