Arthur Andersen received the maximum sentence of five years' probation and a $500,000 fine Wednesday for obstructing the government's investigation into now bankrupt energy trader
Andersen, which has shut down its auditing practice and now employs a skeletal crew of just 2,000 people, was convicted in June of shredding and altering documents related to its audit work on Enron.
A federal judge upheld that verdict last month although Andersen is appealing.
While Andersen admitted to destroying documents in January for "housekeeping" purposes, jurors said that was not the reason they found the firm guilty. In fact, the outcome was decided because in-house lawyer Nancy Temple asked David Duncan, Andersen's top Enron auditor, to remove her name from a memo discussing Enron's misleading earnings report. Temple told Duncan that her name on the memo might increase "the chances that I might be a witness, which I prefer to avoid."
Duncan pleaded guilty April 9 to obstruction of justice and is expected to be sentenced Oct. 25. Temple hasn't been charged with any crime.
Andersen was indicted in March after settlement talks with the Justice Department and
Securities and Exchange Commission
broke down. The accounting giant said at the time that the indictment was tantamount to a death sentence and, indeed, clients defected en masse in subsequent months.
Wednesday's sentence, while a formality, is significant because Andersen continues to face huge shareholder lawsuits related to Enron's crash.
The scandal surrounding Andersen and Enron ushered in a new wave of corporate reforms in Washington. In late July, President Bush signed into law the Sarbanes Oxley Act, which, among other things, regulates the responsibilities and composition of audit committees and restricts the non-audit services that accounting firms can provide.
While some of these provisions became effective upon enactment, others are awaiting SEC implementation. On Wednesday, the SEC said it was considering implementing a provision in the Act that would prohibit actions designed to improperly influence auditors. The commission may also require public companies to disclose information about internal control reports, company codes of ethics and audit committee financial experts.
The new rules have been published for comment, meaning that the SEC will hear reaction from the public before implementing them.