a. What did Andersen do that upset government prosecutors?
b. Why did it destroy documents?
c. Did it know that the government would prosecute it or Enron?
d. How did Andersen decide which documents to destroy?
e. Is a document retention policy illegal?
f. What is illegal, then?
g. Was this result important for Andersen?
Arthur Andersen audited Enron Corporation's financial statements. When Enron's financial and accounting problems began to surface at the beginning of August, a senior accountant at Enron told two Andersen partners that Enron could face severe accounting scandals. Shortly thereafter, the SEC opened an informal investigation. Early in October, Nancy Temple, a lawyer at Andersen, realized that an SEC investigation was highly probable. A few days later, at a general training meeting attended by 89 employees, including 10 from the Enron engagement team, Odom, an Anderson partner, urged everyone to comply with the firm's document retention policy. He added: "If it's destroyed in the course of the normal policy and litigation is filed the next day, that's great. We've followed our own policy, and whatever there was that might have been of interest to somebody is gone and irretrievable." Three times that month, Temple reminded Andersen employees to follow the document retention policy. Andersen employees did indeed destroy a substantial number of paper and electronic documents. At a meeting on October 31, Duncan picked up a document with the words "smoking gun" written on it and began to destroy it, adding "we don't need this."
On October 30, the SEC opened a formal investigation and sent Enron a letter that requested accounting documents. In November, the SEC served Enron and Andersen with subpoenas for records. Duncan's assistant then sent an e-mail that stated: "Per Dave -- No more shredding . . . . We have been officially served for our documents."
Andersen was indicted for obstruction of justice, that is, intentionally persuading its employees to withhold documents from an official proceeding. A jury returned a guilty verdict. The Court of Appeals affirmed and the Supreme Court granted certiorari.