Filed: Jun. 25, 2004
Latest Update: Feb. 21, 2020
Summary: United States Court of Appeals Fifth Circuit F I L E D REVISED June 24, 2004 June 16, 2004 IN THE UNITED STATES COURT OF APPEALS Charles R. Fulbruge III FOR THE FIFTH CIRCUIT Clerk No. 02-21200 UNITED STATES OF AMERICA, Plaintiff-Appellee, versus ARTHUR ANDERSEN, LLP, Defendant-Appellant. Appeal from the United States District Court for the Southern District of Texas Before REAVLEY, HIGGINBOTHAM, and BENAVIDES, Circuit Judges. PATRICK E. HIGGINBOTHAM, Circuit Judge: Today we decide one of the ma
Summary: United States Court of Appeals Fifth Circuit F I L E D REVISED June 24, 2004 June 16, 2004 IN THE UNITED STATES COURT OF APPEALS Charles R. Fulbruge III FOR THE FIFTH CIRCUIT Clerk No. 02-21200 UNITED STATES OF AMERICA, Plaintiff-Appellee, versus ARTHUR ANDERSEN, LLP, Defendant-Appellant. Appeal from the United States District Court for the Southern District of Texas Before REAVLEY, HIGGINBOTHAM, and BENAVIDES, Circuit Judges. PATRICK E. HIGGINBOTHAM, Circuit Judge: Today we decide one of the man..
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United States Court of Appeals
Fifth Circuit
F I L E D
REVISED June 24, 2004
June 16, 2004
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk
No. 02-21200
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ARTHUR ANDERSEN, LLP,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Texas
Before REAVLEY, HIGGINBOTHAM, and BENAVIDES, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Today we decide one of the many cases arising from the rubble
of Enron Corporation, which fell from its lofty corporate perch in
2001 wreaking financial ruin upon thousands of investors, creditors,
and employees. Like a falling giant redwood, it took down with it
many members of its supporting cast. Our present focus is upon one
of those, Arthur Andersen, LLP, then one of the largest accounting
and consulting firms in the world.
Arthur Andersen appeals from a judgment of conviction entered
in the Southern District of Texas upon a jury verdict finding it
guilty of obstructing an official proceeding of the Securities and
Exchange Commission, in violation of 18 U.S.C. § 1512(b)(2). The
indictment leading to the conviction was returned on March 7, 2002,
charging Andersen in a single count of corruptly persuading one or
more Andersen personnel to withhold, alter, destroy, or conceal
documents with the intent to impair their availability in an
official proceeding. That proceeding, which the government said
Andersen knew was imminent and inevitable, was an investigation by
the SEC into the relationship between Enron and Andersen, from whom
Enron obtained accounting, auditing, and consulting services.
Trial commenced on May 6, 2002, and the verdict was returned
on June 15, 2002. Writ large, the government says that Andersen,
in an effort to protect itself and its largest single account,
ordered a mass destruction of documents to keep them from the hands
of the SEC.
Andersen asks this court to reverse its conviction, urging
errors in four evidentiary rulings, misconduct by the prosecutor in
his rebuttal jury summation, and two legal contentions regarding the
required proof under § 1512(b)(2). The evidentiary rulings include
admitting extensive evidence regarding two unrelated SEC enforcement
actions against Andersen, excluding evidence of the volume of
documents Andersen did not destroy, and excluding impeachment
evidence. Regarding the proof required by § 1512(b)(2), Andersen
urges that given its element of “corruption,” the government had to
2
prove more than that it acted with an intent to impede the SEC.
Finally, Andersen asserts that the government had to prove that
Andersen intended to interfere with a “particular” proceeding.
We are not persuaded that this conviction is flawed by
reversible error and we affirm the judgment of conviction.
I
During the 1990's, Enron transformed itself from a natural gas
pipeline operator into a trading and investment conglomerate with
a large volume of trading in the energy business. Andersen both
audited Enron’s publicly filed financial statements and provided
internal audit and consulting services. By the late 1990's,
Andersen’s “engagement team” for its Enron account included more
than 100 people, a significant number of which worked exclusively
in Enron quarters in Houston, Texas. From 1997 through 2001 the
engagement team’s leader was David Duncan. He was in turn subject
to certain managing partners and accounting experts in Andersen’s
Chicago office. Enron was a valued client producing 58 million
dollars in revenue in 2000 for Andersen with projections of 100
million for the next year. Enron’s Chief Accounting Officer and
Treasurer throughout this period came to the employ of Enron from
the accounting staffs of Andersen, as did dozens of others. This
was a close relationship. Indeed, the jury heard evidence that
Andersen removed at Enron’s request at least one accountant from his
assignment with Enron after Enron disagreed with his accounting
advice.
3
With Enron’s move to energy trading and rapid growth came
aggressive accounting, pushing Generally Accepted Accounting
Principles to its advantage. Part of this picture included Enron’s
use of “special purpose entities,” SPEs. These were “surrogate”
companies whose purpose was to engage in business activity with no
obligation to account for the activity on Enron’s balance sheet.
Four of these SPEs - called Raptors - play a large role in this
story. They were created in 1999 and 2001, with the assistance of
Andersen, largely capitalized with Enron stock. The Raptors engaged
in transactions with “LJM,” an entity run by Andrew Fastow, Enron’s
Chief Financial Officer. By late 2000 and early 2001, the traded
price of Enron’s stock was dropping and some of the Raptor’s
investments were also turning downward. Some of the SPEs were
profitable and some were experiencing sharp losses. But aggregated
they reflected a positive return to Enron. GAAP would not permit
such an aggregation of the four entities and Andersen’s Chicago
office told David Duncan that it would not - that it was a “black
and white” violation. That advice was ignored and the losses were
buried under the profits of the group in the public reporting for
the first quarter 2001. The slide of Enron stock continued,
dropping some 50% from January to August 2001.
The summer of 2001 brought problems to Andersen on other
fronts, and these “unrelated” events later become important to the
issues before us. In June 2001 Andersen settled a dispute with the
SEC regarding Andersen’s accounting and auditing work for Waste
4
Management Corporation. Andersen was required to pay some $7
million, the largest monetary settlement ever exacted by the SEC,
and Andersen suffered censure under SEC Rule 102(e). Then in July
2001, the SEC sued five officers of Sunbeam Corporation and the lead
Andersen partner on its audit.
Meanwhile, events at Enron began to accelerate. On August 14,
2001, Jeffrey Skilling, Enron’s CEO, resigned, pushing Enron stock
further downward. Within days, Sherron Watkins, a senior accountant
at Enron, formerly at Andersen, warned Enron’s Chairman, Kenneth
Lay, that Enron “could implode in a wave of accounting scandals.”
She also warned David Duncan and Michael Odom, an Andersen partner
in Houston who had oversight responsibility for Duncan. Chairman
Lay promptly asked Enron’s principal outside legal counsel to
examine the accused transactions. And by early September, senior
Andersen officials and members of its legal department formed a
“crisis-response” group, including, among others, its top risk
manager and Nancy Temple, an in-house lawyer in Chicago assigned to
Enron matters on September 28, 2001.
