Lawyer for a Lost Cause: He Shouted, He Pouted, He Defended Arthur Andersen - and He Nearly Won

January 22, 2003
Reprinted with Permission of Texas Lawyer, Dec. 23, 2002

Houston lawyer Rusty Hardin is accustomed to the limelight and big cases, but he took a giant leap into the national spotlight in 2002 by leading Arthur Andersen's defense in its six-week-long obstruction of justice trial in Houston this summer.

Images of Hardin's face, framed by a gaggle of microphones and television cameras, were recurring on CNN and in national publications as the outspoken lawyer, usually wearing colorful attire, spoke to reporters on a daily basis outside the federal courthouse. All of that exposure in an important case that fed the public's new obsession with corporate scandal helped boost Hardin's public standing and his reputation inside and outside of Texas.

It was a case Hardin wasn't supposed to win - and ultimately he didn't. In the 10th day of deliberations, a jury in U.S. District Judge Melinda Harmon's court found Andersen guilty of one count of obstruction of justice. But Hardin, with assistance from a team of lawyers from Chicago's Mayer, Brown, Roe & Maw, New York's Davis Polk & Wardwell and New Haven, Conn.'s Wiggin & Dana, presented a case that kept a sequestered jury in deliberations for 10 days. "The fact that Rusty turned it into a real contest is a tribute to his skill as a trial lawyer," says Jeffrey Parsons, a trial lawyer at Houston's Beirne, Maynard & Parsons.

"It shaped his profile quite a bit, and he did a credible job," says Michael Clark, a former prosecutor in the Southern District of Texas.

Clark, a partner in Hamel, Bowers & Clark, says, "There was no downside on a personal level."

"He proved to the country as a whole that he is a world-class litigator and that he is absolutely fearless and irrepressible, and he had a sixth sense for what is just over the horizon," says Christopher Bebel, a former Securities and Exchange Commission and Department of Justice prosecutor who watched much of the trial. He's a partner in Shepherd Smith & Bebel.

It was those long deliberations that were so amazing, particularly after David Duncan, the former lead Andersen accountant on the Enron Corp. account, pleaded guilty to obstruction and agreed to testify for the government. Ten days before jury selection, Hardin asked Harmon for a delay for a few months due to pretrial publicity, but she turned him down, saying she didn't think that the public's interest in the case would wane.

There was a lot at stake for Hardin and the rest of Andersen's legal team. Hardin suggests that the indictment, not the verdict, was a death knell for the accounting firm. Up until the indictment, even as Andersen's reputation was damaged as it became embroiled in the Enron scandal, Hardin says only 5 percent of Andersen's clients had left. Once the indictment came down in March, the firm lost 80 percent of its client base, he says.

"Andersen was dead by the time of trial," he says.

Andersen's defense team was fighting for the broader cause against the Enron Task Force, the team of prosecutors investigating the collapse of Enron. An acquittal, even a mistrial, for Andersen would put more pressure on the prosecutors.

The indictments against Andersen and Duncan came down long before anyone from Enron was charged with criminal activities in connection with the downfall of Enron, the formerly high-flying energy trading company that filed for Chapter 11 in December 2001. The most prominent indictment so far is Andrew S. Fastow, Enron's former chief financial officer, who has pleaded not guilty to charges of mail and wire fraud, money laundering and conspiracy.

Hardin says he felt pressure only from himself during the Andersen trial.

"I believed the people in Arthur Andersen did not commit a crime. I thought it was a tragic social and legal mistake for the government to indict the company itself. I thought that made absolutely no sense. I think you now are seeing an evolution of that," he says.

For all the ease Hardin showed in fielding questions from the press, Harmon didn't make it easy for the former state prosecutor inside the courtroom. The two repeatedly clashed over evidentiary rulings, with hostilities coming to a head in the second week of trial. In a shouting match after the jury went home for the day, the judge characterized Hardin's tactics as underhanded, and Hardin suggested she was biased against his client.

On May 17, one day after the heated argument, Harmon signed an order sought by prosecutors "addressing alleged misconduct" on Hardin's part. The order barred Hardin from a laundry list of inappropriate actions, such as making sidebar remarks; making argumentative, detailed objections unless at the bench; or arguing rulings already made by the court or requesting a basis for the ruling.

Hardin says the order didn't affect his conduct in court, but admitted to being perplexed by some of the prosecution's objections to his questions and the judge's rulings on those evidentiary matters.

Hardin says he second guesses himself constantly, but has no regrets about how he defended Andersen. He says the die was cast even before opening arguments, when Harmon agreed to allow prosecutors to present evidence of Andersen's prior "bad acts" under Federal Rule of Evidence 404 [b]. Andersen was under probation because of a consent decree in 2001 stemming from its work for Waste Management Inc.

"Absent circumstances that would have allowed long, long delay before trial, I can't think of anything different [we could have done]," Hardin says.

Hardin, 61, says he is hopeful the results of the trial, while bad for Andersen and its employees, will have some positive impact. He says it may teach people, or remind them, to learn the facts before rushing to judgment. Secondly, Hardin says, he hopes it convinces some that the practice of law can be a lot of fun.

Hardin, who does criminal and civil work at his five-lawyer firm in Houston, was hired on the civil side for Andersen. Andersen needed local counsel after it was named in numerous Enron-related shareholder and securities fraud suits being filed in state and federal courts in Houston. Denis McInerney, a partner in Davis, Polk in New York, suggested Hardin, a friend since 1994, when they both worked on the Whitewater prosecution.

As the Enron situation worsened over the next few weeks, McInerney says, the firm also brought in lawyers from Wiggin & Dana and Mayer Brown to assist. After Andersen was indicted on March 14 on a charge of obstruction of justice for destroying Enron documents - and after Mayer Brown's role had eclipsed Davis Polk's amid questions about Andersen's pre-indictment strategy - Hardin took the lead on the criminal defense.

Hardin, no shrinking violet with the media, says he was surprised at the interest, even after Duncan finished testifying and the trial stretched into six weeks in steamy Houston. "To this day I'm not sure why," Hardin says.

After the jury returned a guilty verdict against Andersen on June 15, the out-of-town lawyers assisting Hardin with the trial flew back East. But Hardin stayed in Houston, where he returned to the courtroom within days, winning a DWI acquittal for Houston Rockets guard Steve Francis and more favorable press for himself.

Hardin is a former state prosecutor in Houston who has been in private practice since 1991, when he opened a civil trial firm with four other ex-prosecutors with the aim of representing crime victims. His clients have ranged from the crime victims he set out to help a decade ago to sports celebrities. He also does major plaintiffs litigation and won a $65 million verdict in 1999 in a nursing home suit.

Hardin says he is in demand temporarily as a speaker about the Andersen trial and on corporate governance issues. He figures that will wind down soon and isn't sure what other extraordinary case is in his future. He continues to represent Andersen in the civil litigation in Harmon's court.

Hardin says that after working on Whitewater and participating in an investigation against the former president of the United States, he thought it would be hard to find a more high-profile case. Then he found himself in the national spotlight again, in 2001, for his role in Playboy model Anna Nicole Smith's probate-court litigation in Houston seeking a share of the estate of her wealthy husband, J. Howard Marshall II.

After the Andersen trial, Hardin says he's prepared to retreat into the anonymity of the average legal case.

"The truth is I love practicing law, and I love being a lawyer, and sometimes that attracts public attention and sometimes it doesn't," he says. "I think the beauty of this kind of practice is I literally don't know what's going to come in the door."