Judge fines Arthur Andersen $500,000

A federal judge fined accounting firm Andersen $500,000 and sentenced it to five years probation for obstructing justice in a probe of client Enron, a hollow punishment as the auditor is all but out of business. The sentencing comes exactly a year after Enron Corp. released a dismal third-quarter earnings report that sparked its rapid spiral into bankruptcy and harsh scrutiny of U.S. corporate accounting practices. Though Andersen was charged after admitting it shredded hundreds of Enron audits records, jurors decided the 90-year-old Chicago firm was guilty because in-house lawyer Nancy Temple suggested removing her name from a memo recounting internal discussions of the flawed earnings report. Since it is a corporate conviction, no one will serve jail time. But the firm, which keeps a minimal corporate structure primarily to settle mountains of litigation, will have to pay the fine and one of its employees will likely have to meet with federal probation authorities. A federal jury, after hearing five weeks of testimony and deliberating for nine days, convicted Andersen on June 15. The conviction meant Andersen could no longer audit publicly traded companies, but it was by then a moot point since the indictment had caused nearly all of the firm's publicly traded clients to leave. Andersen plans to appeal its conviction to the U.S. 5th Circuit Court of Appeals. The appeal, Andersen lawyers have said, will focus on Judge Melinda Harmon's jury instructions that appeared to break a lengthy deadlock. It would also focus on Harmon's admission of prosecution evidence about Andersen's problems with the Securities and Exchange Commission involving two clients, trash hauler Waste Management Inc. and appliance maker Sunbeam Corp. In January, Andersen admitted it shredded or otherwise destroyed thousands of records involving its work for Enron. Andersen fired lead Enron audit partner David Duncan and began trying cut a deal with the SEC and the Justice Department. The talks subsequently fell apart, and Andersen was indicted in March. The firm called the indictment a death sentence, and that prophecy rang true as more than 700 clients abandoned it in the ensuing months. Duncan in April pleaded guilty to obstruction of justice and agreed to serve as the prosecution's key witness in the trial, effectively cutting off a second round of plea talks. He still awaits sentencing. Andersen, which once boasted 85,000 employees worldwide, has disintegrated as partners and employees moved to competitors. About 2,000 employees remain in Andersen LLP, the U.S.-based arm of the firm that once was considered the paragon of accounting integrity.