Possible proceedings became a reality on November 8, 2001, when
Andersen received an SEC subpoena. The time line between September
28 and November 8, from a possibility of a proceeding to fact, is
important and we turn briefly to that narrative.1
1
The indictment alleged that the acts of obstruction took place between
October 16 and November 9, 2001.
5
On October 8, Andersen contacted a litigation partner at Davis,
Polk and Wardwell in New York regarding representation of Andersen.
The following day, Nancy Temple discussed the problem of Enron with
senior in-house counsel at Andersen. Her notes from this meeting
refer to an SEC investigation as “highly probable” and to a
“reasonable possibility” of a restatement of earnings. Her notes
also recorded, “without PSG agreement, restatement and probability
of charge of violating cease and desist in Waste Management.” Two
days later, on October 10, Michael Odom urged Andersen personnel to
comply with the document retention policy, noting “if it’s destroyed
in the course of normal policy and litigation is filed the next day,
that’s great . . . we’ve followed our own policy and whatever there
was that might have been of interest to somebody is gone and
irretrievable.”
On October 12, Temple entered the Enron crisis into Andersen’s
internal tracking system for legal matters, labeling it “government
regulatory investigation,” and asked Odom if the engagement team was
in compliance with Andersen’s document policy. Odom forwarded the
email to Duncan in Houston.
Meanwhile, Enron was facing an October 16 date for announcing
its third quarter results. That release had to disclose a $1.01
billion charge to earnings and, to correct an accounting error, a
$1.2 billion reduction in shareholder equity. Enron’s draft of the
proposed release described the charge to earnings as “non-
recurring.” Andersen’s Chicago personnel advised that this phrase
6
was misleading, but Enron did not change it. With one exception,
Andersen took no action when its advice was not followed: Temple
suggested that Andersen’s characterization of the draft release as
misleading be deleted from the email exchanges.
An SEC letter to Enron quickly followed the releases of October
16. In the letter the SEC advised that it had opened an informal
investigation in August and an additional accounting letter would
follow. Andersen received a copy of the letter on Friday, October
19. A Saturday morning conference of Andersen’s Enron crisis group
followed. While the meeting traversed a range of issues, Temple
again reminded all “to make sure to follow the policy.” The
following Tuesday, October 23, Enron had a telephone conference with
security analysts. At the same time, Duncan scheduled an “urgent”
and “mandatory” meeting in Houston at which, following lengthy
discussion of technical accounting issues, he directed the
engagement team to comply with Andersen’s records retention policy.
On October 26, a senior partner at Andersen circulated an
article from the New York Times discussing the SEC’s response to
Enron. In an email, he commented that “the problems are just
beginning and we will be in the cross-hairs. The marketplace is
going to keep the pressure on this and it’s going to force the SEC
to be tough.” Evidence that this prediction of SEC toughness was
sound came quickly. On October 30, the SEC sent Enron a second
letter requesting accounting documents - a letter signed by the two
7
top enforcement division officials.
Throughout this period Andersen’s Houston office shredded
documents. Government witnesses detailed the steady shredding and
deletion of documents and the quantity of paper trucked away from
the Houston office. Almost two tons of paper were shipped to
Andersen’s main office in Houston for shredding. The government
produced an exhibit at trial charting the time and quantity of the
carted waste paper from January 2001 through December of that year.
The pounds carted remained fairly steady at a rate under 500 pounds,
but spiked on October 25 to just under 2500 pounds. The shredding
continued until the SEC served its subpoena for records on November
8. Temple advised Duncan that the subpoenae had been served. The
next day Duncan’s assistant advised the Houston team: “Per DAVE –
No more shredding. . . . We have been officially served for our
documents.”
Enron filed for bankruptcy on December 2, 2001. The following
April, David Duncan pleaded guilty to obstructing the SEC.
II
We turn first to Andersen’s claims of error in certain
evidentiary rulings at trial.
1
The first such contention urges error in the district court’s
exclusion of Andersen’s evidence of the volume of documents retained
by the engagement team that were either not deleted or recaptured
and produced to the SEC. This evidence was relevant, Andersen
8
argues, because it is inconsistent with the charge that its
personnel were “corruptly persuaded” to destroy documents and delete
emails to keep them from the SEC. Andersen’s explanation for the
shredding and deleting, at least for the upward spike on October 23,
was that personnel in its Houston office were attempting to clean
up their files in anticipation of their examination by Chicago
supervising personnel, and that the presence of multiple copies of
significant documents was evidence that there was “no systematic
attempt to root out embarrassing materials.” The argument continues
that the district court misunderstood the issue. Pointing to an in
limine order, Andersen argues that Judge Harmon believed the
proffered evidence inadmissible as an attempt to offer evidence that
“on other occasions the defendant acted innocently,” when the true
thrust of the evidence was to negate the evidence that any person
acting for Andersen acted corruptly and with the intent necessary
to commit the charged crime.
The government replies that refusing to admit the documents
into evidence was simply the court’s enforcement of its pretrial
ruling on discovery – that the defendant could not offer documents
in trial that it had not produced for examination by the prosecution
before trial; that Andersen never authenticated the documents nor
by a proper predicate demonstrated that the documents not destroyed,
to which it wanted to point, were relevant Enron documents.
Relatedly, the government notes that other evidence was before the
jury demonstrating that not all of the documents were destroyed.
9
Finally, it argues that the evidence supporting Andersen’s
conviction is so powerful, that any error was not reversible error.
The government relied on the volume of documents destroyed as
evidence of Andersen’s intent. It follows that competent evidence
countering the government’s proof of the volume of shredding, as
well as its timing, undeniably had some relevance. To put the issue
in perspective, Andersen did not attempt to deny that it shredded
large numbers of documents and for sustained periods, leaving the
government’s assertion to this extent largely unchallenged. Nor
does Andersen’s principal argument claim error in the exclusion of
specific documents alleged to have been destroyed. In sum, that all
documents were not destroyed and that large numbers of documents
were produced to the SEC by Andersen was not challenged.2 Some 21
boxes of Duncan’s preserved desk files were introduced by Andersen
and displayed to the jury. Andersen’s explanation for the
undeniable surge in shredding and the persistent and uncustomary
reminders to employees to abide Andersen’s retention policy was that
it wanted to leave only the work papers of auditing efforts, and
that Duncan did not want his superiors in Chicago to face his
unkempt files. That explanation pointed to the upsurge in papers
trucked away shortly after he learned of his superior’s planned
visit to Houston. The jury was free to evaluate this testimony.
2
There was a misstatement by a prosecutor regarding an email he
represented to the jury was deleted and not produced by Andersen. That was
corrected on the objection of the defense. We describe this event later in Part
IV while addressing Andersen’s claim of prosecutorial misconduct.
10
Andersen maintained at trial that it was not offering the
specific documents into evidence and hence its proffer of documents
not identified to the prosecution as trial exhibits before trial did
not violate the pretrial order entered by the trial judge; that it
wanted to place into perspective the government’s evidence of the
amount of paper carted away by proof of the large amount of
documents produced for the SEC. The government responded at trial
that the evidence would not be relevant without the predicate proof
of what the documents were and that proof, if forthcoming, would put
the proffer in the teeth of the pretrial preclusion order. Fine
point it is, but we cannot conclude that the trial judge abused her
discretion in this ruling.
