Business law: principles and applications

Business Law

In the case of Arthur Andersen v. United States, the Supreme Court overturned a lower court ruling that the company had obstructed justice. The case centered on the allegation that as Enron's financial difficulties became public, the company's auditor Arthur Andersen "instructed its employees to destroy documents pursuant to its document retention policy." The initial ruling was held that this occurred. Arthur Andersen appealed on the grounds that the District Court's jury instructions did not properly convey the meaning of "corruptly persuades" and "official proceeding." The jury instructions, it was alleged, failed to convey the requisite consciousness of wrongdoing.

The documents in question were destroyed prior to any official investigation. The District Court had outlined that the jury did not need "to find that the person who altered or destroyed documents had any particular proceeding in mind…" (Hasnas, 2005). The Supreme Court disagreed with this interpretation on a couple of grounds. The first is that persuading someone to withhold testimony or documents "in not inherently malign"; the second is that the persuasion had to be both knowing and corrupt. The original jury instructions were not to his standard as the knowing part was not mandatory. As such, the Supreme Court found that the original jury instructions were "fatally defective" (Hasnas, 2005). The court also found that the jury needed to consider the knowingly corrupt act within the context of a specific investigation.

The Supreme Court does not rule on whether or not the employees of Arthur Andersen acted in a knowingly corrupt manner or not when they instructed Enron employees to destroy documents. The Court only ruled on the original District Court case. At the time, different District courts interpreted the concept of knowingly corrupting someone differently.

I do not agree with this decision. The Supreme Court likened the situation to other situations, including convincing someone to invoke the Fifth Amendment and two other scenarios involving privilege (Hasnas, 2005). There was no privilege in this situation. The Fifth Amendment is part of the Constitution while the right to shred documents is not. The situations therefore are not analogous. I believe the Supreme Court also erred in finding that the knowingly corrupt act needed to be within the context of a specific investigation. If a criminal act is being undertaken, there is a reasonable chance of an investigation being launched. The Supreme Court's interpretation allows for criminals to legally destroy evidence at any point prior to the opening of an investigation. This decision traces back to United States v. Aguilar. At the time, it may have been the case that such an action was legal. It is reasonable that any document could at some point be valuable to a federal investigation and therefore no document would be allowed to be destroyed. Once a document is destroyed, its contents are entirely speculative; retroactive assumption that the documents were critical to the assumption of the investigation is therefore also speculative.