On March 14, a federal grand jury indicted Arthur Andersen, the first criminal charges in the nation’s biggest bankruptcy. According to Deputy Attorney General Larry Thompson, Arthur Andersen employees engaged in “the wholesale destruction” of Enron-related materials. (Washington Post, March 15, 2002)

The one-count indictment, alleging obstruction of justice, read that for a one-month span in October and early November, “Andersen ... did knowingly, intentionally, and corruptly persuade” employees to “alter, destroy, mutilate, and conceal.” The indictment charged that Arthur Andersen employees “were instructed by Andersen partners and others to destroy immediately documentation relating to Enron and told to work overtime if necessary to accomplish the destruction.” The indictment also called the destruction an “unparalleled initiative to shred physical documentation and delete computer files.” (Washington Post, March 15, 2002)

Pointing to top executives, the indictment said that shortly before the destruction began, Arthur Andersen’s high-level management held a conference call to discuss the Securities and Exchange Commission’s inquiry. (Washington Post, March 15, 2002)

Arthur Andersen officials fired back, charging that the indictment was similar to the “death penalty” against the firm. They accused the Justice Department of “a gross abuse of governmental power.” (Washington Post, March 15, 2002)

During the trial, the only major issue of dispute between the government and defense was whether anyone at Arthur Andersen acted with an improper purpose of impeding the regulatory proceeding. The fate of Arthur Andersen hung on this single issue.

Arthur Andersen’s specialist on securities regulators, John Riley, maintained that he never considered the possibility of a federal inquiry in the fall of 2001 at a time others in the firm were destroying documents related to Enron. (Washington Post, March 15, 2002)

Meanwhile, the government established that there were numerous articles appearing in major publications in late 2001 that questioned Enron’s accounting, which appeared before the document destruction began. And it was an article in the Wall Street Journal in August 2001 that led to the opening of the SEC’s informal inquiry, agency officials testified .(New York Times, June 5, 2002)

In mid-June, the federal jury convicted Arthur Andersen of obstruction of justice after 10 days of deliberation. In interviews, jurors said that they reached their decision because an Arthur Andersen lawyer had ordered critical deletions to an internal memorandum, rather than because of the firm’s wholesale destruction of Enron-related documents. (New York Times, June 15, 2002)

The testimony of former Enron auditor David Duncan helped in the conviction. But he denied any overt efforts to destroy documents related to Enron, shed little light on Enron’s accounting, and defended his maligned work checking Enron’s books.

THE DOJ INVESTIGATION. In examining the details of off-the-books partnership schemes, federal investigators looked for such basics as whether Enron misled investors about the value of hard assets like pipelines and power plants, according to people involved in the case. Beginning in late 2002, analysts studied whether Enron carried assets on its books for billions of dollars more than their actual worth. (New York Times, December 26, 2002)

One person involved in the case described the investigation as an effort by federal officials to determine whether Enron had “a WorldCom problem.” Prosecutors charged executives of WorldCom with shifting expenses around on its books in an effort to mislead investors about the company’s financial health.

In May 2005, the Supreme Court oveturned the Arthur Andersen conviction, saying jury instructions were too vague in trial for the destruction of Enron documents before the energy giant’s collapse. (New York Times, May 31, 2005)