Regardless, even if there was a sufficient showing that these
documents were relevant to the SEC proceeding, it is clear that
Andersen was denied only this particular method of demonstrating
that it produced a large number of documents; that it otherwise made
this showing at trial is not seriously challenged. The district
court observed that there was “ample evidence already in the record
that all the documents were not destroyed” and that “Andersen does
not need to introduce evidence of 1660 boxes of remaining desk files
to make this point.” Any error was not reversible error.
In sum, we are not persuaded that the district court committed
reversible error in its rulings regarding the evidence of the volume
of documents destroyed or retained.
2
11
We turn next to Andersen’s contention that the district court
erred in allowing the government to offer evidence of two SEC
proceedings filed against it arising out of Andersen’s work with
Sunbeam Corp and Waste Management, Inc. Andersen argues that the
evidence of these charges of its misconduct and their settlement was
not relevant in that there was no evidence that they were connected
to any “corrupt persuader,” or that any partner at Andersen involved
in work at Sunbeam or Waste Management was also involved with its
Enron account. It concedes that while the fact of these two
difficulties with the SEC offers at least “a small kernel” of
relevant evidence that “could have been thought relevant,” far too
much detail of the unproved accusations and settlements were
admitted. This excess was such that the jury could not be expected
to cabin its consideration to Andersen’s motive in shredding
documents. Rather, the argument goes, the government was allowed
to prove that Andersen was “a bad corporate actor and should be
found guilty for that reason alone.”
Rule 404(b) is a rule of inclusion allowing proof of prior bad
acts of a defendant when the acts are relevant to an issue other
than the defendant’s character, such as “motive, opportunity,
intent, preparation, plan, knowledge, identity, or absence of
mistake or accident.”3 When the relevance of an issue is shown, the
inquiry turns to Rule 403, which requires the exclusion of the
3
FED. R. EVID. 404(b).
12
evidence if its relevance is substantially outweighed by the danger
of unfair prejudice.4 There must be a “genuine risk that the
emotions of the jury will be excited to irrational behavior,” and
the risk must be “disproportionate to the probative value of the
offered evidence.”5 We will reverse only on a clear showing of a
prejudicial abuse of discretion.6
The government opened its case with the testimony of Thomas
Newkirk, one of four associate directors in the Division of
Enforcement of the SEC. He explained (1) the structure of the
Agency; (2) the difference between a matter under investigation or
MUI and a formal inquiry; (3) that a 102(e) proceeding is directed
at professionals engaged in misconduct in their practice before the
commission, such as lawyers or accountants; and (4) that this
proceeding could result in both a prohibition of practice before the
SEC and censure for unprofessional conduct. He also explained that
“almost without fail” a restatement of earnings by a Fortune 500
company will prompt a formal investigation and that documents for
the investigation are obtained by subpoena.
Newkirk’s attention was then drawn to prior proceedings by the
SEC against Andersen. He explained to the jury that Sunbeam was a
4
FED R. EVID. 403.
5
United States v. Beechum, 582 F.2d 898, 915 n.20 (5th Cir. 1978)
(quoting Trautman, Logical or Legal Relevancy A Conflict in Theory, 5 VAND. L.
REV. 385, 410 (1952)).
6
United States. v. Davis, 546 F.2d 583, 592 (5th Cir. 1977).
13
public company whose stock was traded on the New York Stock Exchange
in the 1990's. Andersen was its auditor when in November 1998
Sunbeam filed a restatement of its earnings, reducing its earnings
for two previous quarters by $60 million, nearly 30 percent of its
earnings for that period. Under his supervision, the SEC on May 12,
1998, launched an investigation into Sunbeam’s financial statements.
He explained the course of the investigation, including Andersen’s
production of documents under an SEC subpoena and the filing of a
complaint in the United States District Court in Florida. The
complaint, also admitted into evidence, charged five officers from
Sunbeam and the Andersen engagement partner with fraud. An amended
complaint was filed on July 11, 2001.7
Newkirk then outlined the SEC action taken against Andersen and
Waste Management. As he explained it, Waste Management, a Fortune
500 Company whose stock was traded on the New York Stock Exchange,
filed a restatement of earnings for the years 1992 through the first
three quarters of 1997 of more than $1.7 billion, the largest
restatement in history, prompting a formal investigation. There had
been an informal investigation, but on the filing of the formal
investigation, the SEC promptly issued a subpoena for Andersen
documents. Then on June 19, 2001, the SEC filed a complaint in the
Federal District Court in Washington, D.C. Andersen consented to
a decree enjoining it from future violations of the Securities Laws.
7
At this juncture Judge Harmon instructed the jury that these documents
were only evidence of the SEC’s statements, not the truth of the statements.
14
The Federal Court also imposed a fine of $7 million against Andersen
and fines of from 30 to 50 thousand dollars against three Andersen
partners sued in that case. This was the largest fine against a Big
Five firm sought and obtained by the SEC. Finally, the government
offered through Newkirk the censure of Andersen for issuing false
and misleading statements that its audit of Waste Management had
been conducted in accordance with generally accepted accounting
principles.
Andersen’s contention that the evidence of its difficulties
with the SEC in the Sunbeam and Waste Management cases was not
relevant is not persuasive. The district court carefully examined
this question in a written ruling before trial to which she adhered
in trial.
The defense of Andersen faced three large realities. First,
David Duncan, its partner in charge of the Enron account, pleaded
guilty to a criminal charge of obstruction, confessing intent to
impede the SEC investigation by shredding documents. Second, it
could hardly deny that Andersen engaged in massive shredding and
deletion of files as a part of senior management’s investigation of
its handling of Enron, including difficulties with the accuracy of
Enron’s financial statement. Third, it must have known that a
restatement of earnings of any appreciable size by a Fortunate 500
company would prompt a formal SEC investigation and subpoena for its
documents. A contrary contention was a hard sell, at best.
15
As for Duncan, Andersen’s able trial counsel suggested in his
cross examination that Duncan was innocent, despite his plea of
guilty. The large shredding was said to be an effort to catch up
with the cleaning of files that had been put aside, contrary to
Andersen’s records retention policy and to get the files in order
for review by Andersen’s Chicago-based supervisors. It was not to
frustrate an SEC investigation.
Under the court’s charge, the government had the burden of
proving that the shredding was done with the intent to subvert,
undermine, or impede an official proceeding, including proceedings
before the SEC. In confronting that burden, the government urged
that Andersen’s difficulty with the SEC in other matters was the
backdrop to Andersen’s destruction of documents in its internal
investigation of its work for Enron. Specifically, the government
noted that the trouble at Enron came within months of Andersen being
hit in the Waste Management case with the largest fine ever imposed
by the SEC upon a Big Five accounting firm, accompanied by censure
and a consent to an injunction not to mislead in violation of the
securities laws, and that this blow was quickly followed by the
filing of an amended complaint in the SEC’s Sunbeam suit which
leveled charges of fraud against Sunbeam officials and the Andersen
partner in charge of that account. This backdrop, with its
attendant press, includes the quickly following sudden resignation
of Skilling, Enron’s CEO, in August 2001. That is, trouble with
Enron, Andersen’s largest account, came into view less than 90 days
16
from these large developments in Andersen’s difficulties with the
SEC regarding its work with both Sunbeam and Waste Management.
