Document Destruction after Arthur Andersen: Is It Still Housekeeping or Is It a Crime?

Article excerpt

The indictment and subsequent conviction of Arthur Andersen & Co. (1) has recently focused much attention on the previously little-known subject of document retention. The government charged that Andersen's auditors willfully obstructed justice when they destroyed thousands of Enron work papers as an SEC investigation loomed, but had not yet commenced. (2) In defense, the accounting firm's representatives claimed that it was merely "good housekeeping" to inform employees of the need to eliminate reams of unnecessary paper. (3) Because the jury evidently based its ultimate decision on an altered memorandum rather than on the wholesale shredding, (4) important questions about the legality of Andersen's policy were not fully resolved. The resulting uncertainty seems likely to yield confusion, as this short essay will demonstrate.

It is surely impossible for a large firm, or even an individual, to retain every piece of paper generated in a professional practice. But when must documents be saved and stored, and when may they be destroyed? And most importantly, what constitutes guilty knowledge when documents are in fact being discarded? Every company in the United States is probably reviewing its own policies, at one level or another, in view of Andersen partner David Duncan's statement that he did not initially believe he had done anything wrong, but after much "soul searching" came to conclude that he had "committed a crime." (5) The courts, however, have provided little guidance on this issue, (6) which will likely remain unaddressed when the Fifth Circuit reviews the Arthur Andersen case. (7)

Given the relative dearth of case law, the Ohio Supreme Court's opinion in Ohio ex rel. Corn v. Russo (8) is potentially quite important, since it is one of the relatively few appellate court decisions to address the general question of document retention outside the context of discovery abuse. (9) Many corporate executives, consultants, and especially expert witnesses, will find much cause for alarm in this case, as it appears to set an exceptionally high standard for maintaining documents, even in the absence of an investigation or discovery request. Moreover, the court evidently predicated its decision on a single line of transcript--a flaw not unknown elsewhere in appellate court review, but especially problematic in this context.

The significance of the decision is somewhat obscured by the arcana of Ohio appellate practice. The case involves a contempt proceeding against an expert witness, but much of the opinion is devoted to such technicalities as the difference between a writ of prohibition and a writ of mandamus, the distinction between civil and criminal contempt, and the trial court's jurisdiction over witnesses following dismissal of the underlying case. These questions are procedurally meaningful, of course, but they do not have much extrinsic impact. The ultimate issue in the case, however, could end up having tremendous consequences for record keeping, by businesses and expert witnesses, in Ohio and elsewhere.

In brief, these were the facts in Corn: Dr. Corn is an orthopedic surgeon frequently retained as an expert witness by defense counsel in personal injury cases. He testified for the defense in this case, and in an attempt to establish his pro-defense biases, the plaintiff's lawyers subpoenaed his tax and office records, hoping that they would reveal Dr. Corn's receipt of great amounts of money from insurance companies. Most importantly, the plaintiffs wanted all of Dr. Corn's appointment calendars for the previous eight years and all of his Independent Medical Examination (IME) reports for the same period. (10)

Dr. Corn produced one appointment calendar and about one hundred IME reports, claiming that the balance of the requested material had been discarded according to his office policy. (11) Faced with this response, most courts would either accept the witness's excuse (12) or, at most, bar his testimony for failure to comply with a valid discovery request. …