Corrupting The Meaning Of 'Corruption': Supreme Court To Decide Whether Advocacy Is A Crime
By Barry Tarlow
On March 7, 2002, Arthur Andersen L.L.P. earned the dubious distinction of being the first of the nation’s most venerable accounting firms to be indicted on felony charges. In April of that year, one of its more senior partners, David Duncan, pled guilty to obstructing justice. Within a mere two months of the indictment, on May 6, the firm’s trial began, and by June 15, 2002, it became the first business of its kind to be convicted of a felony. United States v. Arthur Andersen, L.L.P., 374 F.3d 281, 284, 287 (5th Cir. 2004) [hereinafter “Andersen Appeal”]; Kurt Eichenwald, Andersen Misread Depths of the Government’s Anger, N.Y. Times, March 18, 2002. New York Times reporter Kurt Eichenwald recently published his epic about Andersen’s single largest account entitled, “Conspiracy of Fools,” chronicling “the multibillion-dollar Ponzi scheme anointed America’s ‘most innovative company,’ ” the Enron Corporation. Frank Rich, Enron: Patron Saint of Bush’s Fake News, N.Y. Times, March 20, 2005.
In an attempt to survive the fiascos of its major client, Enron, Andersen drew the unwelcome attention of federal prosecutors. The firm earned $58 million in revenue from Enron in 2000 alone, but by 2001 it was being called to account for its own role in assisting Enron. Andersen Appeal, 374 F.3d at 284. According to Eichenwald and the case record, Andersen maintained a document retention/destruction policy requiring it to keep all information fully documenting its actual work product but to discard all preliminary drafts, notes and duplicates. The policy prohibited the destruction of information after the firm became aware of particular litigation or subpoenas. Following this policy, Andersen employees shredded copies of documents and deleted emails relating to Enron at a time when, in hindsight, a formal investigation into Andersen’s accounting practices was almost ready to begin.
Frustrated by the destruction of the copies and determined to bring criminal charges against Andersen, a task force of DOJ attorneys and AUSAs filed a one-count indictment. Strangely enough, although Andersen was publicly vilified for its document shredding, a charge more commonly brought under general obstruction of justice provisions, see generally 3 Kathleen F. Brickey, Corporate Criminal Liability § 12.03, at 195 n.48 (2001 Supp.) (“Tampering with documentary evidence also violates [18 § U.S.C.] 1503. Concealing, destroying, altering or fabricating documents may constitute a crime” under the omnibus provision of the section.), the indictment invented a different way of applying the witness tampering statute, 18 U.S.C. § 1512(b), to cover advice concerning the shredding of documents.
This charge was a gamble for the AUSAs not only because it relied upon a different theory than the usual fare, but also because the evidence against Andersen was not necessarily overwhelming, the firm intended to assert its rights to a speedy trial, and it was ready to use all its wherewithal to defend against these allegations. See Kurt Eichenwald, Andersen Misread Depths of the Government’s Anger, N.Y. Times, March 18, 2002. Even so, after five weeks of trial and ten days of deliberation in June 2002, a jury in a Texas federal court found Andersen guilty, and the Fifth Circuit Court of Appeals has affirmed the decision.
Following a grant of certiorari by the United States Supreme Court, see Arthur Andersen LLP v. United States, 2005 U.S. LEXIS 617 (Jan. 7, 2005), the question whether Andersen’s conviction will stand is now an open one of importance to defense lawyers. On April 27, 2005, the Court heard argument as to whether Andersen should have ever been convicted. The trial court might have mistaken the elements of the offense and given the jury the wrong instructions, despite the Fifth Circuit’s later blessing. On certiorari, the issue is “[w]hether [Andersen]’s conviction for witness tampering under 18 U.S.C. § 1512(b) must be reversed because the jury instructions upheld by the Fifth Circuit misinterpreted the elements of the offense . . . .” Petition of Arthur Andersen L.L.P. for a writ of certiorari in Arthur Andersen L.L.P. v. United States (“Andersen Cert. Petition”), at i. Arguably, the firm simply did not violate the law when several of its high-ranking partners directed others to comply with a lawful document shredding policy. How the court ultimately interprets the statue could alter the bounds of what constitutes legitimate advocacy, as well as impact upon the advice lawyers must give to professionals and corporations maintaining document retention policies.
