A federal judge denied Arthur Andersen LLP's request for acquittal yesterday after federal prosecutors rested their obstruction-of-justice case against the accounting firm over its destruction of Enron Corp documents.
Andersen defense lawyer Lee Rubin asked for an acquittal ruling, saying the government had presented "insufficient evidence to prove any attempt to subvert or undermine" federal investigators probing whether fraud led to Enron's collapse and record bankruptcy filing.
US District Judge Melinda Harmon replied: "Motion denied."
Andersen lawyer Rusty Hardin told the judge he plans to present 12 witnesses for the firm's defense. He began by calling Richard Corgel, Andersen's US practice director, to the witness stand.
With the firm's criminal trial in Houston now in its fourth week, Andersen's lawyers will seek to convince a federal jury that Enron audit records were shredded under regular document-handling procedures and not as part of a cover-up.
Andersen, the world's fifth-largest accounting firm, has lost more than 470 clients, including 68 companies in the Standard & Poor's 500 Index, along with hundreds of partners since the energy trader's Chapter 11 filing in December.
If convicted, the Chicago-based firm would lose its ability to audit public companies.
Houston-based Enron sought bankruptcy protection after restating US$586 million in revenue because of accounting problems with partnerships used to keep debt off the company's books.
Andersen, which was Enron's auditor for 16 years, signed off on those entities.
Cross-examination
Earlier yesterday, Hardin cross-examined the government's final witness, FBI investigator Paula Schanzle, who oversaw evidence collected by the Justice Department's Enron task force.
Seeking to counter US claims of widespread shredding, Hardin asked Schanzle about evidence saved by Andersen auditors that was turned over to the government.
The FBI agent confirmed that the firm preserved e-mails and notes from Nancy Temple, Andersen's in-house lawyer. Hardin also pointed out that even if one copy of a particular e-mail was destroyed, it was retained elsewhere at Andersen and given to prosecutors.
Temple, who has asserted her Fifth Amendment right not to testify at trial, sent an e-mail reminder in October about the firm's document retention policy. The government argues that the e-mail was a tacit order to shred documents.
Temple also kept several copies of an e-mail with an attachment about allegations about financial wrongdoing at Enron, Schanzle said.
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