Man Without Qualities

Saturday, June 15, 2002

Learning From Andersen's "Conviction"

Andersen has been convicted of obstruction of justice for corruptly destroying documents.

The Associated Press says that "The verdict is also a potential boon for prosecutors trying to unravel the Enron debacle."

Really? Unfortunately, the Associated Press does not share with us just how this verdict is a "potential boon" for the prosecutors. So we have to review matters for ourselves. This much we know:

First, Judge Harmon prompted the "guilty verdict .. by ruling [the jury] didn't have to agree on who committed a crime as long as they all believed someone at the firm 'acted knowingly and with corrupt intent.' Harmon acknowledged she appeared to be breaking new legal ground, a prospect she acknowledged was 'terrifying.''' This new legal ground might be called "ex post facto legislation adjacent." And the judge is correct that her act is truly terrifying - in the way the thinking that created a Star Chamber of judges who thought they were doing good while actually and progressively deforming criminal procedure was "terrifying."

Second, the prosecution was unable to convince the jury that any one person at Andersen committed the corrupt act. So the "potential boon" to the prosecutors is the knowledge that if the individual agents had been added as co-defendants not one of them would have been convicted - even David Duncan, who had already confessed. That's not an incentive to the prosecutors to bring actions against the agents - who may all have rights of collateral estoppel and double jeopardy as a result of this conviction, anyway. [As noted in a prior post, "under prevailing notions of double jeopardy, if a jury has tried and failed to reach a unanimous verdict, a new trial may be held - but if there is a conviction of the corporate defendant this rule does not apply. The question then seems to becomes one of untested collateral estoppel policy." Professor Khanna has written a good general discussion of just how difficult and perverse "double jeopardy" considerations become in the already problematic area of corporate criminal law.]

Third, the main value of the obstruction of justice charge was as leverage to obtain cooperation from Andersen and its potentially vulnerable "agents." That has now been lost or severely impaired - especially since the agents now know the jury could not decide any of them was guilty.

Fourth, Andersen is already highly insolvent - so it can't pay any fine. And any fine paid to the government means less money left over for private plaintiffs. Do you think the private plaintiffs are happy about that?

Fifth, there will be one fewer national accounting firm. That was already determined by the indictment - but the conviction certainly makes the point. The loss of Andersen on the basis of the unproven acts of anyone at the firm, where the firm could have been reformed, will be a big loss to investors. That is hardly a validation of the prosecutors' strategy.

Sixth, the Man Without Qualities does not know the terms of Mr. Duncan's plea agreement. But right now he is sitting at home with the knowledge that even with his un-repudiated confession the jury refused to "convict" him. He should seriously think about repudiating that plea agreement and argue he was "coerced". Depending on the agreement's terms, he may be better off. Because this is clearly a result totally unexpected by the prosecution, the plea agreement terms may not contemplate these developments at all.

Seventh, there will be an appeal and a likely reversal. That does give the prosecution more leverage than an acquittal or deadlocked jury - which probably motivated the judge's decision. But that hardly amounts to a "potential boon."

Eighth, this was the "slam dunk" case that - according to the media and its experts - could only go Andersen's way if the jury acquitted against the law. Well, the jury has now convicted against the law - with the help of the judge. A "slam dunk" that became an "Ave Maria" that became "Hocus Pocus" by judicial fiat. And the judge and prosecutors seem to have known it was the only way they could get a conviction. The potential underlying fraud-based cases arising in the Enron mess are supposed to be vastly more complex and more difficult to prove.

The New York Times (!) actually gets this part right:

"The difficulty in obtaining a guilty verdict, however, may prove in the long run to be more important than the government's ultimate victory. The trial was an opening act to the eventual prosecution of Enron executives. But it appears to have done little to aid that effort and, in some ways, may have hurt it. Moreover, the verdict does little to advance the cause of reform in the auditing industry."

With a "potential boon" like this, what would a prosecution disaster look like?

Of course, things get a lot harder for the prosecution when they're trying to prove things that probably aren't so - like pervasive, obvious and egregious fraud by Andersen, Enron and their now-irrelevant human agents!

Comments: Post a Comment