Fortunately, the Court seems poised to reverse the Fifth Circuit’s decision. “The justices were so clearly sympathetic to Andersen . . . that the only question by the end of the argument appeared to be how quickly the Court would produce an opinion overturning the firm’s conviction.” Linda Greenhouse, Justices Dubious of U.S. Case on Andersen, N.Y. Times, Apr. 8, 2005. The justices expressed concern that the government’s theory is too vague and confusing and leaves people guessing as to what conduct is criminal. When Deputy Solicitor General Michael R. Dreeben “referred to the Sarbanes-Oxley Act and started to explain that the Andersen case ‘threw a spotlight’ on the need for additional legislation, Justice Scalia interrupted. ‘I suggest that it throws a spotlight on the fact that your theory is wrong.’” Id.
What is extraordinarily troubling in Andersen’s case is that even if the conviction is reversed, the firm — like many defendants — has been destroyed. Following its indictment and conviction, it is little more than a tarnished, bankrupt memory winding up its last financial operations. See Kathryn Keneally, Destruction of a Business by the Destruction of Documents: White Collar Crime, The Champion (Jan./Feb. 2005). The firm has abruptly collapsed, and after the smoke cleared only a single partner, David Duncan, entered a guilty plea stating he obstructed justice. Andersen Guilty of Obstruction, Forbes.com June 15, 2002. Notably, while Duncan’s statements to federal agents during the investigation and to the court during his plea hearing were not initially admissible without violating the Confrontation Clause if Andersen did not have an opportunity to cross-examine him, see Crawford v. Washington, 541 U.S. 36, 68–69 (2004), once he took the stand at trial it all became fair game, id., at 59 n.9. Strangely enough, although Duncan cooperated as the government’s key witness, the jury apparently did not convict Andersen based on his conduct or the actual document shredding. Instead, the verdict apparently turned upon the advice of an in- house lawyer, Nancy Temple, who directed others to comply with the firm’s unremarkable document retention/destruction policy. Jonathan D. Glater, Jurors Say File Shredding Didn’t Factor Into Verdict, N.Y. Times, June 16, 2002, cited in Steven Lubet, Document Destruction After Arthur Andersen: Is It Still Housekeeping or Is It a Crime?, 4 J. App. Prac. & Process 323 (2002).
Given these circumstances, the case brings to the forefront the practical question that many businesses accused of wrongdoing face: How can it be good social and judicial policy to destroy a major business or to ruin a person’s life, livelihood or reputation based on accusations that are highly questionable? The idea that such a slim degree of culpability could bring down one of the nation’s leading accounting firms is a startling reminder of the power of the Justice Department. The result is even more chilling since attorney Temple apparently directed others to do something legal, and she never admitted to or was formally charged with any wrongdoing. Although Andersen might have deserved some measure of blame for its role in the Enron fiasco, the destruction of the firm appears to be a prime example of overkill.
Stirring The Waters
Like many of the accused, Andersen has been severely punished not so much for its specific conduct, but rather due to some of the company it kept and the enemies it made along the way. Its downfall stemmed from its dealings with major corporations like Enron, Waste Management, WorldCom and Sunbeam, which experienced rapid corporate growth through tactics ranging from a willingness to bend or break the rules to outright fraud. As the public’s opinion of those companies fell in tandem with their stock prices, the common link among the companies — namely, Andersen — stuck out like a sore thumb to prosecutors and class action lawyers. After years of supposed “bow[ing] to management[,] cav[ing] in to powerful entrepreneurs[ and] repeatedly ignor[ing] warnings from whistleblowers[,] its past history [came] back to haunt it.” No Accounting for Greed, B.B.C. News, July 23, 2002.
