Arthur Andersen Indicted in Enron Case

W A S H I N G T O N, March 14 -- 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."