These “prior” acts were indisputably relevant to the question
of Andersen’s intent in its destruction of Enron-related documents.
This was evidence of Andersen’s actual experience with restating
earnings and the inevitability of an SEC subpoena. It was evidence
that Andersen knew its audit work would be at issue. Moreover, it
was a powerful rebuttal of the testimony of Andersen’s SEC expert,
John Riley, that no SEC subpoena was expected until the end of the
first week in November.
Andersen urges that evidence about Sunbeam and Waste Management
could not be relevant, absent proof that the facts offered were
known by a single person, a corrupt persuader. It urges that it
cannot be charged with the collective knowledge of all its agents.
The government replies that the law is to the contrary, pointing to
decisions of courts of appeals.8 We need not resolve that debate.
The notes of Nancy Temple, an in-house lawyer, make clear that she
was keenly aware of the cease and desist order and the 102(e)
censure proceedings in Waste Management, and that she viewed Waste
Management and Sunbeam as a “model” for the Enron difficulties.
There is much more. On November 6, Lawrence Rieger, a senior
partner, sent an email to Temple with press accounts of the press
releases by Sunbeam and Waste Management. He included an Andersen
8
United States v. Bank of New England, 821 F.2d 844, 856 (1st Cir. 1987);
Steere Tank Lines, Inc. v. United States,
330 F.2d 719, 724 (5th Cir. 1963).
17
memorandum entitled “Action Steps in Response to Indications of
Possible Restatement of Financial Statement.” That document had
been distributed to all U.S. partners. Goolsby, an Andersen
partner, and John Riley had extensive knowledge of the proceedings
in both Waste Management and Sunbeam and participated in conference
calls with Andersen personnel addressing the Enron “crisis.”
Goolsby had signed the court papers in Waste Management. David
Duncan, who had never worked on either Waste Management or Sunbeam
matters, knew about those cases. It defies common sense to assert
that partners in Andersen would not be informed about both of these
cases. At the least, a jury could reasonably so conclude.
Andersen retreats to the contention that in any event there was
too much detail about unproved charges, detail that was unnecessary
and prejudicial. It points out that its offer to stipulate to the
fact of the prior occurrences was not accepted. We are unpersuaded.
The government was not required to accept a sterile recitation of
the prior events. Rather, it was entitled to leave the clothes on
these events, so recent. The district court carefully instructed
the jury regarding the limits upon the evidence. Many of the
documents were redacted before being sent into the jury room, and
counsel had full opportunity to place the events in perspective
through cross examination and closing argument. We find no abuse
of discretion in the trial judge’s weighing of the probative value
of the evidence and the risk of collateral prejudice.
3
18
Andersen next contends that the district court erred in
excluding evidence of statements made by Kathy Agnew during an
interview with the FBI. According to Andersen, these statements
would have enabled Andersen to impeach one of the government’s key
pieces of evidence suggesting a link between Andersen’s decision to
destroy documents and its concern over an SEC investigation of
Enron.
During the testimony of Agent Sullivan, the agent supervising
the FBI’s investigation of Andersen, the government introduced notes
taken by Agnew of an October 23, 2001, meeting with Andersen partner
Thomas Bauer. In these notes, Agnew wrote: “Clean up documentation.
SEC voluntary request. Two suits, more on the way.” Andersen did
not challenge the admission of Agnew’s notes, attack Agnew’s
credibility, or attempt to introduce evidence of other statements
made by Agnew while Agent Sullivan was on the stand. Several weeks
later, however, the day before closing arguments, Andersen attempted
to introduce an FBI report written by Agent Sullivan summarizing
statements Agnew made about the October meeting. The report
indicates that Agnew did not specifically remember the October 23
meeting, but she recalled that their goal was to ensure that the
work papers were complete.
Andersen claims that the statements recorded in Sullivan’s
report were admissible under Federal Rule of Evidence 806 to impeach
the out-of-court statements in her notes. We disagree. Rule 806
allows a party to attack the credibility of a declarant when a
19
hearsay statement or a statement defined in Rule 801(d)(2)(C), (D),
or (E) has been admitted.9 Rule 806 does not apply in this case,
however, because the Agnew notes were not hearsay: the government
did not admit them to prove the truth of the statements contained
in them. The statements were instead admitted only to show that
they were made and that Andersen knew that it was subject to SEC
investigation. Because the statements were not hearsay, Rule 806
does not apply.
Indeed, Andersen effectively concedes this point in its reply
brief, insisting that the notes were admitted for the truth of the
proposition they “implicitly” advanced -- that Andersen personnel
were instructed to destroy documents because the SEC was conducting
an inquiry. That the notes may have suggested a link between
Andersen’s document destruction and the SEC, however, does not alter
the fact that the statements in the notes were not admitted for
their truth.
Nonetheless, Andersen urges that Agnew’s notes were admitted
into evidence only under Rule 801(d)(2)(D) and that Rule 806 should,
by its terms, allow for the admission of the FBI report. Andersen’s
argument is unpersuasive for several reasons. First, despite
Andersen’s claim, it is not apparent from the record that the
9
FED. R. EVID. 806. Rule 806 provides in pertinent part: “When a hearsay
statement, or a statement defined in Rule 801(d)(2)(C), (D), or (E), has been
admitted in evidence, the credibility of the declarant may be attacked, and if
attacked may be supported, by any evidence which would be admissible for those
purposes if declarant had testified as a witness.”
20
district court relied on Rule 801(d)(2)(D) in admitting the notes
because Andersen made no objection to their admission and the court
did not address the matter directly. Since the notes were readily
admissible as non-hearsay statements without regard to Rule
801(d)(2)(D), we will not presume that Rule 801(d)(2)(D) was the
sole basis for their admission. Moreover, Andersen appears to
assume that Rule 806 applies whenever a statement might have been
admitted under Rule 801(d)(2)(D), even if it was in fact admitted
on other grounds. We do not read Rule 806 so broadly. As the
Advisory Committee notes make clear, the purpose of Rule 806 was to
allow for the impeachment of a hearsay declarant.10 Because the
statements in Agnew’s notes were not hearsay at all, Rule 806 simply
does not apply.
We conclude that the district court did not commit reversible
error by refusing to admit the FBI reports of an interview with
Agnew.
III
Andersen contends that the jury instructions were flawed in
three ways: first in explaining the meaning of “corruptly
persuades,” then in misstating the element of “official proceeding,”
and finally in not instructing the jury that the government had to
prove that Andersen knew that its destruction of records was
unlawful.
10
See FED. R. EVID. 806 advisory committee’s notes.
21
“We review the rejection of a requested jury instruction for
abuse of discretion, ‘affording the trial judge substantial latitude
in tailoring [the] instructions.’”11 Reversal is required only if
the requested instruction "1) is substantively correct; 2) was not
substantively covered in the charge actually delivered to the jury;
and 3) concerns an important point in the trial so that the failure
to give it seriously impaired the defendant’s ability to effectively
present a defense."12 No error results from a court’s refusal to
give an instruction that is not substantially correct in its
statement of the law.13
1
Andersen was convicted of obstructing justice under what has
come to be known as the “corrupt persuasion” prong of 18 U.S.C.
