Andersen v. U.S.: Policy Implications and a Social Science Research Agenda

Author:Brian T. O?Connell - Marc W. Patry
Position:University of Colorado - Psychology Department, Saint Mary?s University
Pages:16-23
16 The Open Law Journal, 2009, 2, 16-23
1874-950X/09 2009 Bentham Open
Open Access
Andersen v. U.S.: Policy Implications and a Social Science Research Agenda
Brian T. O’Connell1 and Marc W. Patry*,2
1University of Colorado; 2Psychology Department, Saint Mary’s University
Abstract: The U.S. Supreme Court overturned the conviction of Arthur Andersen, LLP for its involvement in the Enron
scandal. The Court held that that the jury instructions did not accurately convey the meaning of the witness tampering
statute that Andersen was charged with. Since the original trial, relevant sections of the Criminal Code were updated with
the passage of the Sarbanes-Oxley Act (2002). Although Andersen was convicted under the pre-Sarbanes-Oxley statutes,
the Court’s ruling will likely affect enforcement of post-Sarbanes statutes, possibly limiting their scope. We discuss
whether Sarbanes was an appropriate response to corporate crime and consider some other methods of punishing corpora-
tions. We also raise a number of empirical questions related to this case.
Keywords: Corporate crime, jury decision making.
INTRODUC TION
According to FBI figures, there were over 200,000 white-
collar offenses1 committed between 1997 and 1999 (Barnett,
2000). Simpson (2002) reported that data from 178 corporate
offenses tried in U.S. courts in the 1980’s revealed that the
average cost per offense was $565,000. During that same
time period the average cost per burglary was $1,000 and the
average cost per larceny was $400. Additionally, there are
approximately 22,000 homicides per year, a figure that is
one-fifth the annual number of deaths that result from dis-
ease and injury related to work (Simpson, 2002). Thus,
white-collar/corporate crime is by no means rare and is po-
tentially the most damaging type of crime to society (Simp-
son, 2002). When Enron investors lost billions of dollars in
2001, the extensive media coverage of the event helped
thrust the issue of corporate crime into the national spotlight
(Bowman 2003). Enron’s declaration of bankruptcy was the
largest in U.S. history and the scandal destroyed the Enron
Corporation and its accounting firm Arthur Andersen LLP.
The Supreme Court decision in Andersen v. U.S. (2005) re-
focused the media and the American public on the issue of
corporate cr ime.
In this review of the case, the authors examine the U.S.
Supreme Court decision in the Arthur Andersen case in the
context of the culpability of a corporation v. an individual in
a criminal case. The authors examine the difficulty in prose-
cuting a corporate entity and the subsequent practical impli-
cations that result from prosecuting a corporation instead of
individuals. The decision is also examined in the context of
current research on jury instructions and future implications
for court decisions based on the Sarbanes-Oxley Act.
*Address correspondence to this author at the Psychology Department,
Saint Mary's Unive rsity, Halifax, Nova Scotia , Canada B3H 3C3;
Tel: (902) 491-8605; Fax: (902) 496-8287; Email: Marc.Patry@smu.ca
1 These offenses include fraud, bribery, counterfeiting/forgery, and embezzlement.
THE CASE AGAINST ANDERSEN
On March 7th, 2002, Andersen was indicted in the South-
ern District of Texas on one count of witness tampering. The
indictment charged that Andersen was in violation of 18
U.S.C. § 1512 (b) (2000) which defines witness tampering as
“Whoever knowingly…corruptly persuades another person,
or attempts to do so, or engages in misleading conduct to-
ward another person, with intent to cause or induce any per-
son to alter, destroy, mutilate, or conceal an object with in-
tent to impair the object’s integrity or availability for use in
an official proceeding…shall be fined under this title or im-
prisoned not more than ten years, or both”, (Table 1).
The government contended that Andersen was in viola-
tion of this statute between October 10th 2001 and November
9th 2001 due to the urgings of Andersen executives to follow
the company document retention policy. The government
accused Andersen of corruptly persuading its employees to
destroy documents to impair their availability for use in an
official proceeding.
The government supported its charge with the actions
taken within the Andersen firm between those dates. The
prosecution argued that the facts showed executives were
planning to face some litigation prior to their notification of
a U.S Securities and Exchange Commission (SEC) investiga-
tion of their Enron accounting, and they were certainly en-
forcing the document retention policy. However, Andersen
claimed that they had no knowledge of any official proceed-
ing until they were served with a subpoena for their docu-
ments. Andersen also claimed that prior to November 9th
they were simply following th e company document retention
policy.
AWARENESS OF THE SEC INVESTIGATION
The first public sign of irregularity at Enron occurred on
August 14, 2001 when the CEO, Jeffrey Skilling, suddenly
resigned (And ersen v. U.S., Brief for the U.S. 2005), (Table 2)
for a summary timeline of key dates. His resignation led to
speculation that the company may have been having finan-
cial difficulties. Two weeks later the Wall Street Journal

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