Wednesday, February 25, 2015
Co-blogger Solomon Wisenberg's post on today's Supreme Court decision in Yates v. United States highlights the plurality opinion that focuses on a straight statutory interpretation analysis. But there is an interesting and important note in the dissent that is worth mentioning.
In Part III of the dissent it states, "That brings to the surface the real issue: overcriminalization and excessive punishment in the U.S. Code." - So even though the dissenters are not willing to toss out the statute with the fish, they are recognizing the overcriminalization movement.
Second, the dissenters state - ". . . , I tend to think, for the reasons the plurality gives, that s 1519 is a bad law -- too broad and undifferentiated, with too-high maximum penalties, which give prosecutors too much leverage and sentencers too much discretion. And I'd go further: In those ways s 1519 is unfortunately not an outlier, but an emblem of a deeper pathology in the federal criminal code."
The recognition by these dissenting justices of the growing problem of overcriminalization in the United States is an important step. In many ways this decision is really a 9-0 decision in that the plurality tossed the fish case out because it did not fit in this sea. The dissenters felt their hands were tied to allow the fish case to stay, but they weren't happy with what Congress was doing and sent their message in the sentences above. Will Congress listen, that is the important question here.
The U.S. Supreme Court has rendered its opinion in Yates v. United States. A fish is still a fish, but it is not a tangible object under 18 U.S.C. Section 1519, which was passed as part of the Sarbanes-Oxley Act. Under Section 1519:
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 for not more than 20 years, or both.
Yates was charged under 1519 with destroying, concealing, and covering-up some undersized groupers which he threw overboard after they were segregated and ordered preserved by Officer John Jones of the National Marines Fisheries Service.
The Court ruled 5-4 that Yates' conduct did not run afoul (or a fish) of 1519, because the little fishies were not tangible objects under that particular statute which was clearly aimed, as an examination of its title and overall language shows, at document-related cover-ups. Justice Ginsburg, writing the Opinion of the Court for a four person plurality, held that a tangible object under 1519 is really only a tangible object "used to record or preserve information." She was joined by Chief Justice Roberts and Justices Breyer and Sotomayor. Justice Alito concurred in the judgment alone, but used a textual-contextual approach similar to that employed by the plurality, stating that a tangible object under 1519 had to be "something similar to records or documents." Always careful not to offend the federal prosecutorial apparatus, Alito called it a very close case.
In dissent Justice Kagan, joined by Justices Scalia, Kennedy, and Thomas, used a straight textual approach and pointed to the plain and ordinary meaning of tangible object--an object that is touchable. You can touch a fish. Ergo, a fish is a tangible object. You can destroy, cover-up, or conceal a fish. By doing so with the right amount of intent, you can violate 1519. End of story.
Tuesday, February 17, 2015
Any internal white collar invesitgation is limited by the nature and scope of the investigation and the power of the entity conducting it. And those are just the tangible, objective limiting factors. Are you reporting to the Audit Committee or directly to the Board? Does your law firm (or audit firm or private investigation firm) have other business, or seek further business, with the company or governmental unit that has ordered the investigation? Are subtle signals being sent your way?
Last week the University of Texas System released the Kroll Final Report on Admissions Practices and Allegations of Undue Influence at University of Texas at Austin. The Kroll Report was commissioned by the Chancellor and Vice Chanchellor of the U.T. System after a former U.T.-Austin Admissions Office official came forward alleging that the office of U.T.-Austin President William Powers had "at times exerted pressure on the [Admissions Office] to admit some applicants of lesser qualifications in response to external influences." This official came forward after an earlier, strictly internal, investigation was completed, with its attendant report released to the public. The earlier investigation included interviews of Powers and his top assistant.
As I wrote here last June, this is all part of a long-running battle between former U.T. System Regent Wallace Hall (plus some of his colleagues) and President Powers. Hall started snooping around, which is actually his duty as a Regent, and found several things that troubled him, including:
Admission of students to the University of Texas School of Law who had LSAT scores below the average for entering U.T. Freshlaws. Some of the admitted students were related or connected to powerful state legislators with key roles in funding the university and law school.