§ 1512(b)(2)(A)&(B). It provides:
Whoever knowingly uses intimidation, threatens, or
corruptly persuades another person, or attempts to do so,
or engages in misleading conduct toward another person,
with intent to . . . cause or induce any person to (A)
. . . withhold a record, document, or other object, from
an official proceeding; [or] (B) alter, destroy,
mutilate, or conceal an object with intent to impair the
object's integrity or availability for use in an official
proceeding . . . shall be fined under this title or
imprisoned not more than ten years, or both.
In this case, the charge read in relevant part:
11
United States v. Morales, 272 F.3d 284, 289 (5th Cir. 2001).
12
Id.
13
Id.; United States v. Dixon,
185 F.3d 393, 402-03 (5th Cir. 1999).
22
To “persuade” is to engage in any non-coercive attempt to
induce another person to engage in certain conduct. The
word “corruptly” means having an improper purpose. An
improper purpose, for this case, is an intent to subvert,
undermine, or impede the fact-finding ability of an
official proceeding.
Andersen’s principal argument is that the district court’s
definition of the term “corruptly” in § 1512(b)(2) renders the term
superfluous. Andersen argues that, since § 1512(b)(2) explicitly
requires that the accused act with the intent to withhold materials
from an official proceeding, the term “corruptly” has no meaning
under the district court’s definition. Andersen urges that
“corruptly persuades” requires more than an intent to withhold
documents. Andersen contends that the term should be read to
require either proof that the person persuaded violated an
independent duty or that the person engaged in inherently culpable
conduct, such as bribery.
The government challenges Andersen’s basic contention that the
term “corruptly” would have no independent meaning if defined as “an
improper purpose.” The government relies on the term’s plain
meaning, its definition in closely related statutes, the statute’s
structure, and legislative history. Specifically, the government
notes that courts have routinely defined the term “corruptly” in
companion statutes like §§ 1503 and 150514 to require “an improper
14
18 U.S.C. § 1505 criminalizes, in relevant part, anyone who “corruptly
. . . influences, obstructs, or impedes or endeavors to influence, obstruct, or
impede the due and proper administration of the law under which any pending
proceeding is being had before any department or agency of the United States, or
. . . being had by either House, or any committee of either House or any joint
committee of the Congress.”
23
purpose.”15 In United States v. Reeves, for example, we defined the
term to be an intent to “secur[e] improper benefits or advantages
for one’s self or for others.”16 The majority of circuits
interpreting the term as used in § 1512(b) have reached a similar
result, defining “corruptly” in terms of improper purpose despite
the dim light it casts upon its meaning, its circularity aside.17
We find Andersen’s surplusage argument unpersuasive.
Andersen’s argument relies heavily on the Third Circuit’s decision
in United States v. Farrell.18 In Farrell, a divided panel
15
See United States v. Haas, 583 F.2d 216, 220 (5th Cir. 1978) (defining
“corruptly” as “for an improper purpose” or “an evil or wicked purpose”); United
States v. Partin,
552 F.2d 621, 641-42 (5th Cir. 1977).
16
752 F.2d 995, 1002 (5th Cir. 1985) (interpreting “corruptly endeavor”
as related to obstructing the due administration of the tax laws).
17
United States v. Shotts, 145 F.3d 1289, 1300-01 (11th Cir. 1998) (“It
is reasonable to attribute to the ‘corruptly persuade’ language in Section
1512(b), the same well-established meaning already attributed by the courts to
the comparable language in Section 1503(a), i.e., motivated by an improper
purpose. We are unwilling to follow the Third Circuit’s lead in imposing a
requirement for an additional level of culpability on Section 1512(b) in the
absence of any indication that Congress so intended and in the face of persuasive
evidence that it did not.”); United States v. Thompson,
76 F.3d 442, 452 (2d Cir.
1996) (finding § 1512(b) not to be unconstitutionally overbroad or vague because
“Section 1512(b) does not prohibit all persuasion but only that which is
‘corrupt[ ],’” and “[t]he inclusion of the qualifying term ‘corrupt[ ]’ means
that the government must prove that the defendant’s attempts to persuade were
motivated by an improper purpose”); see also United States v. Khatami,
280 F.3d
907, 911-12 (9th Cir. 2002) (“Synthesizing these various definitions of ‘corrupt’
and ‘persuade,’ we note the statute strongly suggests that one who attempts to
‘corruptly persuade’ another is, given the pejorative plain meaning of the root
adjective ‘corrupt,’ motivated by an inappropriate or improper purpose to
convince another to engage in a course of behavior--such as impeding an ongoing
criminal investigation.”). But see United States v. Farrell,
126 F.3d 484, 490
(3d Cir. 1997) (“[B]ecause the ‘improper purposes’ that justify the application
of § 1512(b) are already expressly described in the statute, construing
‘corruptly’ to mean merely ‘for an improper purpose’ (including those described
in the statute) renders the term surplusage, a result that we have been
admonished to avoid.”).
18
126 F.3d 484 (3d Cir. 1997).
24
concluded that the term “corruptly persuades” in § 1512(b) did not
proscribe “a noncoercive attempt to persuade a coconspirator who
enjoys a Fifth Amendment right not to disclose self-incriminating
information . . . from volunteering information to investigators.”19
In reaching its decision, the court specifically rejected the notion
that the term could mean “persuades with the intent to hinder
communication to law enforcement,” concluding that such a definition
“would render the word ‘corruptly’ meaningless.”20 The panel also
dismissed the relevance of court decisions interpreting the term
“corruptly” in companion statutes like § 1503.21 Although these
decisions had routinely defined the term to mean “with an improper
purpose,” the court found these decisions unpersuasive because of
the differences between § 1512 and § 1503.22 Unlike § 1512(b), §
1503 does not include any mens rea element except the term
“corruptly.” Section 1512(b), by contrast, expressly requires a
specific intent to withhold documents from investigators. With this
in mind, Andersen asserts that a definition which makes sense in §
1503 becomes surplusage when applied to § 1512(b).23
19
Id. at 488.
20
Id. at 487.
21
18 U.S.C. § 1503(a) provides, in relevant part, that “[w]hoever . . .
corruptly . . . influences, obstructs, or impedes, or endeavors to influence,
obstruct, or impede, the due administration of justice, shall be punished as
provided in subsection (b).”
22
Farrell, 126 F.3d at 489-90.
23
Id. at 490.
25
The Third Circuit, however, did not define the term “corruptly”
to require the violation of an independent legal duty, as Andersen
claims.24 Rather, it held the converse, that encouraging another to
exercise a constitutional right is not corrupt.25 The Farrell court
specifically declined to define the term in any detail or to give
substantive content to the term. Rather, the decision can fairly
be read more narrowly: that a person who persuades someone to invoke
his Fifth Amendment right does not violate the statute.
