Anderson ruling won't deter fraud prosecution

By Carrie Johnson

updated 12:04 a.m. ET June 1, 2005

WASHINGTON - The Supreme Court's resounding decision in favor of disgraced accounting firm Arthur Andersen LLP is a harsh rebuke for federal prosecutors but will not force a retreat in the Justice Department's three-year-old effort to prosecute corporate fraud, legal experts said yesterday.

Andersen's March 2002 indictment marked the first big federal prosecution of business abuses as multibillion-dollar frauds at Enron Corp., Rite Aid Corp. and WorldCom Inc. were exploding into public view. The accounting firm's conviction a few months later helped end the company's accounting practice, created momentum for other corporate prosecutions and helped silence critics who claimed that the Bush administration was too cozy with corporations to hold them accountable for fraud and misconduct.

Justice Department officials yesterday expressed disappointment with the high court's decision overturning Andersen's conviction for obstructing justice. They said they had not yet decided whether to retry Andersen, a once-respected Chicago accounting firm with 28,000 employees across the nation.

"We remain convinced that even the most powerful corporations have the responsibility of adhering to the rule of law," acting Assistant Attorney General John C. Richter said in a prepared statement.

Ruling not seen as deterrent
Defense lawyers and former prosecutors said the unanimous Supreme Court ruling will not substantially deter the government from prosecuting businesses and high-profile executives. One major reason is that the witness-tampering law under which former Enron auditor Andersen was indicted has been supplanted by a new obstruction-of-justice statute in the 2002 Sarbanes-Oxley Act, corporate accountability legislation Congress passed after investor outcry.

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In addition, the President's Corporate Fraud Task Force has won important victories since Andersen went out of business, including several for obstructing justice. Prosecutors have convicted former WorldCom chief Bernard J. Ebbers, former Adelphia Communications Corp. chief John J. Rigas and domestic entrepreneur Martha Stewart, among others.

However, defense lawyers for investment banker Frank P. Quattrone yesterday asked an appeals court for more time to appeal his conviction to the U.S. Court of Appeals for the 2nd Circuit, citing the Andersen decision. In May 2004, Quattrone was convicted of two counts of obstructing justice and one count of witness tampering, with that charge under the same law as the one in the Andersen case..

"What [the ruling] ought to do is make the government more reflective before they pull the trigger in certain circumstances," said E. Lawrence Barcella Jr., a longtime Washington defense lawyer and former federal prosecutor."

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