Of all these corporate dealings, Andersen is probably best remembered for its relationship with Enron. Enron, of course, was an overnight sensation, a Goliath of the 1990s. In a single decade, “Enron transformed itself from a natural gas pipeline operator into a trading and investment conglomerate with a large volume of trading in the energy business.” Andersen Appeal, 374 F.3d at 284. It epitomized the 1990s way of doing business and, like anything archetypal, it had its qualities in the extreme. It was obsessed with growth and finding and promoting talent, raiding its competitors for their best and brightest businesspeople. Its focus was on doing whatever it took to show the gains its investors expected. It even conjured up fake business operations to display to investors who visited the company’s Houston headquarters. “In a typical ruse in 1998, a gaggle of employees was rushed onto an empty trading floor at the . . . headquarters to put on a fictional show of busy trading for visiting Wall Street analysts being escorted by Mr. Lay. . . . [A] laid-off Enron employee told the Wall Street Journal in 2002[,] ‘We had to make believe we were on the phone buying and selling’ even though ‘some of the computers didn’t even work.’ ” Frank Rich, Enron: Patron Saint of Bush’s Fake News, N.Y. Times, March 20, 2005. When Enron fell at the turn of the millennium, it went down hard. “Like a falling giant redwood, it took down with it many members of its supporting cast,” including Andersen. Andersen Appeal, 374 F.3d at 284.
But Andersen’s demise did not begin with the Enron fiasco. Regulators focused on Andersen because of its earlier auditing work for the refuse disposal megalith, Waste Management. Over the years, Waste Management has been the subject of a number of criminal investigations. For several years during the mid-1990s, the company had also overstated the value of its garbage hauling equipment, inflating the statement of its assets and understating its expenses. No Accounting for Greed, B.B.C. News, July 23, 2002. Arthur Andersen signed off on these financial statements. Although its auditors tried along the way to suggest plans to stop the practice and correct the misleading statements, Waste Management would not relent, and Andersen purportedly looked the other way. In 1997 and 1998, an SEC investigation resulted in a restatement of its pretax profits to the tune of about $1.5-billion. “At the time, it was the largest earnings restatement in history.” Kurt Eichenwald, Andersen Misread Depths of the Government’s Anger, N.Y. Times, March 18, 2002. The restatement caused a collapse in the company’s share price that left investors short $6 billion. No Accounting for Greed, B.B.C. News, July 23, 2002.
During the SEC’s enforcement action against Waste Management, the commission forced Andersen to turn over its internal auditing records. Kurt Eichenwald, Andersen Misread Depths of the Government’s Anger, N.Y. Times, March 18, 2002; United States v. Arthur Andersen, 2002 U.S. Dist. LEXIS 26870 (S.D. Tex. May 24, 2002) [hereinafter “Andersen Trial I”]. When preparing to turn over the materials, firm members reviewed internal memoranda and found documents revealing the firm knew of the accounting problems. They were appalled at the situation. Ultimately in June 2001, and without admitting to any wrongdoing, Andersen “agreed to the entry of a consent decree against [it] and three of its partners in which [it] was enjoined from further violations of the securities laws and fined $7 million.” Andersen Trial I, 2002 U.S. Dist. LEXIS 26870, at *4. In part, the agreement included a censure of Andersen. Andersen Appeal, 374 F.3d at 290. Like Waste Management’s restatement, moreover, Andersen’s fine was the largest of its kind at the time. In response to that fine, Andersen adopted the document retention/destruction policy it was applying when matters at Enron took a turn for the worse. In fact, when matters grew dim at Enron a few months later, talk of the Waste Management debacle and the resulting document policy, which was designed partly to ensure that incriminating drafts of documents did not sit around on company shelves waiting to be found, again came to the forefront.
Meanwhile, as things were souring at both Waste Management and Enron, Andersen was also experiencing major problems related to another client, the Sunbeam Corporation. After a restatement in 1998 of three years’ worth of earnings, the company filed for bankruptcy. In July 2001, an SEC enforcement action followed, and the commission decided to investigate the Andersen partner who led the Sunbeam accounting team. The investigation was still pending during the Andersen criminal trial. Id., at *5.