Andersen is incorrect, moreover, in its contention that the
court’s definition of “corruptly” rendered the term superfluous.
The court defined “corruptly” to mean “an intent to subvert,
undermine or impede the fact-finding ability of an official
proceeding.” Andersen contends that “corruptly” has no independent
meaning under this definition because § 1512(b) already separately
requires an intent to impede the fact-finding ability of an official
proceeding. Section 1512(b), however, requires an “intent to impair
the . . . integrity or availability [of an object] for use in an
official proceeding”; it does not focus on undermining an agency’s
24
Id. at 488 (“[W]e are hesitant to define in more abstract terms the
boundaries of the conduct punishable under the somewhat ambiguous ‘corruptly
persuades’ clause. However, we do not think it necessary to provide such a
definition here because we are similarly confident that the ‘culpable conduct’
that violates § 1512(b)(3)’s ‘corruptly persuades’ clause does not include a
noncoercive attempt to persuade a coconspirator who enjoys a Fifth Amendment
right not to disclose self-incriminating information about the conspiracy to
refrain, in accordance with that right, from volunteering information to
investigators.”).
25
Id. at 488-89.
26
fact-finding ability. In short, as defined by the court, “corruptly”
was not a mirror of § 1512(b)’s intent requirement.
This point becomes more apparent when the charge is read in
full. The district court instructed that “[a]n improper purpose,
for this case, is an intent to subvert, undermine, or impede the
fact-finding ability of an official proceeding,” including “subvert”
and “undermine” as urged by Andersen.26 Acting with an intent to
“subvert, undermine, or impede” an investigation narrowed the reach
of the statute, insisting upon a degree of culpability beyond an
intent to prevent a document from being available at a later
proceeding. A routine document retention policy, for example,
evidences an intent to prevent a document from being available in
any proceeding. But it does not alone evidence an intent to
“subvert, undermine, or impede” an official proceeding. In
narrowing the statute’s potential reach, the district judge rejected
the government’s argument that the jury should be charged on the
bare bones of the statute and shaped the charge to the facts of the
case. It also gave meaning to “corruptly persuades.” “Subvert”
means “to overturn or overthrow from the foundation, ruin” or “to
pervert or corrupt by an undermining of morals, allegiance, or
faith.” The most relevant definition of “undermine” is “to subvert
or weaken insidiously or secretly.” Impede means “to interfere with
26
The limiting words “for this case” were included at Andersen’s urging.
The word “impede” was requested by the government and included over the objection
of Andersen.
27
or get in the way of,” to “hold up.” Each of these terms implies
a degree of personal culpability beyond a mere intent to make
documents unavailable.
The legislative history of § 1512(b), explored by the dissent
in Farrell, further persuades us that the district court’s charge
was correct.27 Section 1512(b) was enacted to replace and expand
the witness protection provisions incorporated in § 1503. As
initially drafted, § 1512(b) did not bar noncoercive conduct
performed with an intent to hide information from investigators; one
could violate the statute only through intimidation, use of physical
force, threats, or misleading conduct. Congress added the term
“corruptly persuades” in 1988 to “include in section 1512 the same
protection of witnesses from non-coercive influence that was (and
is) found in section 1503.” Congress knew that courts had uniformly
defined “corruptly” in § 1503 as “motivated by an improper purpose,”
and it is logical to give the word “corruptly” in § 1512 the same
meaning that it has in § 1503. At the very least, this legislative
history – and its clear intent to criminalize non-coercive conduct
– deflates Andersen’s “structural” argument that § 1512 targets
certain means used to obstruct justice and not just motive.28
27
Farrell, 126 F.3d at 491-93 (Campbell, J., dissenting).
28
Andersen argued that the structure of the statute required the
definition of “corruptly persuades” to be based on the means of persuasion used
rather than the persuader’s motive or intent. It points out that, before the
statute was amended to include “corrupt persuasion,” the statute criminalized
only certain behaviors – namely, the use of intimidation or physical force,
threats, and misleading conduct. Andersen argued that it would be anomalous to
construe the term “corruptly persuades” differently; it must also be interpreted
28
We are persuaded that defining “corruptly” as “motivated by an
improper purpose” comports easily with the legislative history.
Congress intended that § 1512(b) have the same substantive scope as
former § 1503. Since § 1503 proscribed conduct undertaken “with an
improper purpose,” § 1512(b) should also do so.
Andersen requested that the jury be instructed that the only
way corrupt persuasion may be found is by an improper method or a
violation of an independent legal duty. We find no court that has
come to this conclusion. Andersen bases its argument on Farrell,
but Andersen’s description of the holding is an incomplete statement
of the Third Circuit’s viewpoint. Farrell made clear that a
violation of an independent legal duty is sufficient to prove
corrupt persuasion, and it refused to define “corruptly persuade”
as acting with an improper purpose, but it did not hold that
violating an independent legal duty or persuading by an improper
method was the only way to establish a § 1512(b) violation.29 The
statute itself has no such requirement.
Andersen, moreover, gives no explanation why “improper purpose”
should require unlawful conduct. Under the caselaw, “corruptly”
to require similarly culpable actions.
29
Farrell, 126 F.3d at 488-90 (explaining that it was “hesitant to define
in more abstract terms the boundaries of the conduct punishable under the
somewhat ambiguous ‘corruptly persuades’ clause,” and finding it unnecessary to
do so because the conduct at issue - “a noncoercive attempt to persuade a
coconspirator who enjoys a Fifth Amendment right not to disclose
self-incriminating information about the conspiracy to refrain, in accordance
with that right, from volunteering information to investigators” - could not
satisfy the statute).
29
requires an improper purpose, not improper means,30 and Andersen
offers no explanation why “improper purpose” should require
“improper means.” Indeed, the means used would seem to be relevant
only to the extent that they shed light on whether the purpose was
improper. Moreover, the only examples of “unlawful conduct” that
Andersen gives are bribery and counseling a witness to lie. The
statute would have little independent reach, however, if it could
be violated only through bribery or suborning perjury because such
conduct is to a large extent criminalized in other provisions of the
criminal code.31 Yet Andersen offers no other examples of
“culpable” or “unlawful” conduct sufficient, under its test, to
trigger the statute. We cannot lightly conclude that Congress
intended for the statute to do only work already done by the
criminal code.
Finally, even ignoring Andersen’s failure to request a
substantially correct instruction, the submitted instruction
survives harmless error review. Trial error is harmless unless it
had a “substantial and injurious effect or influence in determining
the jury’s verdict,” or leaves us in “grave doubt” as to whether it
such an effect. On the facts of this case, that the jury was not
required to find a violation of an independent legal duty did not
30
See, e.g., U.S. v. Khatami, 280 F.3d 907, 911-12 (9th Cir. 2002); U.S.
v. Shotts,
145 F.3d 1289, 1301 (11th Cir. 1998); United States v. Thompson,
76
F.3d 442, 452-53 (2d Cir. 1996).
