Arthur Andersen LLP V. United States

1. Citation: Arthur Andersen LLP V. United States 544 U.S. 696 (2005)

2. Facts:

Arthur Andersen LLP was prosecuted by the government for destroying paper and electronic records of its auditing work for its client, Enron, as the energy company went crashing financially in October 2001. The destruction of records happened shortly before the Securities and Exchange Commission (SEC) formally started an investigation into Enron’s financial misdeeds. In the month of October, 2001, the managers at Arthur Anderson kept reminding its employees to shred and destroy records pertaining to Enron as per its document retention policy even when it knew about the possible SEC investigation. In March 2002, petitioner was indicted in the Southern District of Texas on one count of violating §§1512(b)(2)(A) and (B). The indictment charged that, from October 10 to November 9, 2001, the petitioner “did knowingly, intentionally and corruptly persuade . . . other persons, to wit: [petitioner’s] employees, with intent to cause” them to withhold documents from, and alter documents for use in, “official proceedings, namely: regulatory and criminal proceedings and investigations.” In its defense, Andersen argued that it did nothing wrong, simply instructing employees to follow the firm's own rules for disposing of unnecessary documents. A jury trial followed. The jury returned a guilty verdict, based on the District Court’s definition of “knowingly … corruptly persuad[e]” provide to the jury. The District Court denied petitioner’s motion for a judgment of acquittal. Latter, the Court of Appeals for the Fifth Circuit affirmed the District court’s ruling. It held that the jury instructions properly conveyed the meaning of “corruptly persuades” and “official proceeding”; that the jury needs not find any consciousness of wrongdoing; and that there was no reversible error. The Supreme granted certiorari because of a split of authority regarding the meaning of §1512(b),

3. Issue

In this case, the attention is focused on what it means 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.” The District court’s jury instructions about this meaning are at issue here. The question was if the instructions simply failed to convey the requisite consciousness of wrongdoing.

4. Ruling: Reversed, Conviction Overturned.

5. a. Rules of Law

The government based its case on the 18 U.S.C. § 1512(b)(2)(A) and (B) which is the Victim and Witness Protection Act of 1982. The Chapter 73 of Title 18 of the United States Code provides criminal sanctions for those who obstruct justice. The law makes it a crime for one party "knowingly" to "corruptly persuade" another to destroy documents "with intent" to make them unavailable "for use in an official proceeding." The guilty if proved shall be fined under this title or imprisoned not more than ten years, or both.

b. Rationale

The court found two flaws in how the case was sent to the jury in analysis of the statute. First, Justice Rehnquist said, the instructions "simply failed to convey the requisite consciousness of wrongdoing." Not only did the instructions fail to define "corruptly" as "dishonestly," he said, but they also permitted a conviction if prosecutors could show simply that Andersen had sought to "impede" a government proceeding. The district court instructed the jury, at the government’s insistence and over the defendant’s objection, that the "knowingly" element of the offense would be satisfied if the evidence showed intent to "impede" an investigation. The use of the word "impede" meant that the word "corruptly" word in the statute provided no limit on convicting a person merely because he withheld information from the government. The mere persuasion of someone to withhold a document from a government proceeding is not inherently malign, particularly when he/she does not have in contemplation any particular official proceeding in which those documents might be material."

The other flaw in the instructions, according to the court, was the omission of a requirement for the jury to find a link between the document destruction and any particular official proceeding in which the documents would

have been required to be produced. The S.E.C. served Enron and Andersen with subpoenas on Nov. 8, 2001, a month after the shredding had begun.