As a matter of law, the United States Supreme Court is always right -- at least until two-thirds of Congress and three-quarters of the states say otherwise. But as a matter of common sense, the "Supremes" sometimes get it wrong. Yesterday marked one such occasion: The highest court in the land threw out the "guilty" verdict handed down to accounting firm Arthur Andersen in June 2002.
But before I take off my lawyer hat and start practicing common sense, let's make one thing crystal clear: The Supreme Court did not declare Andersen "innocent" yesterday. It only pointed out that the trial court's instructions to the jury were too lax, thereby allowing the possibility that jurors convicted Andersen without the government proving the accounting firm's guilt. In essence, the high court said: "The judge goofed, and you need to try Andersen again." That's it.
So when Andersen's PR guy characterized the court's decision as dispelling "an unjustified cloud over the professionalism and integrity of the people of Arthur Andersen," that's a bit of a stretch. When he termed the shredding of 2 tons of documents on the eve of a subpoena a "routine business decision," it strained credibility. And when Andersen's attorney asserted that the company and its employees "never intended to do anything wrong" and "certainly never intended to obstruct justice," well, that's what he's paid to say, of course. But saying it doesn't make it so. Put all that self-congratulatory verbiage together, and it amounts to little more than the verbal equivalent of a pile of stinky red herring.
Don't buy that fish.
Andersen may no longer be officially "guilty," but its actions were far from innocent. As the Court pointed out, Andersen had hired lawyers as early as Oct. 8, 2001, to defend it against expected litigation arising from the Enron scandal. On Oct. 9, Andersen's in-house lawyers termed an investigation of their firm by the Securities and Exchange Commission "highly probable." The very next day, Andersen partner Michael Odom instructed Andersen employees to "comply with the firm's document retention policy" (wink, wink), adding that "[I]f it's destroyed in the course of [the] normal policy and litigation is filed the next day, that's great. . [W]e've followed our own policy, and whatever there was that might have been of interest to somebody is gone and irretrievable."
Yet Andersen's own policy mandated that "in cases of threatened litigation . no related information will be destroyed." With Andersen's lawyers warning that investigation and litigation were imminent, anyone with any common sense at all would have known that the decision to fire up the shredders was wrong. (Indeed, several of Andersen's own managers were cited as expressing reservations.)
And that, Fools, is the real tragedy of this case. Had the government's prosecutors been just a bit less aggressive in fighting to get their preferred language into the jury instructions, had they trusted the jury's innate common sense to add up the facts and come to the correct conclusion, Andersen would probably remain convicted today.
So yes, technically, the Supremes called this one right. The jury instructions were flawed. They gave the government too much leeway and required its prosecutors to prove too little. But does that make Andersen innocent? No way.
Fool contributor Rich Smith is a former prosecutor and a current member of the Bar of the U.S. Supreme Court. He has no ownership interest in any of the companies mentioned in this article.