31
18 U.S.C. § 1622, for example, criminalizes subornation of perjury.
30
have a substantial and injurious effect on the verdict. The jury
was instructed that to corruptly persuade another, Andersen must
have acted with an intent to subvert, undermine, or impede the fact-
finding ability of an official proceeding. Contrary to Andersen’s
assertions, this instruction does not read “corruptly persuade” out
of the statute. Acting with an intent to withhold a record from an
official proceeding casts a wider net than acting with an intent to
subvert, undermine, or impede the entire fact-finding ability of the
proceeding. There is nothing improper about following a document
retention policy when there is no threat of an official
investigation, even though one purpose of such a policy may be to
withhold documents from unknown, future litigation. A company’s
sudden instruction to institute or energize a lazy document
retention policy when it sees the investigators around the corner,
on the other hand, is more easily viewed as improper. The
instruction’s requirement of an improper purpose in withholding the
documents ensures that the jury found a level of culpability over
and above the mere intent to withhold a document from an official
proceeding. We cannot say that the error had a substantial and
injurious effect on the jury’s verdict.
The court narrowed the reach of the statute at the urging of
Andersen. Any error that occurred did not have a substantial and
injurious effect on the jury’s verdict.
31
2
Andersen argues that the jury instructions were also flawed in
their explanation of an “official proceeding.”32 The contention is
that while § 1512(b)(2) provides that the proceeding “need not be
pending or about to be instituted at the time of the offense,”33 it
does not offer guidance as to the concreteness of the defendant’s
expectation of a proceeding.
Andersen first contends that it was entitled to have the jury
instructed that an “official proceeding” had to be “ongoing or
. . . scheduled to be commenced in the future.” Resting on this
court’s decision in United States v. Shively,34 the argument is that
there must be proof of “intent to affect . . . some particular
federal proceeding that is ongoing or is scheduled to be commenced
32
The jury charge instructed:
An “official proceeding” is a proceeding before a
federal court, judge, or agency. In this regard, you
are instructed that the Securities and Exchange
Commission, otherwise known as the “SEC,” is a federal
agency, and that an “official proceeding,” for this
case, is a proceeding before a federal agency, such as
the SEC. A proceeding before a federal agency includes
all of the steps and stages in the agency’s performance
of its governmental functions, and it extends to
administrative as well as investigative functions, both
formal and informal. For purposes of this case a civil
law suit brought by private litigants is not an official
proceeding.
The charge goes on to explain that “[t]he government need prove only that
Andersen acted corruptly and with the intent to withhold an object or impair an
object’s availability for use in an official proceeding, that is, a regulatory
proceeding or investigation whether or not that proceeding had begun or whether
or not a subpoena had been served.”
33
18 U.S.C. § 1512(e)(1).
34
927 F.2d 804, 812-13 (5th Cir. 1991).
32
in the future.”35 The government argues, and we agree, that this
statement was dicta, it having already concluded that the government
failed to prove that the defendant intended to affect an official
proceeding. This reconciles Shively with the plain language of the
statute, an accommodation that we should prefer over a reading that
defies the statutory provision that an official proceeding “need not
be pending or about to be instituted at the time of the offense.”
Andersen next maintains that it was entitled to an instruction
to the jury that it could not be found guilty unless at the time of
the obstructing act it “had in mind a particular proceeding that it
sought to obstruct.” In addition to its reliance upon Shively,
Andersen argues that Congress could not have intended to criminalize
the widespread use of records retention programs, all of which have
a general purpose of not retaining documents that might be helpful
to some later appearing adversary - that this court should read the
statute to insist upon proof that a defendant intended to impede a
particular proceeding. The argument anticipates a government
argument that this is fanciful, pointing out that the prosecution
argued just that in ascribing criminal intent to Michael Odom’s
statement in a videotaped meeting with employees that the records
retention policy should be followed because it would make records
unavailable in possible future litigation — even though it asserts
his remarks were unrelated to Enron. Indeed, it argues, the jury
35
Id.
33
asked to see the video during its deliberations. This, it urges,
makes clear that the jury was allowed to convict for acts that do
not violate the statute.
This contention is not without force, but it fails here.
Andersen’s requested instruction is in tension with the
congressionally detailed reach of the statute. It ignores the
statutory language, which does not require a defendant to know that
the proceeding is pending or about to be initiated.36 Its stronger
argument is that without insisting that a defendant’s intent to
impede a proceeding have some limiting sights, companies could be
convicted for maintaining records retention programs which were
adopted with no proceeding in mind. The answer here may lie with
the sound application of the elements of corrupt purpose and intent.
That case is not before us.
Ultimately, we find no reversible error. Wherever the
permissible reach of this statute may be finally drawn, it is beyond
this case. This case was tried on the theory that Andersen intended
to undermine, subvert, or impede a proceeding of the SEC. The
government did not suggest that a records retention program violated
the Act. Rather, it argued that Andersen used that policy as a code
to shred - to subvert, undermine, or impede a government proceeding
it knew was imminent. There was no risk of conviction for innocent
maintenance of a records program. That the SEC was the feared
36
See 18 U.S.C. § 1512(b), (f).
34
opponent and initiator of a proceeding and not some other shadowy
opponent was clear at every step. That is how the case was tried
and the jury charged. Prosecutor Matthew Freidrich in the first
opening statement of the government told the jury:
They knew that the SEC was coming . . . they knew what
that could mean to the firm . . . and the reason that
they knew that was because Andersen – at the time these
events that are set out in the indictment happened,
Andersen was already under a form of probation with the
SEC . . . if Andersen was found to, again, have violated
securities laws, they could have their ticket pulled,
meaning they could be debarred. They could be stopped
from practicing accounting in front of the SEC, and that
would have meant the end of the practice. . . . [T]his
case is all about a group of partners at Andersen who
knew that the law was coming and did what they could
. . . to hinder the law. And at the end of the trial, we
will ask you to find them guilty of that.
This case, as charged37 and tried, was well within the statute.
We cannot find reversible error in the trial court’s rejection of
Andersen’s request to add to the definition of an official
proceeding that it be a particular proceeding.
3
Finally, Andersen argues that the district court erroneously
charged the jury by not instructing that “a conviction under section
1512(b)(2) is permissible only if the defendant is shown to have
known that its conduct was wrongful.” It asserts that because
persuading another to withhold documents from an official proceeding
37
The indictment alleged, “In the summer and fall of 2001, a series of
significant developments led to ANDERSEN’s foreseeing imminent civil litigation
against, and government investigation of, Enron and ANDERSEN.” The jury was
instructed in the court’s final charge that “for purposes of this case a civil
law suit brought by private litigants is not an official proceeding.”
35
is not necessarily culpable conduct, Congress must have intended
“corruptly” to shield those who act without knowledge of their
unlawful conduct from culpability.
The government responds, and we agree, that the jury was
properly instructed because knowledge of one’s violation is not an
element of § 1512(b)(2). The general rule, of course, is that
ignorance of the law is no defense.38 When Congress wishes to avoid
the general rule, it usually does so by requiring that a defendant
act willfully or with specific intent to violate the law.39 Section
1512(b)(2) does not require that the defendant act willfully, and
does not provide that a defendant may be convicted only if the
defendant knows his conduct is unlawful. Andersen’s argument misses
the import of the jury’s finding that it acted with an improper
purpose; one could act with an improper purpose even if one did not
know that the actions were unlawful. The instructions required the
jury to find the appropriate mental states for a § 1512(b)(2)
violation: the jury could convict Andersen only if it found that
Andersen intended to subvert, undermine, or impede the fact-finding
ability of an official proceeding. The district court did not err
by refusing to give an “ignorance of the law” instruction.