Yet perhaps there was something more to the prosecution’s motivation than its imparting of guilt by association. According to the prosecution, Andersen’s relationship with Enron was not merely that of a perhaps too creative accounting firm pandering to one of its largest clients. Instead, it presented a picture of highly intertwined businesses helping to perpetuate a fraud. As the Fifth Circuit later remarked, “Enron’s Chief Accounting Officer and Treasurer throughout this period came to the employ of Enron from the accounting staffs of Andersen, as did dozens of others. This was a close relationship. Indeed, the jury heard evidence that Andersen removed at Enron’s request at least one accountant from his assignment with Enron after Enron disagreed with his accounting advice.” Andersen Appeal, 374 F.3d at 284–85. Each business was sharing high-level employees to help one another make money hand over fist. Andersen’s projected Enron-related revenue for 2001 was $100 million. Id., at 284. Perhaps the taint that infected the firm’s clients had become intrinsic to at least part of Andersen itself. As part of its close relationship with Enron, the firm helped the company create special purpose entities, or “SPEs,” known as “the Raptors” to hide income and losses and to engage in cloaked “transactions with ‘LJM,’ an entity run by Andrew Fastow, Enron’s Chief Financial Officer.” Id., at 285. These insider transactions ostensibly occurred out of the public eye, in a way that some of the firm’s Chicago partners told Duncan ran afoul of the rules. Id. Yet the firm did nothing to stop it.
By the time Enron imploded, it was this confluence of events that ostensibly motivated federal prosecutors in the DOJ and the United States Attorneys’ Offices of Houston, Boston and Alexandria, Virginia to decide to focus on Arthur Andersen, L.L.P. See id., at *1. “In the end, prosecutors resolved that Andersen should pay a price for its past problems. Its history proved to be the critical factor in their decision to indict the firm — even if the charge amounted to a death sentence.” Kurt Eichenwald, Andersen Misread Depths of the Government’s Anger, N.Y. Times, March 18, 2002.
Cleaning House: Extraordinary ‘Ordinary’ Housekeeping
By July 2002, the front page of the Wall Street Journal was reporting that the percentage of Americans believing the country was headed in the wrong direction had increased to 42 percent, the highest rate since at least 2000. A full 70 percent did not trust brokers or corporations, 60 percent thought regulators would not go far enough, and just one-third approved of Congress’s performance. Gerald F. Seib and John Harwood, Reform Redux: What Could Bring a 1930s-Style Regulatory Overhaul, Wall St. J., July 24, 2002, at A1, cited in Note, Recent Legislation: Corporate Law - Congress Passes Corporate and Accounting Fraud Legislation, 116 Harv. L. Rev. 728, 728 n.5 (Dec. 2002). The outcry ultimately grew so great as to motivate the passage of the Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745, a mere one month after Andersen’s conviction. The act, of course, included changes to the sister provisions in the chapter on obstruction of justice relating to Andersen’s indictment, as well as new provisions criminalizing accounting misconduct.
While public sentiment was headed toward a fevered pitch, investigators in the Andersen case continued to dig into the firm’s recent history. As a basis for a criminal charge, Andersen’s document retention/destruction activities were a mixed bag. They took place in compliance with an apparently lawful policy, but they were given a seemingly special priority in the task list in the weeks before the SEC launched a formal investigation into Enron’s and Andersen’s dealings. Of course, “[t]here is nothing improper about following a document retention policy when there is no threat of an official investigation, even though one purpose of such a policy may be to withhold documents from unknown, future litigation. A company’s sudden instruction to institute or energize a lazy document retention policy when it sees the investigators around the corner, on the other hand, is more easily viewed as improper.” Andersen Appeal, 374 F.3d at 297. A court and a jury would be called upon to decide if this extra emphasis upon the policy crossed the line.
Andersen claimed it had fallen behind on its usual shredding and file organization tasks. The number of staff assigned to these jobs had shrunk. Many documents and emails that ordinarily would have been mere memories were beginning to pile up. Kurt Eichenwald, Andersen Misread Depths of the Government’s Anger, N.Y. Times, March 18, 2002. Had the decisions about what documents should be retained and what materials were duplicates or superceded drafts been made in a timely manner, Andersen might still be here today.
