Andersen Trial Heads to Jury

The fate of Arthur Andersen LLP, the accounting firm indicted in connection with the collapse of Enron Corp., was handed to a federal jury late Wednesday.

U.S. District Judge Melinda Harmon dismissed four alternates before giving the case to the jury of nine men and three women. Jurors agreed to begin deliberations Thursday morning.

Harmon sequestered the jurors, who were to spend the night in a hotel.

During closing arguments Wednesday in the trial's fifth week, a federal prosecutor said Andersen's scramble to shred Enron Corp.-related documents was a calculated effort to prepare for lawsuits and criminal probes.

"They were getting ready to deal with the [Securities and Exchange Commission] and the investors who would sue them," Assistant U.S. Attorney Sam Buell told jurors. "They were girding for the Enron wars."

Rusty Hardin, Andersen's lead lawyer, countered that prosecutors "struck for quick gain" by indicting the firm two months after it reported the shredding to the government in January and picked through documents to find seemingly incriminating messages.

He said prosecutors brought suspicion "to a new art level" based on timing and Andersen's efforts to adhere to its document retention policy.

"They had no evidence that anybody did this for this improper purpose," Hardin said.

Buell pummeled Andersen's document retention policy and in-house Andersen lawyer Nancy Temple's sudden promotion of it last October as the SEC began investigating Enron's accounting practices. Andersen says the shredding was routine compliance with a policy designed to protect client confidentiality.

Temple was one of three witnesses who invoked their Fifth Amendment right guarding against self-incrimination and declined to testify in the trial.

Buell said notes Temple took from numerous conference calls with top Andersen executives, beginning in late September, show mentions of SEC interest in the questionable accounting that pushed then-client Enron into bankruptcy.

He said Andersen knew Enron employed risky accounting methods but decided in February last year to stick with its client, which generated $52 million in revenue for Andersen in 2000.

On Oct. 12, Temple sent an e-mail to the Houston office encouraging a reminder to the Enron audit team of the policy calling for the destruction of extraneous papers and e-mails and the retention of work that supports final audit conclusions.

Shredding began in earnest on Oct. 23 after Andersen's former top Enron auditor, David Duncan, told his staff to follow the policy. Duncan pleaded guilty April 9 to obstruction for directing the shredding.

Destruction continued through Nov. 9, when the team learned that the SEC had sent a subpoena for Enron documents to the firm the day before.

"She doesn't order [a] massive campaign of document destruction. She's not saying, 'Obstruct the SEC.' She's doing what she thinks she can get away with," Buell said.

Duncan, for his part, carried out the order and told the Enron team to follow his lead, Buell said.

"If you know the SEC is coming, you can't destroy evidence," Buell said.

However, Hardin said that while Duncan declared, "I obstructed justice," in nearly a week of testimony, he decided he had committed a crime only after several meetings with prosecutors months after the shredding.

Hardin added that while Duncan testified he ordered staffers to comply with the policy, he knew the policy calls for retention of important papers.

If convicted, Andersen faces fines and would be barred from auditing public companies. More than 650 of its 2,300 clients already have fired the firm, most since the indictment was unsealed March 14.