Arthur Andersen Llp v. United States

• Decision Date: 31 May 2005
• Docket Number: No. 04-368.,04-368.
• Citation: 544 U.S. 696
• Parties: ARTHUR ANDERSEN LLP v. UNITED STATES.
• Court: U.S. Supreme Court

544 U.S. 696

ARTHUR ANDERSEN LLP v. UNITED STATES.

No. 04-368.

Supreme Court of United States.

Argued April 27, 2005.

Decided May 31, 2005.

As Enron Corporation's financial difficulties became public, petitioner, Enron's auditor, instructed its employees to destroy documents pursuant to its document retention policy. Petitioner was indicted under 18 U. S. C. §§ 1512(b)(2)(A) and (B), which make it a crime to "knowingly . . . corruptly persuad[e] another person . . . with intent to . . . cause" that person to "withhold" documents from, or "alter" documents for use in, an "official proceeding." The jury returned a guilty verdict, and the Fifth Circuit affirmed, holding that the District Court's jury instructions properly conveyed the meaning of "corruptly persuades" and "official proceeding" in § 1512(b); that the jury need not find any consciousness of wrongdoing in order to convict; and that there was no reversible error.

Held: The jury instructions failed to convey properly the elements of a "corrup[t] persua[sion]" conviction under § 1512(b). Pp. 703-708.

(a) This Court's traditional restraint in assessing federal criminal statutes' reach, see, e. g., United States v. Aguilar, 515 U. S. 593, 600, is particularly appropriate here, where the act underlying the conviction— "persua[sion]"—is by itself innocuous. Even "persuad[ing]" a person "with intent to . . . cause" that person to "withhold" testimony or documents from the Government is not inherently malign. Under ordinary circumstances, it is not wrongful for a manager to instruct his employees to comply with a valid document retention policy, even though the policy, in part, is created to keep certain information from others, including the Government. Thus, § 1512(b)'s "knowingly . . . corruptly persuades" phrase is key to what may or may not lawfully be done in the situation presented here. The Government suggests that "knowingly" does not modify "corruptly persuades," but that is not how the statute most naturally reads. "[K]nowledge" and "knowingly" are normally associated with awareness, understanding, or consciousness, and "corrupt" and "corruptly" with wrongful, immoral, depraved, or evil. Joining these meanings together makes sense both linguistically and in the statutory scheme. Only persons conscious of wrongdoing can be said to "knowingly . . . corruptly persuad[e]." And limiting criminality to persuaders conscious of their wrongdoing sensibly allows § 1512(b) to reach only those with the level of culpability usually required to impose criminal liability. See Aguilar, supra, at 602. Pp. 703-706.

(b) The jury instructions failed to convey the requisite consciousness of wrongdoing. Indeed, it is striking how little culpability the instructions required. For example, the jury was told that, even if petitioner honestly and sincerely believed its conduct was lawful, the jury could convict. The instructions also diluted the meaning of "corruptly" such that it covered innocent conduct. The District Court based its instruction on the Fifth Circuit Pattern Jury Instruction for § 1503, which defined "corruptly" as "knowingly and dishonestly, with the specific intent to subvert or undermine the integrity" of a proceeding. However, the court agreed with the Government's insistence on excluding "dishonestly" and adding the term "impede" to the phrase "subvert or undermine," so the jury was told to convict if it found petitioner intended to "subvert, undermine, or impede" governmental factfinding by suggesting to its employees that they enforce the document retention policy. These changes were significant. "[D]ishonest[y]" was no longer necessary to a finding of guilt, and it was enough for petitioner to have simply "impede[d]" the Government's factfinding ability. "Impede" has broader connotations than "subvert" or even "undermine," and many of these connotations do not incorporate any "corrupt[ness]" at all. Under the dictionary definition of "impede," anyone who innocently persuades another to withhold information from the Government "get[s] in the way of the progress of" the Government. With regard to such innocent conduct, the "corruptly" instructions did no limiting work whatsoever. The instructions also led the jury to believe that it did not have to find any nexus between the "persua[sion]" to destroy documents and any particular proceeding. In resisting any nexus element, the Government relies on § 1512(e)(1), which states that an official proceeding "need not be pending or about to be instituted at the time of the offense." It is, however, quite another thing to say a proceeding need not even be foreseen. A "knowingly . . . corrup[t] persaude[r]" cannot be someone who persuades others to shred documents under a document retention policy when he does not have in contemplation any particular official proceeding in which those documents might be material. Cf. Aguilar, supra, at 599-600. Pp. 706-708.