The real problems began when matters soured for Enron. When Enron’s CEO Jeffrey Skilling resigned in August 2001, Chairman Kenneth Lay ordered a review of the company’s documents by outside counsel, and Andersen also decided to review the state of its housekeeping. Interestingly, the person who prompted both reviews was Sherron Watkins, a former Andersen accountant who had become a high-ranking accountant at Enron. She talked to both Lay and Duncan, as well as Michael Odom who was a Practice Director in the Houston office and oversaw Duncan’s work. Andersen Appeal, 374 F.3d at 285. In the fall of 2001, boxes and boxes of Enron-related documents were sent from the Houston headquarters, where partner David Duncan was heading the firm’s Enron-engagement team, to experts in Chicago. The document retention policy soon began to receive more attention as the amount of shredding jumped fivefold from 500 pounds to 2500 pounds of paper per month.
Andersen Appeal, 374 F.3d at 286.
At one point, Odom called a practice group meeting where he “urged Andersen personnel to comply with the document retention policy.” Id. He “explained that in past lawsuits, Andersen had been forced to produce documents that should not have been retained.” Kurt Eichenwald, Andersen Misread Depths of the Government’s Anger, N.Y. Times, March 18, 2002. Other specialists reviewing the documents worried, perhaps with good reason, that some internal memoranda could be construed as approving of accounting methods that allowed the overblown energy trading company to understate its debts and misstate its value by $1.2 billion. Worse yet, some of the approvals might be traced to the office in Chicago. Id.
The document review specialists held frequent conference calls in which they were joined by Nancy Temple, a seasoned in-house lawyer and former partner at Sidley & Austin. According to Andersen’s court filings, “the team was principally concerned with the discovery that Andersen had permitted Enron to use an improper accounting methodology to measure potential impairment of notes received from [the SPEs] known as the Raptors.” Andersen Petition, at 5; see Andersen Appeal, 374 F.3d at 285. If the application of correct accounting methodologies would result in a restatement of income, the SEC would probably conduct a formal investigation. If no significant income restatement were necessary, however, no formal proceedings would result. Id. The question of Andersen’s intent, therefore, hinged in significant part upon the evidence, if any, that the firm expected a formal investigation.
On October 9, 2001, Temple did what any top-rate lawyer would do. She called a meeting with senior in-house colleagues to discuss the matter, assess the situation and formulate a strategy to protect her client’s interests. As for the assessment of the situation, her notes of the meeting mention some sort of “SEC investigation as ‘highly probable’ and [refer] to a reasonable possibility of a restatement of earnings.” Andersen Appeal, 374 F.3d at 286. Andersen, according to court filings, expected an informal investigation but was uncertain whether there would be any need for a formal inquiry. Andersen Petition, at 5. Temple’s “notes also recorded ‘without PSG agreement , restatement and probability of charge of violating cease and desist in Waste Management.’” Andersen Appeal, 374 F.3d at 286. The worry supposedly was that the broader fall-out from the investigation could hurt the firm. According to the defense analysis, with talk of Waste Management still fresh in the air, decisions were quickly made to come in to compliance with the document retention policy created in response to that matter.
The prosecution, however, had a far more sinister interpretation of these events. The task force noted that on October 10, Odom called a practice group meeting where he “urged Andersen personnel to comply with the document retention policy, noting ‘if it’s destroyed in the course of normal policy and litigation is filed the next day, that’s great . . . we’ve followed our own policy and whatever there was that might have been of interest to somebody is gone and irretrievable.’ ” Id. Heeding the message, employees began to purge old materials. “The government said in its indictment that the document destruction that day had been the first attempt to obstruct justice.” Kurt Eichenwald, Andersen Misread Depths of the Government’s Anger, N.Y. Times, March 18, 2002.
Two days later, Temple made an entry for the Enron matter in the firm’s internal tracking system under the category “Government/Regulatory Investigation,” with an notation that it was unclear whether any restatement would be required. Andersen Petition, at 5. The same day, she sent an email to Odom saying, “[i]t might be useful to consider reminding the engagement team of our documentation and retention policy. It will be helpful to make sure that we have complied with the policy.” Id., at 6. The message was forwarded to Duncan.
