Arthur Andersen Indicted in Enron Case

The U.S. Justice Department today announced the indictment of embattled accounting firm Arthur Andersen on one count of obstruction of justice relating to the collapse of former energy giant Enron Corp.

A federal grand jury actually filed the indictment on March 7, but it was unsealed today.

"The firm sought to undermine our justice system by destroying evidence," said Deputy Attorney General Larry Thompson at an afternoon news conference, saying the firm has intentionally disposed of "tons" of evidence after a government inquiry began last October.

He added: "At the time, Andersen knew full well that these documents were relevant."

Andersen, however, has made it clear it will not plead guilty to the charge, having already rejected a plea bargain deal with the government.

The company released a vigorous response to the announcement this afternoon, calling the Justice Department's actions "without precedent and an extraordinary abuse of prosecutorial discretion," and "a gross abuse of government power."

Charge Based on Shredding

The obstruction charge is based on claims that Andersen employees shredded important documents about Enron's finances, even though they knew the Securities and Exchange Commission was formally looking into Enron. The Justice Department also alleges Andersen employees deleted relevant computer files.

Andersen's basic line of defense is that the shredding was conducted in the company's Houston office under the supervision of David Duncan, the firm's lead partner in charge of Enron's audits, and was not ordered by executives at Andersen headquarters in Chicago.

An Andersen internal report, written by two law firms and obtained today by ABCNEWS, emphasizes this point.

At the time of the shredding in October, says the report, "Duncan and the other partners on the Enron engagement knew that the SEC had made an informal request to Enron for documents and information relating to partnerships involving Enron's former CFO, Andrew Fastow, and that private civil lawsuits had also been filed."

But the indictment charges the document destruction was widespread and involved employees at multiple locations, including Andersen's London office.

"The obstruction effort was not just confined to a few isolated individuals or documents," said Thompson. "This was a substantial undertaking over an extended period of time with a very wide scope."

Duncan's lawyers released a statement this afternoon saying that he "continues to cooperate with all of the ongoing investigations" and would not comment on Andersen's indictment.

On Jan. 10, Andersen acknowledged it had destroyed thousands of Enron-related documents and e-mails last fall, as investigations into the events that ultimately led to the company's bankruptcy were under way. Enron, after filing the largest-ever U.S. bankruptcy on Dec. 2, fired Andersen on Jan. 17.

The maximum potential punishment for the charge is a five-year probation term for Arthur Andersen and a $500,000 fine.

Multiple Reasons for Indictment

In another letter released Wednesday night by Andersen, the firm defends itself and strongly criticizes the Justice Department's line of inquiry into the Enron matter.

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