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Saturday, 15 June, 2002, 22:09 GMT 23:09 UK
Andersen guilty in Enron case
Defence lawyer Rusty Hardin outside the Houston court
Andersen says it will appeal against the ruling
A jury in the United States has found accountancy firm Arthur Andersen guilty of obstructing justice by shredding documents relating to the failed energy giant Enron.

The verdict could be the death knell for the 89-year old company, once one of the world's top five accountants.

Papers at Arthur Andersen ready for shredding
The firm said destroying documents was routine
Andersen has already lost much of its business, and two-thirds of its once 28,000 strong US workforce. Following the conviction, multi-million dollar lawsuits brought by Enron investors and shareholders demanding compensation are likely to follow, and could bankrupt the firm.

The company called Saturday's verdict "wrong" and is contemplating an appeal, but at the same time did promise to stop auditing publicly traded companies - pre-empting an official ban that now is a near certainty.

Enron's collapse last December was partly blamed on questionable accounting that kept hundreds of millions of dollars in debt off its books.

Andersen, which audited Enron's accounts, went on trial in Houston, Texas, after allegations that employees had illegally destroyed thousands of documents and computer records relating to its scandal-hit client, which was based there.

The 12-member jury had heard nearly five weeks of testimony and was in its 72nd hour of deliberation over 10 days when it finally reached the verdict.

Andersen's defence lawyer, Rusty Hardin, said the firm was disappointed by the verdict.

He said it would file an appeal but had to wait until after the sentencing date - 11 October - to do so.

He added: "This company did not commit a crime."

Andersen also faces a fine of up to $500,000.

'Housekeeping'

The firm's lawyers had argued that the shredding of documents had been routine housekeeping, but the jury decided it was an attempt to thwart federal regulators investigating Enron.

The trial heard how one Andersen executive said on a training video that if documents were shredded and then the investigators arrived, that would be good.

US District Court Judge Melinda Harmon
Judge Melinda Harmon apparently set a legal precedent
But Mr Hardin had argued that a number of important documents had survived the shredding, suggesting there was no conspiracy to cover up Andersen's work on Enron's books.

The prosecution's star witness was former Andersen partner David Duncan, who was in charge of the Enron audit team.

He admitted obstructing justice in April and told jurors that he had signed an agreement with Andersen to present a united front, claiming that neither had done anything wrong.

He said that he had reneged on the agreement after much "soul searching".

Legal precedent

The verdict came after US District Court Judge Melinda Harmon made what is believed to be a landmark legal decision to break a deadlock among the jury.

She ruled that jurors could reach a verdict on the company as a whole, even though they failed to agree on the individual responsible for ordering the shredding.

Judge Harmon agonised over the decision for more than a day as she sought to clarify a point of law that mystified even seasoned attorneys and other experts on American jurisprudence.

"I'm kind of in a position of a case of first impression, which is terrifying for a district judge," she said, aware that her ruling could set a precedent and be subject to future legal challenges.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Stephen Evans
"This could be the final nail in Andersen's coffin"
Andersen's defence lawyer, Rusty Hardin
"This company did not commit a crime"
Author Will Hutton
"There are profound concerns about the quality of US corporate earnings"

The trial

The disintegration

Background

IN-DEPTH
See also:

04 Jun 02 | Business
28 Nov 01 | Business
16 Jun 02 | Business
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