Post by Moses on Jun 1, 2005 4:43:27 GMT -5
June 1, 2005
Reversal of Andersen Conviction Not a Declaration of Innocence
By KURT EICHENWALD
After yesterday's Supreme Court reversal of Arthur Andersen's conviction for obstruction of justice in the Enron case, there were rumblings among former Andersen partners and some legal analysts that this was the proof that the accounting firm should never have been indicted, much less found guilty.
Not so fast. While the reversal makes a retrial legally feasible, though unlikely, in truth the Supreme Court's judgment simply underscores the significance of a rule in white-collar cases: a jury cannot properly convict without first being required to conclude that a defendant had intended to engage in wrongdoing.
In its reversal, the Supreme Court focused on one issue: the jury charge given by Judge Melinda Harmon of Federal District Court in Houston that defined the standards and hurdles the jury had to clear to reach a guilty verdict. In her instructions to the jury, Judge Harmon "failed to convey the requisite consciousness of wrongdoing," Chief Justice William Rehnquist wrote in the unanimous opinion. "Indeed, it is striking how little culpability the instructions required."
The reason this is important is simple. White-collar cases are not akin to - and are, in fact, often the opposite of - trials involving murder or bank robbery, where everyone usually acknowledges that a crime took place and merely debate the culpability of a particular defendant. Instead, in white-collar cases, defense lawyers often admit their client's involvement in particular acts, while arguing that no crime ever occurred.
That is because a potential fraud or obstruction of justice is only illegal if the defendant acted with the knowledge and intent to commit a crime. Of course, this does not mean that a potential defendant must know the particulars of a 10b-5 securities law violation or the dictates of the obstruction laws; the government merely has to prove that actions were undertaken with the intent to deceive or with knowledge they were dishonest acts. In truth, it is hard to argue with the law's logic: no one should be locked away in prison as punishment for making a business misjudgment.
"Criminal intent is the heart of the white-collar case," said Stephen Ryan, a former federal prosecutor who is now a partner in Washington at Manatt, Phelps & Phillips. "A prosecutor has to lead a jury to believe that the defendants intended to commit a criminal act, with a criminal intent in mind."
Because the decision pertains solely to the jury instruction, the reversal yesterday says nothing about the quality of evidence marshaled by the Justice Department's Enron Task Force, which presented a range of proof about potential motive and intent. But the potential for reversal was set in motion once Judge Harmon agreed to the government's wording for the jury instructions. The instructions, the Supreme Court found, resulted in a jury being able to convict simply by making a finding that Andersen impeded the government's ability to find facts in the Enron case, without any requirement of concluding that there was dishonest motive.
In other words, even though the prosecution provided evidence of intent, and even though that evidence could have allowed a reasonable juror to conclude that Andersen acted dishonestly and with consciousness of wrongdoing, the instructions issued by Judge Harmon did not require the jurors to reach such a finding. As a result, the Supreme Court is essentially arguing, there is no way the appellate courts could know if the Andersen jury cleared the analytical hurdles necessary to conclude that the firm was guilty.
None of that, legal experts said, means that the Supreme Court ruling has cleared Arthur Andersen or demonstrated anything about whether it should have been indicted.
"The correctness of the jury instructions says very little about actual guilt of Arthur Andersen," said Stephen L. Meagher, a former prosecutor who now runs his own law firm in San Francisco. "What it does say is that the government may have a little bit harder time in proving guilt" if the case is retried.
Indeed, this is far from an unusual outcome. Many high-profile white-collar convictions - particularly those that emerged from the Wall Street insider trading and market manipulation scandals of the 1980's - fell apart on appeal on the very issue of lack of proof of criminal intent or poor jury charges on knowledge of wrongdoing.
Legal experts said that the reversal in the Andersen case might well result in more careful wording of jury instructions in future white-collar cases involving Enron and other high-profile defendants. But while that may raise the hurdle a bit for the government, these experts said, it is far from a crippling blow.
"It is certainly less likely that there will be a permissive jury instruction in Enron cases because of this ruling," Mr. Meagher said. "But the likelihood of conviction depends on the quality of the evidence, not the instruction. And the evidence of intent in the Enron cases looks a lot stronger than Andersen's ever did."