Arthur Andersen jury deadlocked on decision

After seven days of deliberation, the jury in Arthur Andersen LLP's obstruction of justice trial said Wednesday night they were deadlocked.

The 12-member jury, which heard nearly five weeks of testimony before U.S. District Judge Melinda Harmon, sent the judge a note that said simply: "We are unable to reach a unanimous decision."

Judge Harmon told attorneys in Houston afterward that she planned to send the jury back for more deliberations with a so-called Allen charge.

The Allen charge - or more colloquially a "dynamite charge" - is an order that will send the panel back to the jury room until members declare they are hopelessly deadlocked.

The case was supposed to have been a legal slam dunk for U.S. prosecutors eager to find wrongdoers in the rubble of Enron Corp.'s messy collapse.

The deadlock raises the possibility of a mistrial, which could give the 89-year-old accounting firm more time to sell off what's left of its business as it battles potentially crippling lawsuits and a flight of its largest clients.

Andersen stands accused of shredding thousands of Enron-related documents and deleting computer files last fall to keep them out of the hands of U.S. securities regulators probing accounting irregularities at the Houston-based energy trader.

Judge Harmon told the 12 jurors that to convict Andersen they need only be convinced that just one of its thousands of employees tried to persuade another to destroy documents to keep them away from the U.S. Securities and Exchange Commission.

And Andersen partner David Duncan has already pleaded guilty to doing just that.

The jury deciding the accounting firm's fate has been in deliberations since 9 a.m. Thursday, and worked through the weekend, albeit in shorter sessions so members who so desired could attend church.

If the jury were to come back with a guilty verdict it would amount to a death sentence for Andersen, which would face fines and a ban on auditing public companies.

But even without a verdict, Andersen still faces a mountain of lawsuits and possible civil punishment from the SEC. Few expect the partnership to survive in any real form.

Andersen's U.S. work force has dwindled to 10,000 from 28,000 before Enron became the largest bankruptcy in U.S. history last fall. The firm has lost more than 600 clients this year and as much as $1-billion (U.S.) of its annual revenue.

Rivals Ernst & Young and Deloitte & Touche, which acquired Andersen's business in Canada, have picked up many Andersen employees and a large chunk of its revenue around the world.

Chicago-based Andersen admitted destroying thousands of Enron audit records in a two-week period starting Oct. 23, as the SEC began looking into Enron's murky accounting of off-balance sheet partnerships that hid billions in debt.

Andersen, which knew of the inquiry as early as Oct. 17, stopped shredding records after receiving an SEC subpoena on Nov. 8.

Prosecutors alleged the voluminous shredding was undertaken to keep records away from investigators who would fault the auditor. Andersen lawyers had argued the firm destroyed extraneous documents under its normal record-keeping policy and in fact retained many important ones.

Enron, Andersen's second-biggest client, spiralled into the biggest U.S. bankruptcy filing on Dec. 2, forcing thousands to be laid off and wiping out billions in shareholder dollars and employee pensions.

The high-stakes court battle, which went to trial just two months after the accounting firm's indictment, capped a dizzyingly fast series of shifts in fortune for Andersen. The firm demanded a speedy trial after plea negotiations failed.

The government's case was initially seen as strong, and then seemed bulletproof when Mr. Duncan pleaded guilty.

But Mr. Duncan, who was fired on Jan. 15 for ordering his team to clean up their audit files, gave equivocal testimony that was as much a help to Andersen as it was to prosecutors.

Andersen lawyer Rusty Hardin said Wednesday this was the longest jury deliberations he has seen over a career that has spanned some 120 jury trials.

"Thinking back, three days was the max for me," he said.

The "dynamite charge" can produce a verdict, according to Robert Gordon, a jury consultant who has been watching the trial.

"I've seen it work a few times," Mr. Gordon said. "It worked because of the authority of the court and respect for the court."

With files from Reuters, AP and Dow Jones