NewsWire

Post-Arthur Andersen, Government More Cautious
The first Enron-related trial pitted government prosecutors against Arthur Andersen, an international “Big Five” accounting firm that virtually dissolved after a 2002 obstruction-of-justice conviction for allegedly shredding Enron audit documents. But, with only a handful of employees left and no hope of being fully resurrected, the damage was already done by the time a 2005 U.S. Supreme Court opinion unanimously reversed the conviction. “The only good thing that came from the prosecution of Arthur Andersen is that the government now thinks harder before pursuing and destroying a large corporation based on the perceived conduct of a few,” says Houston lawyer Rusty Hardin, who defended Arthur Andersen. “Unfortunately, it took the demise of an 88,000-employee worldwide company for that reality to sink in.” For more information, contact Bruce Vincent at 800-559-4534 or bruce@androvett.com.

Criminal Cases Boosted Careers, Blemished DOJ
The federal prosecutors on the Enron Task Force enhanced their careers and put Houston on the white-collar crime map, but in many instances their propensity to overreach in the effort to win convictions ended up giving the Department of Justice a bad name. “Prosecutorial abuses in the disclosure of exculpatory information, intimidation of potential defense witnesses, ill-considered theories of fraud, including ‘honest services’ claims, and outrageous attempts to put people in prison for decades did not serve justice or this country,” says Thomas Hagemann of the Houston office of Gardere Wynne Sewell LLP, who worked as a defense attorney in the Enron Nigerian barge case. “These prosecutors were long gone by the time the reversals started rolling in on the Arthur Andersen, Nigerian barge and Broadband cases, which were riddled with flaws and ultimate failures.”  For more information, contact Mary Flood at 800-559-4534 or mary@androvett.com.

Need for Whistle-Blower Protections Becomes Evident
Though business interests are waging legal war over new financial bounties for corporate whistle-blowers, it is crucial to maintain the new rules in the Dodd-Frank Wall Street Reform and Consumer Protection Act that encourage corporate whistle-blowing and discourage Enron-like corrupt corporate cultures. “Corporate corruption takes root in the tolerances of those at the top. Deceit and concealment can become the morés of a company. So it was in Enron 10 years ago, so it is today with companies like News Corp.,” says Houston white-collar criminal defense lawyer Philip Hilder, who represented Enron’s Sherron Watkins and now represents a News Corp. whistle-blower. “After Watkins warned of bad deals that could implode Enron, those above her considered retaliating. Congress realized Dodd-Frank protections are necessary to encourage and protect those who internally or externally make the effort to correct wrongs.” For more information, contact Mary Flood at 800-559-4534 or mary@androvett.com.

Technology Would Make e-Discovery Battle Worse Today
Enron’s demise in civil, criminal and bankruptcy courts included a mountain of paper documents and emails. But a similar set of circumstances would create far more headaches today. “Employees in 2011 have many fewer paper documents than they did 10 years ago, and the Enron e-documents were largely on internal servers, desktops and laptops,” says Rachel Womack, a data security and electronic discovery expert at Stroz Friedberg who was involved in Enron-related litigation. “If the same scenario happened today, those documents likely would be on employee cell phones, iPads, external memory drives and in ‘the cloud.’ Important emails could be on private Google, Yahoo or other accounts. It is important for a company to put someone in charge of documents and for courts to have uniform e-material rules for all parties.” For more information, contact Robert Tharp at 800-559-4534 or robert@androvett.com.

Far-Reaching Legal, Regulatory Legacy
The Enron investigations and prosecutions transformed the landscape of corporate regulation, as well as the tactics used by federal investigative agents and prosecutors. “The 2002 Sarbanes-Oxley Act, the 2009 Fraud Enforcement and Recovery Act and the 2010 Dodd-Frank Act all were inspired by Enron and greatly expanded federal criminal and regulatory authority over corporations and their officers,” says Richard Roper, a Dallas lawyer at Thompson & Knight and the former U.S. Attorney for the Northern District of Texas. “Because of what was learned during Enron, federal prosecutors now routinely employ obstruction-of-justice statutes as a tool to bring corporations and officers to their knees. And corporate whistle-blowers are now positioned to receive millions of dollars in awards for reporting alleged corporate misconduct while enjoying near immunity from perceived attempts of employer retaliation.” For more information, contact Barry Pound at 800-559-4534 or barry@androvett.com.

Bankruptcy Spawned Current Cleanup Efforts
Enron was an Oregon corporation with a Texas headquarters, and yet its then-largest bankruptcy was filed and anchored controversially in a New York court, where smaller creditors from around the country had trouble finding affordable representation. “I don't know of a case where venue was so inappropriately set in New York as in the Enron case. The decision to leave it in New York has been heavily criticized,” says Rhett Campbell, a bankruptcy lawyer in Thompson & Knight’s Houston office. “The problem of venue-shopping corporate bankruptcy filings has resulted in an effort in Congress to change the rules. Small and moderately sized creditors are largely disenfranchised by the present law, and the Enron case proved that clearly.” For more information, contact Barry Pound at 800-559-4534 or barry@androvett.com