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Andersen Found Guilty of Obstructing Justice in Enron Probe - 2002-06-15

A jury in Houston, Texas has found the Arthur Andersen accounting firm guilty of obstructing justice in the government investigation of the collapse of the energy trading company Enron.

It took the jury 72 hours of deliberations over 10 days to decide that Andersen's shredding of Enron documents last year was not routine housekeeping, but an attempt to thwart U.S. government investigators looking into the collapse of the energy trading giant. Enron's bankruptcy last year is the largest corporate bankruptcy in U.S. history.

Federal Judge Melinda Harmon will determine the sentence for Andersen. It faces up to five years of probation and a fine of up to $500,000. It could also be fined up to twice the amount of damages the court determines was caused by destroying the documents, and it could be barred from auditing publicly traded companies. That last punishment could put the already-crippled accounting giant out of business.

The verdict also gives a big boost to the federal government's efforts to get to the bottom of the Enron collapse. The government has argued that Andersen officials had intimate knowledge of Enron's complex and secret partnerships the energy company used to boost its appearance of being in good financial health. Enron itself is under investigation by a grand jury, as well as by financial regulators and the U.S. Congress.

On Wednesday, the jury told the judge it was deadlocked. Judge Harmon told the jury to continue deliberating. Thursday, jurors asked if they could rule that Andersen acted improperly in destroying Enron documents while disagreeing on which Andersen employee acted knowingly and with corrupt intent. Judge Harmon said the jury could do so, but admitted she seemed to be breaking new legal ground with that decision. At the same time, the judge rejected a defense motion for a mistrial.

Andersen has argued its employees shredded documents to comply with a long-standing company policy of eliminating unnecessary and outdated materials. Since admitting that it shredded Enron documents, Andersen has lost hundreds of its audit clients. A few months ago, it announced it was laying off several thousand employees.