38
Ratzlaf v. United States, 510 U.S. 135, 149 (1994).
39
Id. at 143-46; Cheek v. United States,
498 U.S. 192, 199-200 (1991).
36
IV
Andersen challenges two additional rulings of the district
court involving the cross-examination of David Duncan and remarks
made by the prosecutor in his closing argument. We find no
reversible error.
1
Inappropriate and harmful comments made during closing argument
may constitute reversible error.40 When reviewing alleged improper
comments, we first determine whether the comments were improper and
then decide whether they caused harm.41 “Improper argument harms
the defendant if it affects his substantial rights.”42 Finally, “it
is necessary to look at [the challenged remarks] in context.”43
The comments at issue here involve an email written by Rodney
Faldyn demonstrating Andersen’s adoption of a previously rejected
accounting practice that allowed Enron to avoid a restatement of
earnings. At least one copy of the email was deleted during the
document destruction, but copies of the email survived. During its
opening statement, the prosecution said, “you won’t find another
copy of this [email] anywhere in evidence. Do you think the SEC
would have wanted to see this document?” At a bench conference,
40
United States v. Simpson, 901 F.2d 1223, 1227 (5th Cir. 1990).
41
United States v. Gallardo-Trapero, 185 F.3d 307, 320 (5th Cir. 1999).
42
Simpson, 901 F.2d at 1227.
43
Gallardo-Trapero, 185 F.3d at 320.
37
Andersen informed the court that a copy of the email was in fact
produced to the SEC. The prosecution told the court that it would
not have made the statement if it knew that a copy was produced, and
the court found that the prosecution acted in good faith. To cure
any confusion, the district court instructed the jury that despite
the government’s good faith belief, “an undeleted copy of the
document exists and [] it was produced to the SEC pursuant to the
subpoena. . . . [Y]ou are not to consider any arguments regarding
whether or not another copy of that document was preserved.”
During rebuttal summation, the government again referred to the
Faldyn email as evidence of Andersen’s change of accounting practice
in relation to Enron. In response to Andersen’s argument that it
destroyed only unimportant documents, the government noted that the
Faldyn email was deleted and said, “ask yourselves, the SEC, would
you want this?” Andersen objected, asserting that the prosecutor’s
argument ignored the court’s previous instruction to the jury that
the SEC received a copy of the email. The court overruled the
objection, and the prosecutor went on to explain to the jury that
even if copies of the email survived and were produced, one deletion
alone was significant. That some Andersen employees “didn’t get the
message” to destroy documents, the argument goes, does not indicate
that Andersen was not attempting to destroy important documents.
The government argued further that the destruction of a copy of an
important document is significant because a copy could indicate who
38
had the document, when the person received it, and whether the
person destroyed it.
Andersen moved for a mistrial after closing arguments, and the
court denied the motion. The court disagreed with Andersen’s
contention that the prosecution simply repeated its confusing
remarks from opening statements, noting that the prosecutor
indicated that there were other copies of the email and “never said
this was the only document”; rather, the prosecutor asked, “wouldn’t
the SEC have liked to have seen that.”
Andersen asserts that the rebuttal comments “created the
incorrect impression that Andersen had deleted all copies of the
email.” Andersen views the rebuttal comments as misleading and
misstating the evidence, and contends that because the discussion
of the Faldyn email was a significant portion of the government’s
rebuttal, a new trial is warranted.
We find no prosecutorial misconduct here. The comments made
during rebuttal were different from the remarks made during opening
statement. The opening statement remark that no copy of the email
would be found in evidence could have confused the jury by implying
that all copies of the email were destroyed. In contrast, the
rebuttal comments highlighted the email’s importance, asserted that
the SEC would want to see it, and noted that at least one copy of
it was deleted. The prosecutor did not claim that all copies of the
email were destroyed or that no copy of the email was received by
the SEC; rather, the prosecutor argued that destruction of one copy
39
alone demonstrates the document’s incriminating nature and
Andersen’s intent to keep it from the SEC, even if other copies
eventually were produced. The court did not err in finding that
these comments were not improper and denying Andersen’s request for
a mistrial.
2
Andersen asserts that the district court “prejudicially
handicapped [its case] by undermining the cross-examination of David
Duncan.” It claims that the basis of its cross-examination of
Duncan was four summaries of interview sessions (“FD-302 forms”)
between Duncan and the FBI drafted by FBI agents after the
interviews. During his cross-examination, Duncan said that the four
FD-302s forms contained various inaccuracies and misstatements. The
court sustained the government’s objection to Andersen’s attempt to
cross-examine Duncan regarding the discrepancies between his
recollection and the summaries. Andersen requested an evidentiary
hearing to determine the nature of the inaccuracies, and the
government explained that Duncan marked his own copies of the
summaries, highlighting portions he felt were inaccurate. The court
conducted an in camera review of three of Duncan’s copies of the
summaries, finding that none of the inconsistencies were material.
Rather, the court found that Duncan’s notations referred to specific
words or phrases, making it “more likely that Duncan, a precise
accountant, meant by his highlighting that the agent failed to
40
capture in his prose the precise flavor of what Duncan recalled as
his actual statement.” The court accordingly denied Andersen’s
motion for an evidentiary hearing.
Based on these events, Andersen presents two claims of error:
(1) the district court exerted insufficient effort to determine the
materiality of misstatements in the FD-302 forms, and (2) the
court’s failure to provide the marked FD-302 forms crippled
Andersen’s ability to effectively cross-examine David Duncan.
Andersen provides no authority to justify reversal of the
jury’s verdict, and we find none. To the contrary, Andersen’s
various assertions are belied by the underlying events. First, the
facts demonstrate that Andersen had everything it needed to
effectively cross examine Duncan. Duncan’s cross-examination lasted
three days and covered a wide range of topics. Andersen could have
questioned Duncan about his statements to the FBI and then compared
his statements to the summaries drafted by the FBI agent. Andersen
then could have highlighted to the jury any inconsistencies between
his testimony and the summaries, and could have called the FBI agent
who drafted the summary to explore the discrepancies. Andersen did
not take these opportunities below, perhaps because impeaching
Duncan’s credibility would undermine its admitted strategy of using
Duncan’s testimony to support its own defense.
Second, Andersen did not present to the court below one of its
primary complaints - that the court could not adequately determine
the materiality of the inconsistencies because the court reviewed
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only three of the four summaries marked by Duncan. Andersen did not
complain to the district court that the court’s review was
insufficient by failing to review the fourth summary. Furthermore,
it was Duncan’s attorney, not the government, who possessed and
provided the marked summaries, but Andersen did not inquire as to
why the fourth summary was not provided.
Given that Andersen provides no authority explaining why the
court’s actions and findings require reversal, and that the facts
undermine its assertion that it could not effectively cross-examine
Duncan, we find no reversible error.
V
For these reasons, we AFFIRM the judgment of conviction.
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