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Wednesday, 16 October, 2002, 21:47 GMT 22:47 UK
Enron auditor fined $500,000
Arthur Andersen lead attorney Rusty Hardin
Rusty Hardin has vowed to appeal Andersen's conviction
Disgraced accountancy firm Arthur Andersen has been handed the maximum penalty allowed under US law for its role in the collapse of Enron.

Arthur Andersen was fined $500,000 (322,000) and sentenced to five years' probation.


It's tragic for everybody involved, and we tremendously regret it

Rusty Hardin, Andersen attorney
Wednesday's sentencing was largely ceremonial as the firm has all but ceased to exist following its indictment on federal fraud charges in March.

Since then, nearly all of Andersen's clients have fled and the auditor has sold off units and whittled down its workforce of 85,000 to fewer than 3,000.

In June, following a trial in a Houston court, a jury convicted Andersen of obstruction of justice after it found that an Andersen attorney altered documents related to its audit work for Enron.

End of audit practice

In a remarkable coincidence, Wednesday's sentencing took place exactly a year after Enron released its financial results that exposed some of the company's dire accounting woes, leading to its precipitous decline.

Shortly thereafter, following the dismissal of chief financial officer Andrew Fastow, who now faces criminal fraud charges, Enron filed for bankruptcy and laid off thousands of workers.

District Court Judge Melinda Harmon
Judge Harmon: Sentence sends a message

In issuing the sentence on Wednesday, District Court Judge Melinda Harmon said: "I believe a message must be sent to the auditing community that the destruction of documents will not be tolerated while an investigation is ongoing."

In addition, Judge Harmon said Andersen must submit a plan to the court if it wishes to once again be an auditor of corporate books - something that does not appear likely.

Andersen effectively ended its audit practice 31 August following June's guilty verdict.

Tremendous regret

Despite the massive downsizing and the complete elimination of its audit practice, Andersen remains an ongoing concern.

Unlike its clients - Enron, WorldCom and Global Crossing - Andersen has not yet had to file bankruptcy.


The government did not destroy Arthur Andersen - Arthur Andersen management destroyed Arthur Andersen

Leslie Caldwell, US Justice Department

Following the guilty verdict in June, Andersen lead attorney Rusty Hardin vowed to appeal, a process that is expected to take a year or more.

During and after Wednesday's sentencing, a defiant Mr Hardin maintained the firm's innocence.

He also took issue with government's tack in the case, saying it made no sense to "destroy an entire company" because of the conduct of a few employees.

"I am totally confident that a year and a half to two years from now, when all this bloodletting is over, that people will say this approach made no sense," he said.

"It's tragic for everybody involved, and we tremendously regret it."

Duncan's defence

In response, Department of Justice attorney Leslie Caldwell said Andersen management and not the government was to blame for the unwinding of Andersen and the loss of thousands of jobs.

US Department of Justice attorney Leslie Caldwell
Caldwell: Andersen chose its own path to oblivion
"The government did not destroy Arthur Andersen," she said. "Arthur Andersen management destroyed Arthur Andersen."

Ms Caldwell said she did not understand why Andersen took the road it did.

In January, Andersen admitted to destroying documents, fired its lead auditor in charge of the Enron account, David Duncan, and tried to cut a deal with federal prosecutors.

But the firm was indicted in March after negotiations broke down between Andersen, and the Securities and Exchange Commission (SEC) and the Justice Department.

Soon after, Mr Duncan turned government witness following a plea agreement, though his testimony proved dubious during the spring trial.

Mr Duncan's sentencing has been delayed until January, following postponement of his appearance in court next week.

 WATCH/LISTEN
 ON THIS STORY
Former Enron employee Brian Cruver
"Enron was all about building an image"
The BBC's Stephen Evans
"Andersen struggles to live, let alone thrive"
Robert Mintz, ex federal prosecutor
"This is simply the epitaph that will forever remain on the tombstone"

The trial

The disintegration

Background

IN-DEPTH
See also:

16 Oct 02 | Business
08 Oct 02 | Business
27 Aug 02 | Business
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25 Jul 02 | Business
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12 Sep 02 | Business
30 Aug 02 | Business
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