374 F. 3d 281, reversed and remanded.

REHNQUIST, C. J., delivered the opinion for a unanimous Court.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT.

Maureen E. Mahoney argued the cause for petitioner. With her on the briefs were Alexandra A. E. Shapiro, J. Scott Ballenger, and Charles A. Rothfeld.

Deputy Solicitor General Dreeben argued the cause for the United States. With him on the brief were Acting Solicitor General Clement, Acting Assistant Attorney General Keeney, Kannon K. Shanmugam, Sangita K. Rao, Andrew Weissmann, and Matthew W. Friedrich.^*

CHIEF JUSTICE REHNQUIST delivered the opinion of the Court.

As Enron Corporation's financial difficulties became public in 2001, petitioner Arthur Andersen LLP, Enron's auditor, instructed its employees to destroy documents pursuant to its document retention policy. A jury found that this action made petitioner guilty of violating 18 U. S. C. §§ 1512(b) (2)(A) and (B). These sections make it a crime to "knowingly us[e] intimidation or physical force, threate[n], or corruptly persuad[e] another person . . . with intent to . . . cause" that person to "withhold" documents from, or "alter" documents for use in, an "official proceeding."¹ The Court of Appeals for the Fifth Circuit affirmed. We hold that the jury instructions failed to convey properly the elements of a "corrup[t] persua[sion]" conviction under § 1512(b), and therefore reverse.

Enron Corporation, during the 1990's, switched its business from operation of natural gas pipelines to an energy conglomerate, a move that was accompanied by aggressive accounting practices and rapid growth. Petitioner audited Enron's publicly filed financial statements and provided internal audit and consulting services to it. Petitioner's "engagement team" for Enron was headed by David Duncan. Beginning in 2000, Enron's financial performance began to suffer, and, as 2001 wore on, worsened.² On August 14, 2001, Jeffrey Skilling, Enron's Chief Executive Officer (CEO), unexpectedly resigned. Within days, Sherron Watkins, a senior accountant at Enron, warned Kenneth Lay, Enron's newly reappointed CEO, that Enron could "implode in a wave of accounting scandals." Brief for United States 2. She likewise informed Duncan and Michael Odom, one of petitioner's partners who had supervisory responsibility over Duncan, of the looming problems.

On August 28, an article in the Wall Street Journal suggested improprieties at Enron, and the SEC opened an informal investigation. By early September, petitioner had formed an Enron "crisis-response" team, which included Nancy Temple, an in-house counsel.³ On October 8, petitioner retained outside counsel to represent it in any litigation that might arise from the Enron matter. The next day, Temple discussed Enron with other in-house counsel. Her notes from that meeting reflect that "some SEC investigation" is "highly probable." Id., at 3.

On October 10, Odom spoke at a general training meeting attended by 89 employees, including 10 from the Enron engagement team. Odom urged everyone to comply with the firm's document retention policy.⁴ He added: "`[I]f it's destroyed in the course of [the] normal policy and litigation is filed the next day, that's great. . . . [W]e've followed our own policy, and whatever there was that might have been of interest to somebody is gone and irretrievable.'" 374 F. 3d 281, 286 (CA5 2004). On October 12, Temple entered the Enron matter into her computer, designating the "Type of Potential Claim" as "Professional Practice — Government/Regulatory Inv[estigation]." App. JA-127. Temple also e-mailed Odom, suggesting that he "`remin[d] the engagement team of our documentation and retention policy.'" Brief for United States 6.

On October 16, Enron announced its third quarter results. That release disclosed a $1.01 billion charge to earnings.⁵ The following day, the SEC notified Enron by letter that it had opened an investigation in August and requested certain information and documents. On October 19, Enron forwarded a copy of that letter to petitioner.

On the same day, Temple also sent an e-mail to a member of petitioner's internal team of accounting experts and attached a copy of the document policy. On October 20, the Enron crisis-response team held a conference call, during which Temple instructed everyone to "[m]ake sure to follow the [document] policy." Brief for United States 7 (brackets in original). On October 23, Enron CEO Lay declined to answer questions during a call with analysts because of "potential lawsuits, as well as the SEC inquiry." Ibid. After the call, Duncan met with other Andersen partners on the Enron engagement team and told them that they should ensure team members were complying with the document policy. Another meeting for all team members followed, during which Duncan distributed the policy and told everyone to comply. These, and other smaller meetings, were followed by substantial destruction of paper and electronic documents.

On October 26, one of...