That last revelation was apparently too much for the legislature (or "the leg" as we called it in my day) and impeachment hearings were commenced by the House Select Committee on Transparency in State Agency Operations ("Transparency Committee").
As I said, the controversy has had its comic moments. The Transparency Committee voted to recommend impeachment of Hall before deigning to draft any Articles of Impeachment. And Transparency Committee Co-Chair Dan Flynn wrote a public letter stating that: 1) there were insufficient grounds to impeach Hall; 2) Hall should resign anyway; and 3) Hall should be impeached if he did not resign. When Hall refused to resign, Flynn voted to impeach him. (The Texas Tribune has a good story here on Flynn's remarkable letter and the response he received from Representative Eric Johnson. Both letters are attached to the story in PDF format.)
The fight between Hall and the legislature is apparently part of a larger years-long battle between th Board of Regents and UT President Bill Powers. The Regents have Governor Perry and company on their side and Powers has legislative allies on his. I'm not concerned about that. I have reviewed Hall's purportedly impeachable offenses and find the allegations against him unpersuasive, but I would not be writing about these things on a white collar blog if impeachment hearings were the only thing going on. Unfortunately, there's more.
The Transparency Committee's Co-Chairs also referred Hall to the Travis County District Attorney's Public Integrity Unit, which has opened an investigation into possible criminal wrongdoing by Hall. This is the same office that brought dubious charges against former U.S. House Speaker Tom DeLay and has a long history of questionable public corruption prosecutions. The Public Integrity Unit is an odd creature of Texas law, housed in the Travis County DA's Office with statewide jurisdiction to investigate and prosecute state officials. The old Travis County DA was Ronnie Earle. The current Travis County DA is Rosemary Lehmberg, an Earle disciple, who refused to resign from office after pleading guilty to Driving While Intoxicated.
The Kroll Report found no violation of law, but did not, and apparently was not asked to, consider any state or federal criminal laws.
The Kroll Report found no proof of a quid pro quo, but did not directly investigate, and with few exceptions did not question, individuals who did not work within the university system.
The Kroll Report found no lies by President Powers when he was questioned as part of the earlier inquiry, noting that he "answered specific questions with technical precision." But Kroll also found that Powers, through material omissions, apparently misled that inquiry, and that Powers "failed to speak with the candor and forthrightness" expected of someone in his position "of trust and leadership."
A Wall Street Journal editorial on the Kroll Report characterizes it as a vindication of Wallace Hall and calls for an "end to the campaign to punish Mr. Hall." But the Journal speaks only of Hall's censure by the legislature and the effort to impeach him, never mentioning the still active criminal investigation hanging over Hall's head.
Holding a press conference after the Kroll Report was issued, Powers called the Report "thorough, accurate and fair" and said that he thinks it clears him. Powers, however, denied being evasive in his answers to the earlier inquiry, noting that the lawyers conducting that inquiry had stressed its limited nature. Powers, after initially refusing to discuss individual regents or donors, also claimed that Hall himself "has exerted influence over the admissions process." But Powers declined to comment on whether the Report exonerated Hall, noting that "there is an investigation going on about his conduct." I find Powers' statement quite chilling. It serves as a reminder that this is Texas and Hall is not out of the woods.
Monday, February 2, 2015
Judge Rakoff has authored an interesting article in the New York Review of Books examining Professor Brandon L. Garrett’s book entitled “Too Big to Jail: How Prosecutors Compromise with Corporations.” Professor Garrett’s book looks closely at the use of deferred prosecution agreements by the government and includes a wealth of information and data. While Professor Garrett concludes that deferred prosecution agreements have been “ineffective,” he also proposes a number of steps that might make them more efficient in the future. Along with conducting a nice discussion of Professor Garrett’s book, Judge Rakoff offers his own perspective on these agreements in his review. For those interested in deferred prosecution agreements, both Judge Rakoff’s article and Professor Garrett’s book are must reads.