After Enron announced a $1.2 billion balance-sheet restatement on October 16, which in Andersen’s experience would only trigger an informal investigation, Duncan stepped up his efforts. Yet the partners and experts in the firm’s Chicago office characterized important details of the restatement as misleading, and Enron refused to change them. Despite Andersen’s later claims that it viewed the proceedings mainly as an informal inquiry, moreover, by October 23, Duncan scheduled an “urgent” and “mandatory” engagement group meeting in Houston, where he directed the team to adhere to the document retention policy. Andersen Appeal, 374 U.S. at 286; Andersen Petition, at 6. The firm’s transition into “crisis mode” suggests that its members already considered formal SEC proceedings to be more than a mere possibility on the horizon.
Andersen’s document policy required the group to keep all information fully documenting Andersen’s actual work product, but to discard all preliminary drafts, notes and duplicates. It specifically stated that “ ‘related information should not be destroyed’ after the firm was ‘advised of litigation or subpoenas regarding a particular engagement.’” Andersen Petition, at 6–7. Notably, even after pleading guilty and testifying at trial as the prosecution’s star witness, Duncan maintained that he only “requested the team to ‘come into compliance with the policy,’ not to ‘do any more or any less,’ and to ‘refer to the policy to make sure they understood it.’” Id., at 7. Employees later testified that, in their understanding, the shredding of documents was still proper during an informal investigation, and they were careful to keep any significant information, including harmful information. Id., at 8.
On November 8, the shredding stopped when Enron filed a $586 million restatement of its net income, and the SEC issued a subpoena. Andersen Petition, at 8.
A Rapid Downfall
Whatever the state of its internal workings, Andersen thought its outside legal problems resulted largely from the actual shredding of the documents, and it felt secure that it had the superior legal position on the issue. When, on March 7, 2002, the United States accused it of committing one count of witness tampering between October 16 and November 9, 2001, in violation of 18 U.S.C. § 1512(b)(2)(A),(B), it was confident it could successfully defend the charge. See id.; Andersen Appeal, 374 F.3d at 285 n.1.
The charge was an odd one to bring under the circumstances. Witness tampering is not the first thing that comes to mind when questions arise about document retention pursuant to a lawful corporate policy. In relevant part, subsection (b)(2)(B) provides for a fine or a maximum prison term of 10 years for anyone who “corruptly persuades another person . . . with intent to . . . cause or induce any person to . . . alter, destroy, mutilate, or conceal an object with intent to impair the object’s integrity or availability for use in an official proceeding . . . .” Subsection (b)(2)(A) provides the same penalty when someone corruptly persuades another to “withhold a record, documents, or other object, from an official proceeding.” The government needed to come up with an innovative way to charge Andersen, however, because the usual ways would not work. “For more than a century, it had been settled law that destruction of documents prior to the initiation of judicial or agency proceedings is not obstruction of justice.” Andersen Petition, at 1; see also 3 Kathleen F. Brickey, Corporate Criminal Liability § 12.05, at 202–207 (2001 Supp.).
Even so, the charge was not guaranteed to stick. Although Andersen’s actions concerned “documents” and “objects,” the firm followed its usual document retention/destruction policy before any formal proceedings had begun and before it received any subpoena for the documents. Its members believed their actions concerning the documents complied with the law. Accordingly, Andersen did not believe any “corrupt” action or “official proceeding” had occurred during the time period of the shredding, and it had acted in good faith, seemingly contrary to the intent requirement.
The Andersen case harkens back to a comment made in 2001: “it is important to remember that the general definition of ‘obstruction of justice’ is extremely nebulous, see 18 U.S.C. § 1503, and, where conduct is specifically described, the statutes threaten to punish a wide range of legitimate conduct, see 18 U.S.C. § 1512.” Legal Representation, Bad Judgment or Obstruction of Justice: No Bright Line: RICO Report, The Champion (July 2001).
