NOVEMBER 21, 2008, 12:38 A.M. ET
Former Enron Prosecutor Speaks Out: Criminal Charges Shouldn't Be So Easy
As one of the lead Justice Department prosecutors investigating the collapse of Enron Corp., Andrew Weissmann in 2002 helped bring criminal charges against Enron's accounting firm, Arthur Andersen, for allegedly destroying evidence. The case was instrumental in the downfall of the large firm, and Mr. Weissmann and his colleagues were roundly criticized by the U.S. business community.
The tables have turned. Mr. Weissmann, now a defense lawyer at Jenner & Block LLP, is trying to make it harder for federal prosecutors to charge companies with crimes, even as he defends the government's decision to charge Arthur Andersen.
On Friday, Mr. Weissmann will argue before a federal appeals court that for nearly a century, judges, prosecutors and defense lawyers have wrongly believed that, under a 1909 Supreme Court decision, New York Central and Hudson River Railroad v. United States, a company can be held criminally liable any time an employee commits a crime intended to help the company.
Mr. Weissmann's arguments are in support of a Greek shipping company, which he says was wrongly convicted of a crime last year. He doesn't represent the company, but he declined to comment on whether he is being compensated for his friend-of-the-court brief.
"When employees commit crimes, companies are at the complete mercy of the government, because technically they're criminally liable, they have no defense and can only appeal to the discretion of the prosecutor to not bring charges," says Mr. Weissmann, whose brief was brought on behalf of the Chamber of Commerce and other groups.
Mr. Weissmann isn't trying to alter the standard for prosecuting "irresponsible" companies with systemic flaws that allowed employees to commit crimes. Those don't deserve a free pass. In the case of Arthur Anderson, he says the government believed company policy relating to document retention encouraged the alleged criminal act. The Supreme Court eventually overturned the company's lower-court conviction. Rather, Mr. Weissmann is arguing that companies with robust compliance programs that try to prevent and root out wrongdoing by employees shouldn't be charged criminally for rogue actors who don't heed the company's efforts.
If Mr. Weissmann prevails, prosecutors would find it harder to threaten some corporations with criminal charges for not giving in to government demands for information. Prosecutors would also have difficulty forcing companies into so-called deferred-prosecution agreements in which they plead guilty to a crime but pay a sometimes-hefty fine and agree to good behavior to avoid charges. Such agreements, which have become increasingly popular in recent years, can do lasting damage to businesses, some defense lawyers say.
It "would do a lot to influence the balance of power between a prosecutor and a defense lawyer representing a company," says Jonathan Polkes, a defense lawyer at Weil, Gotshal & Manges.
Mr. Weissmann, 50 years old, says he noticed the "glitch" in the law four years ago as a prosecutor when he helped put together deferred-prosecution agreements of Merrill Lynch & Co. and Canadian Imperial Bank of Commerce for their conduct in connection with the Enron collapse. It struck him that the standard for criminal liability might be too low for "companies that work hard to create compliance programs" and yet are still on the hook, he says.
In 2006, after he left the government, Mr. Weissmann wrote a law-review article on the topic before he began his private practice, and gave testimony about it before the Senate Judiciary Committee. The National Association of Criminal Defense Lawyers took notice and waited for the right case to try to change the law through the courts. It came in the case of Ionia Management SA, which was convicted last year in federal district court in Connecticut for violations in connection with dumping waste on the high seas.
Mr. Weissmann argued in a brief to the appeals court that the lower-court judge wrongly instructed the jury that a corporate defendant could be criminally responsible for acts committed by a single employee, even if those acts were committed against the company's policies.
The government argues that Ionia didn't challenge the jury instruction during the trial. Moreover, the court correctly told the jury that the company could be liable for its employees' conduct.
The government also argues that the court hearing the appeal today has previously affirmed the prevailing interpretation of the 1909 Supreme Court decision.
Mr. Weissmann argues that interpretation comes from a faulty reading of the case, in which the Supreme Court ruled that a law passed by Congress, the Elkins Act, was constitutional. The law said that a company could be criminally liable for violations of the Elkins Act by individuals. But Mr. Weissmann argues the courts and others took the Supreme Court's ruling to mean corporations can be criminally liable when individuals violate any statute, not just the Elkins Act. He says if Congress wanted that to be the standard, it should pass a law saying so.