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CNN Live Saturday

Interview with Kendall Coffey

Aired June 15, 2002 - 17:01   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN ANCHOR: Now back to our top story, the guilty verdict against accounting firm Arthur Andersen.

CNN's Fred Katayama covererd the trial, and he joins us now with a live report from Houston. Hi there, Fred.

FRED KATAYAMA, CNN CORRESPONDENT: Hi, Fredricka.

The verdict marked the first major conviction, white collar conviction, stemming from the Enron scandal.

A 12-person Texas jury convicted Arthur Andersen on one count of obstruction of justice. Prosecturs charged Arthur Andersen destroyed documents related to the Enron audit, with a criminal intent to impede an investigation.

But in the end, the jurors said the smoking gun was not the shredded documents but an electronic one, an e-mail sent from Andersen in-house lawyer Nancy Temple to the auditor on the Enron account, David Duncan. In it she urged Duncan and others to remove her name as well as other language that suggested that Enron (sic) had concluded Enron's 3rd Quarter financial statment released last year was misleading.

The jury foreman explained why it took so long for the jurors to decide the case.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Understanding what the jury charge was -- there were 11 or 12 page of charge from the judge, and they were not very easy reading, and we had to have all of the jury study those charges several times over several days.

(END VIDEO CLIP)

KATAYAMA: The defense had been arguing that Arthur Andersen destroyed documents not to impede investigators but rather to organize Enron's files. Arthur Andersen vowed to appeal the decision and vowed to fight any further legal challenges.

(BEGIN VIDEO CLIP)

RUSTY HARDIN, ANDERSEN DEFENSE ATTORYNEY: Our position as to whether Arthur Andersen committed a crime has not changed. They did not. Not a single person there did, and if an accountancy board wants to get into all that litigation, come on down. We'll be there. This company did not commit a crime.

(END VIDEO CLIP)

KATAYAMA: Prosecutors say this case boils down to one small but important lesson for corporate America.

ANDREW WEISSMAN, GOVERNMENT PROSECUTOR: This case was really about a simple principle, which is, when you expect the police, don't destroy evidence. And for Arthur Andersen, that police was the SEC.

And they knew they were coming and they destroyed evidence in advance of their getting there. That's what the case was about. That's what they were charged with and that's what they're now convicted of.

KATAYAMA: If the indictment in March was the death sentence for Arthur Andersen, this verdict could be the final death blow. Thousands of innocent employees at Arthur Andersen have been fired. Hundreds of major firms have defected from the firm. It could mark the end of the 89-year-old accounting firm, one that was once the world's largest professional services firm, one that was once known for its integrity and high sense of corporate ethics. Fredricka, back to you.

Thanks very much, Fred Katayama from Houston. Arthur Andersen's reputation was all but shredded even before today's verdict came back.

Twenty-eight percent of the company's public clients have jumped ship since the Enron collapse. The question is, can the company survive and how will today's verdict affect the Enron investigation?

Joining us now to help answer some of these questions is Kendall Coffee. He's a former U.S. attorney. Thanks for joining us.

KENDALL COFFEE, FORMER U.S. ATTORNEY: Thanks for inviting me, Fredricka.

WHITFIELD: Well, you heard Fred even say it, that the defense attorneys already thought if the indictment was a death sentence, then certainly this verdict is a final blow. How do you see it for the Arthur Andersen firm?

COFFEE: Very, very hard to think that this is survivable. There may be a good issue on appeal, in the sense that the jury clearly struggled with the case, and the judge ultimately, in leading to the conviction, answered a question which no judge had answered before. So there are good issues for appeal, but it's a race against time, and it looks like time has expired, because even if, at some point, an appeal could overturn the verdict, remember, that wouldn't mean that Arthur Andersen was innocent, it would simply mean they would get a new trial.

So even talking about an appeal, even a good appeal, doesn't seem likely to help Arthur Andersen's chances of survival much after this guilty verdict today.

WHITFIELD: And the defense attorneys say that they are likely to appeal after that October 11 scheduled sentencing. But odd enough, the jury was deadlocked after eight days of deliberations, then they went back to the judge, and the judge then let them know that you don't have to find everyone guilty, even if you just find one person guilty, then you don't have to necessarily feel like you've got a deadlocked decision here. So how unusual is that? I don't think -- I'm not familiar with that logic being applied. Is that common?

COFFEY: You've hit the key point, Fredricka, because I don't believe any judge has answered that specific question before. And the prosecution's version of the law was what the judge agreed with and instructed the jury. What she said, in effect, is even if you members of the jury don't believe that there's any one person who was a criminal, you can still find that arthur Andersen, as an organization, is a felon.

That's what they did. That's going to be a big controversy. But again, is there really time at this point to get to an appellate court and undo the verdict of guilty that was returned today?

WHIRFIELD: Arthur Andersen has already lost about 15,000 employees just since the enron collapse. It would seem from a lot of people in the business community that this is the end for this 89- year-old accounting firm.

COFFEY: There's so much sympathy and concern from so many people, but if you're a publicly traded company, can you have an accounting firm which is in effect a felon? The answer is going to be no. And as much loyalty as there's been, and it's been remarkable up to now, this is probably the final blow. And the disintegration is going to accelerate, I think, over the coming days.

WHITFIELD: So if the penalties at stake at least for this Arthur Andersen verdict, the penalties are up to $500,000 in fines and possibly a five-year probation. Then does this mean that any and all people would escape any kind of jail time as it relates to this?

So many people lost their jobs, their 401(k)s, et cetera, and they want to see somebody pay some time in jail, possibly.

COFFEY: There is going to be, obviously, more investigation, more indictments. You can't put a corporation in jail. But the individuals who are accountable can be put in prison. And would this case now going forward again, with the guilty verdict today, the other Enron targets, some perhaps in Arthur Andersen, and certainly others among the high-ranking corporate executives of Enron, now are going to be feeling mighty nervous, because their time is coming and there are probably going to be additional indictments before this massive fraud scandal is resolved.

WHITFIELD: All right. This is probably just the beginning, as you said. Former U.S. attorney Kendall Coffey, thank you very much for joining us this afternoon.

COFFEY: Thanks, Fredricka.

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