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Indictments can kill a company

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Indicting a company can be a death sentence, regardless of the firm's innocence. Take Arthur Andersen.

In 2002, the "Big Five" accounting firm was indicted on charges of obstructing the SEC's Enron investigation by destroying documents around the time of Enron's collapse. The Andersen partner in charge of the Enron audit, David Duncan, had already pleaded guilty and agreed to testify against his former firm.

The indictment alone killed Andersen since it could no longer audit public companies. Some 28,000 employees lost their jobs.

Thursday's indictment of SAC Capital Advisors revived memories of the Andersen case.

Read more: SAC Capital Advisors indicted by a federal grand jury)

Andersen's legal team believed it had a deferred prosecution agreement with the head of the Enron Task Force that would have allowed the company to avoid indictment and continue doing business, but higher-level officials in the Justice Department nixed the deal.

Prosecutors argued that a major part of Andersen's motive to obstruct the investigation was that it was already on notice from the SEC following accounting issues with clients Sunbeam and Waste Management. That was also a major rationale for prosecuting the firm.

Andersen was convicted, but appealed, arguing the jury instructions on "corrupt persuasion" were impossibly vague, allowing the jury to convict it even if the government hadn't proven that those involved knew their conduct might be illegal.

In 2005, the Supreme Court unanimously overturned the conviction, but Andersen was already long gone.

Duncan was allowed to withdraw his guilty plea, and today he is CFO of a Houston pipeline firm.

Even before the Andersen case went to the Supreme Court, the Justice Department began rethinking its guidelines for charging corporations. The "Thompson Memo" in 2003 substantially raised the threshold for seeking charges against a company, as did the "McNulty Memo" in 2006.

For example, it is much more difficult to pressure companies to waive attorney-client privilege, and companies can no longer be penalized for covering legal costs of their employees. Companies get credit now for cooperation and for self-reporting potential illegal conduct.

By CNBC's Scott Cohn. Follow him on Twitter @ScottCohnCNBC.

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