Arthur Andersen LLP v. United States
544 U.S. 696 (2005)

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  • Syllabus  | 
  • Opinion (William Hubbs Rehnquist)

SYLLABUS
OCTOBER TERM, 2004
ARTHUR ANDERSEN LLP V. UNITED STATES


SUPREME COURT OF THE UNITED STATES

ARTHUR ANDERSEN LLP v. UNITED STATES

certiorari to the united states court of appeals for the fifth circuit

No. 04–368.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] persuas[ion]” conviction under §1512(b). Pp. 6–12.

   (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. 6–9.

   (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. 9–12.

374 F. 3d 281, reversed and remanded.

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

Primary Holding
A conviction must be overturned if jury instructions are so vague that they allow a finding of guilt based on much less culpability than the criminal statute actually requires.
Facts
Energy conglomerate Enron Corporation enlisted Arthur Anderson LLP to audit the statements that it publicly filed and review its internal accounting practices. In response to the serious crisis in which Enron later found itself, Arthur Anderson compiled a team of investigators who worked with in-house counsel at Enron, Nancy Temple. Temple was aware of the likelihood that the SEC would investigate Enron's practices. She asked that Arthur Anderson be reminded of the document retention policy at Enron, of which employees were informed during a general training course.

Temple notified the Arthur Andersen team when the SEC sent it a notice of investigation, and she attached the document retention policy to the email. She also reminded them about the policy during a conference call on the following day. In two later meetings, her supervisor stressed the importance of complying with the policy. Despite these repeated reminders, many paper and electronic documents were destroyed, including for a week after the SEC opened its formal investigation. When the SEC finally subpoenaed the documents, Arthur Andersen was indicted for violating laws against the obstruction of justice under 18 U.S.C. Section 1512. These prohibit knowingly corrupt persuasion of persons that is intended to cause them to withhold documents from a government investigation. Arthur Andersen was convicted in the trial court.

Opinions

Majority

  • William Hubbs Rehnquist (Author)
  • Anthony M. Kennedy
  • Stephen G. Breyer
  • David H. Souter
  • John Paul Stevens
  • Ruth Bader Ginsburg
  • Clarence Thomas
  • Sandra Day O'Connor
  • Antonin Scalia

The appropriate mental state for this offense is consciousness or knowledge. Determining the scope of liability under a criminal statute requires restraint and lenity toward defendants. Advising a client to withhold documents is not always a criminal action, since attorney-client privilege may apply to the documents. There is nothing illegal per se about having a document retention policy that is designed to shield documents from production to the government. Since the jury instructions did not emphasize conscious awareness of wrongdoing, they did not appropriately cover the mens rea element. The jury had been allowed to convict Arthur Andersen even it found that the accounting firm believed that it was acting legally, which is clearly an inaccurate interpretation of the text of the law.

The prosecution also must show that there is a nexus linking the document destruction to the defendant's knowledge that the documents being destroyed might be material to a proceeding. Arthur Andersen had advised its employees on the crisis response team to follow Enron's document retention policy, so there was no liability here.

Case Commentary

Arthur Andersen's ability to avoid liability because of the vague jury instructions likely spurred Congress to enact the Sarbanes-Oxley laws that criminalized this type of conduct more specifically. The accounting firm was destroyed by the negative publicity, notwithstanding the reversal of the conviction.

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