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. Last Updated: 07/27/2016

$500,000 Fine, 5 Years Probation for Andersen

HOUSTON -- A U.S. federal judge fined accounting firm Andersen $500,000 Wednesday and sentenced it to five years probation for obstructing justice in a probe of client Enron, a hollow punishment as the auditor is all but defunct.

C.E. Andrews, an Andersen director, represented the company that once was considered the paragon of accounting integrity before its disintegration. Andersen paid the fine, and said it would appeal the obstruction of justice conviction next week.

"We will go to our grave saying we are not guilty,'' said lawyer Rusty Hardin, who represented the company in the federal trial.

The jury heard five weeks of testimony and deliberated for nine days before rendering its verdict on June 15. The company now employs less than 1,000 people, down from 85,000 worldwide before its rapid demise earlier this year.

The sentencing comes exactly a year after Enron Corp. released a dismal third-quarter earnings report that sparked its rapid spiral into bankruptcy and harsh scrutiny of U.S. corporate accounting practices.

Though Andersen was charged after admitting it shredded hundreds of Enron audits records, jurors decided the 90-year-old Chicago firm was guilty because in-house lawyer Nancy Temple suggested removing her name from a memo recounting internal discussions of the flawed earnings report.

Judge Melinda Harmon on Wednesday handed down the maximum sentence.

"I believe a message must be sent to the auditing community that the destruction of documents will not be tolerated while an investigation is ongoing,'' Harmon said.

The judge made note of the fact that just a few months before the events involving Enron, Andersen had signed an agreement with federal regulators that it would not participate in accounting fraud again. She was referred to massive fraud at trash hauler Waste Management Inc. Since it is a corporate conviction, no one will serve jail time. But the firm, which keeps a minimal corporate structure primarily to settle about 90 lawsuits, was forced to pay the fine.

The conviction meant Andersen could no longer audit publicly traded companies, but it was by then a moot point since the indictment had caused nearly all of the firm's publicly traded clients to leave.

Andersen lawyers have said the appeal will focus on Harmon's jury instructions, which appeared to break a lengthy deadlock. It would also focus on Harmon's admission of prosecution evidence about Andersen's problems with the Securities and Exchange Commission involving clients Waste Management and appliance maker Sunbeam Corp.

Andersen was indicted in March after attempts to cut a deal with the SEC and the U.S. Justice Department fell apart.

The firm called the indictment a death sentence, and that prophesy rang true as more than 700 clients abandoned it in the ensuing months.