Jim Cunha’s phone started ringing long before he left for work Tuesday morning, as his former colleagues at the Andersen accounting firm called him to give him the good news.
For Cunha, a former managing partner of Andersen’s office in Columbus, Ohio, the U.S. Supreme Court’s decision to overturn the firm’s conviction was at long last vindication for what he calls “a business lynching” by the federal government.
“In a sense, this just reaffirms what you knew all along,” said Cunha, now a business consultant in Northern California. “It was a fabulous organization with fabulous people.”
At the same time, for Cunha and thousands of other former Andersen partners and employees, the high court’s decision is a bittersweet victory. It has been more than three years since the firm collapsed, and not even a unanimous vote from nine justices will turn back the clock to Andersen’s glory days when it was the preeminent accounting firm in the world.
“It’s not like Andersen is going to open the doors tomorrow and have all of their clients back,” said Mark Friedlander, who was director of communications at Andersen’s Chicago headquarters. “It’s a hollow victory.”
To a degree, it’s a limited victory, too, because the Supreme Court narrowly stated that the jury instructions at the 2002 trial were wrong. The opinion does not endorse Andersen’s conduct in destroying documents related to its audits of Enron Corp., the Houston-based energy giant that went into bankruptcy after the disclosure of accounting irregularities. The Supreme Court sent the case back to lower courts for a potential retrial.
For some former partners, the ruling is not that meaningful. The damage to the firm and its 85,000 worldwide employees can’t be reversed.
“I’m happy the court overturned the conviction,” said Steve Weinstein, who started Chicago-based Altair Advisers, an investment consulting firm, three years ago with 11 co-workers. “It certainly helps to clear the good name of thousands of innocent people who lost their jobs. At the same, I consider myself fortunate and am not looking back.”
Many postings on a Web site for Andersen alumni echoed Weinstein’s sentiments, said Jonathan Goldsmith, president of AndersenAlumni.net. He said the site received about 100 comments on the Supreme Court decision, one of its busiest days since the site was erected in 2002.
Still, some Andersen loyalists say Tuesday’s decision could be the impetus to start resurrecting the firm. Greg Conlon, who retired in 1991 after 33 years with the firm, has had conversations with several alums and plans to meet with the four managing partners who have remained to wind down Andersen’s business affairs.
The firm has fewer than 200 employees, who operate a training center in St. Charles and tend to the more than 100 pending civil suits against Andersen and its partners that seek billions of dollars. The reversal of the conviction would boost Andersen’s defense in those cases, legal experts said.
Conlon has been following Andersen’s criminal case from his Northern California home and traveled to Washington on April 28 to hear oral arguments before the Supreme Court. He arrived at the court at 5:30 a.m. and was one of 50 members of the public allowed inside.
“I know it’s a long shot, but I know how great the firm is and was and I see no reason why it shouldn’t be again,” Conlon said.
While Andersen alumni welcomed the ruling, its effect on the government’s pursuit of corporate fraud is likely to be muted. As Charles Elson, director of the Center for Corporate Governance at the University of Delaware put it: “This was one very narrow aspect of the whole thing.”
At heart, the decision takes some of the risk out of handling sensitive documents, legal experts say. But far from opening the door to indiscriminate shredding, it underscores the importance of observing document retention policies that most companies already have adopted.
“It’s not open season on destroying relevant documents,” said Douglas Baird, professor at the University of Chicago law school. “You have to have the requisite level of intent to commit a crime.”
Under the precedent set by the Andersen conviction, even an innocent attempt to clean up files could have been interpreted as a criminal act. By making it clear that only such measures taken with criminal intent can violate the law, the Supreme Court has provided more specific guidance.
“You can hear lawyers, accountants, executives and office managers heaving sighs of relief from Florida to Alaska,” said Steven Lubet, a Northwestern University law professor.
Even so, Tuesday’s decision won’t change the advice lawyers typically have been giving. “The wake-up call about document retention went out a long time ago,” Baird explained. “It’s not as if lawyers are calling their clients and telling them to forget everything they said.”
More Top Picks Hamilton Beach Countertop Oven
The decision could have broader implications if it discourages the Justice Department from pursuing corporate crimes.
“People have been very afraid post-Andersen,” said Stephen Huggard, a former federal prosecutor who now practices white-collar defense at Palmer & Dodge in Boston. “Perhaps the climate of fear will be lessened.”
Lately, the Justice Department has retreated from indicting companies, instead negotiating “deferred prosecution” agreements that promise no criminal charges in exchange for cooperation and reforms.
A key Justice Department memo two years ago complained that crooked companies were shielding key employees, failing to disclose records and otherwise dragging their feet. In determining whether to charge a corporation, prosecutors were told to evaluate its willingness to finger top brass, make witnesses available, provide the results of internal investigations and waive attorney-client privilege.
Tuesday’s ruling could discourage that last step–revealing the confidential advice that company attorneys were giving executives, noted Stephanie Martz, director of the white-collar-crime project at the National Association of Criminal Defense Lawyers. “It should not be forced as part of the evaluation of whether a company is cooperating,” Martz said. “Andersen encouraged the government to keep pushing the envelope. We were really concerned.”
———-