Expanded Obstruction Of Justice: Corporate Counsel On The Front Line

“[B]ased on the government’s theory of prosecution, any … business today could face a similar punishment for discarding documents. By this standard, any company could be prosecuted for following standard document disposal practices, before receiving a subpoena or even an informal request for documents from a third party, even when no person involved in the matter believed that anything they were doing was wrong.”

— Statement of Arthur Andersen LLP (June 15, 2002) on the firm’s obstruction of justice conviction.[1]

Arthur Andersen’s alarmist warning about the excessive scope of criminal obstruction of justice statutes is truer today than ever before. As part of the current crackdown on corporate crime, prosecutors are enforcing obstruction statutes more frequently and aggressively, criminalizing conduct many companies would consider not just lawful, but routine.

Prosecutions of regular business activities may occur even more often now given the recent enactment of the Sarbanes-Oxley Act, which significantly expands the scope of obstruction of justice offenses. As a result, now more than ever, corporate counsel needs to know about obstruction of justice.

This article provides an overview of the offense by introducing the concept of obstruction and obstruction statutes, and then analyzes the Sarbanes-Oxley Act’s new obstruction provisions and amendments to the existing obstruction statutes.

What is ‘Obstruction of Justice’?

Generally speaking, obstruction of justice is any “interference with the orderly administration of law and justice.” The offense is designed to prevent the miscarriage of justice resulting from corrupt methods. It targets a variety of means by which the orderly and due process of the administration of justice may be impeded, thwarted, or corrupted.

Obstruction of justice consists of a “medley of crimes,” proscribed by numerous statutes codified primarily in 18 U.S.C., Chapter 73. While there are numerous statutes proscribing obstruction, prosecutors until now have primarily resorted to 18 U.S.C. §§1503 and 1512(b). With the enactment of the Sarbanes-Oxley Act, prosecutors now have an additional, powerful tool with which to combat obstructive acts.

Sarbanes-Oxley Act’s Obstruction Provisions

In response to large-scale corporate misconduct uncovered recently, Congress, on July 30, 2002, enacted the Sarbanes-Oxley Act (the “Act”), a landmark piece of civil and criminal legislation.

To address perceived gaps in existing obstruction laws, the Act created a broad, new obstruction of justice statute, 18 U.S.C. §1519, enlarged an existing statute, 18 U.S.C. §1512, and ratcheted up punishments for those convicted of obstruction.

18 U.S.C. § 1519: Criminal Liability for Document Destruction or Alteration

As prosecutors battled Arthur Andersen over document destruction, Congress took aim at apparent loopholes in existing obstruction of justice statutes that were perceived to hamper prosecutors’ ability to combat the full range of seemingly improper actions taken by companies. According to the legislative history, “current federal obstruction of justice statutes relating to document destruction is [sic] riddled with loopholes and burdensome proof requirements.”

Section 1519 attempts to plug those holes by criminalizing a much broader range of conduct than other obstruction statutes. It provides:

“Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.”

While at first glance this statute may appear to cover obviously improper conduct — such as destroying records with the intent to obstruct a criminal investigation — a closer inspection reveals that it also could be interpreted to embrace far less culpable conduct. It does that by substantially reducing the prosecutions’ burden on two key elements of proof that traditionally have distinguished criminal conduct from everyday business.

First, §1519 diminishes the intent requirement, often the toughest element for the prosecutor to prove. Unlike other obstruction statutes, this statute appears not to require a “corrupt” state of mind. Rather, it merely requires that the defendant acted knowingly and with the “intent to impede, obstruct, or influence.”

Second, courts have narrowly interpreted other obstruction provisions, including the oft-used §1503, to apply only in the context of a pending judicial proceeding and then when there was a cognizable relationship or “nexus” in time, causation, or logic between the obstructive act and the proceeding.

However, §1519 reaches obstruction relating to a sweeping array of government activity: the investigation or proper administration of “any matter within the jurisdiction” of the executive branch or any filed bankruptcy case, and in “relation to or contemplation of any such matter or case.” Section 1519 purports not to contain a “nexus” requirement, as the Act’s legislative history makes clear:

“This statute is specifically meant not to include any technical requirement … to tie the obstructive conduct to a pending or imminent proceeding or matter…. It is also meant to do away with the distinctions … between court proceedings, investigations, regulatory or administrative proceedings (whether formal or not), and less formal government inquiries, regardless of their title…. It also extends to acts done in contemplation of such federal matters, so that the timing of the act in relation to the beginning of the matter or investigation is also not a bar to prosecution.”

By making obstruction easier to prove in these ways, the Act may have gone too far. Rather than simply plugging loopholes to ensure enforcement against the full range of improper acts, §1519 arguably reaches a broad array of non-criminal conduct, including commonplace business actions, such as editing documents to influence executive branch decisionmakers, even if the edits in no way distort the truth, or disposing of any business record prior to an investigation or bankruptcy, even when the investigation or bankruptcy occurs months or years later.

The actual scope of §1519 will not become clear until courts litigate the government’s attempts to enforce the section or Congress enacts clarifying legislation.

In the meantime, corporate counsel should establish or review their company’s document retention policy to ensure it is predicated upon legitimate business reasons for maintaining or disposing of records and should mandate compliance with it throughout the organization. Counsel should be especially cautious about document destruction or alteration, particularly in dealings with any executive branch agency or bankruptcy.

Amendments to Existing Obstruction Statutes

The Sarbanes-Oxley Act also amended §1512, the witness tampering statute, by adding a new subsection that makes it an offense to alter, destroy, mutilate, or conceal a record, document, or other object, or to attempt to do so, with the intent to impair the object’s integrity or availability for use in an official proceeding, or otherwise to obstruct, influence, or impede any official proceeding.

This amendment stems directly from the government’s perceived difficulties in the Arthur Andersen case, where prosecutors felt hamstrung by §1512(b), which makes it a crime to persuade another person to destroy documents, but not to destroy the same documents personally.

Section 1512(c), like §1519, now penalizes acts committed by any person (“whoever”), thus enabling prosecutors to go after persons who destroy or falsify documents on their own or at the direction of another.

Because these amendments allow prosecutors to threaten individual employees engaged in document destruction with possible prosecution more realistically, prosecutors are likely to use these new provisions to get low-level employees to “flip” on their supervisors. Sections 1512(c) and 1519 appear to be specifically crafted to facilitate such prosecution tactics.

Increased Punishment for Obstruction

Finally, the Act increases the punishment for obstruction of justice. Sections 1512(c) and 1519 double the statutory maximum punishment from 10 to 20 years imprisonment. Other provisions of the Act direct the U.S. Sentencing Commission to review and potentially increase sentences for obstruction of justice.

In emergency amendments passed in response to that directive that took effect Jan. 25, the Sentencing Commission increased the base offense level for obstruction offenses and added enhancements for offenses that involve the destruction of a “substantial” amount of evidence, involve the alteration or destruction of “essential or especially probative” evidence, or are “otherwise extensive” in scope, planning, or preparation.

In effect, defendants convicted of obstruction offenses can expect their sentences to increase from approximately 14 months in prison to approximately 26 months — longer sentences than those served by many violent offenders.

[1] The Andersen Verdict; Jury Instructions Were Flawed, Firm Says, L.A. Times, June 16, 2002, at A25.

Michael B. Galvin is a trial lawyer at Dwyer & Collora in Boston, specializing in … The full version of this article can be found at Dwyer & Collora’s website: www.dwyercollora.com.