The special task force assigned to the Andersen prosecution had been under pressure to seek an indictment against at least some of the wrongdoers and to obtain convictions. Even the FBI’s director weighed in on the effort to get results, and the FBI provided heightened cooperation, offering most of the testimony and evidence heard by the grand jury. When Andersen maintained that the problem was limited to a handful of higher-ups like Duncan in Houston, the task force was pressed to find out whether this was really true. Given Andersen’s history of signing off on the financial reports in some of the most serious debacles in corporate history, prosecutors became increasingly hardened against Andersen, seeing it as a repeat player in scams costing investors hundreds of millions of dollars. They also thought if they did not indict the firm, the administrative and punitive measures they employed against companies responsible for financial wrongdoing (such as the consent decree with Andersen in Waste Management) would have no real deterrent effect. Kurt Eichenwald, Andersen Misread Depths of the Government’s Anger, N.Y. Times, March 18, 2002. So they brought the charge under § 1512(b), permitting a conviction for actions taken in advance of any pending proceeding.
When the task force told Andersen they intended to indict the company, rather than just the individuals involved, they offered a plea deal. Andersen, however, knew this would mean that administrative rules would bar it from auditing publicly traded companies, a result it obviously could not accept. When the task force could not assure it of any waiver of the rule in its case, Andersen had no other choice but to go to trial. Id.
Whatever the strength of Andersen’s legal hand , the firm’s economic base quickly eroded. Throughout the investigation, Andersen was rapidly losing its treasured brain capital to competitors as its marketable members jumped ship. By the time of its conviction on June 15, 2002, it had already lost $1.3 billion in business because its clients had hired other firms. When the conviction came, Andersen also lost the ability to audit publicly traded companies, and its fate essentially was sealed just as Andersen had known during plea negotiations. Andersen Guilty of Obstruction, Forbes.com, June 15, 2002.
In the mere three years since its indictment, Andersen has gone from being a blue-chip entity with an 89-year history of distinguished work and a workforce of 28,000 employees to being a bankrupt entity with about 200 employees winding up its partnership affairs. See Linda Greenhouse, Supreme Court Will Review Conviction of Arthur Andersen, N.Y. Times, Jan. 8, 2005; Andersen Guilty in Enron Case, B.B.C. News, June 15, 2002.
Aside from these financial consequences, it became apparent during the course of the proceedings that Andersen could not practically limit its legal liability to the issues of its lawful document destruction. For one thing, District Judge Melinda Harmon, the George H.W. Bush appointee and former state court judge who presided over Andersen’s trial, allowed evidence of Andersen’s dealings with Waste Management and Sunbeam over the firm’s strenuous evidentiary objections. Andersen Trial I, supra, 2002 U.S. Dist. LEXIS 26870, at *4–*15. Of course, these allegations of fraudulent conduct were not admitted for their truth, but only to present the jury with “the backdrop to Andersen’s destruction of documents in its internal investigation of its work for Enron.”
Andersen Appeal, 374 F.3d at 290. This fit nicely with the theme during trial that Andersen was a repeat bad actor. The trial became almost as much about the past as about any current misconduct.
Beyond the past, moreover, rather than honing in on the propriety of the document destruction itself, the jury’s attention shifted to a few actions by a handful of people who managed the process, and especially Temple, Odom and Duncan. Strangely enough, although only Duncan was ever individually charged with any wrongdoing, the jury specifically set its sights on Temple. Unfortunately, and as noted in Andersen’s subsequent motion for a new trial, “the jury, in post-verdict interviews, expressed views indicating that they convicted Andersen for legal conduct.” United States v. Arthur Andersen, L.L.P., 2002 U.S. Dist. LEXIS 26871, at *3 (S.D. Tex. Sept. 11, 2002) [hereinafter “Andersen Trial II”].
The conviction was not a quick one. It took the jury 10 days and an Allen charge to reach a guilty verdict. The instruction over which they mulled read, in part: “The word ‘corruptly’ means having an improper purpose. An improper purpose, for this case, is an intent to subvert, undermine, or impede the fact-finding ability of an official proceeding.” Andersen Appeal, 374 F.3d at 293. In their deliberations, the jury questioned Temple’s communications from Chicago suggesting that the documents should be shredded even though an investigation of some sort was probable. In particular, they viewed as the smoking gun a single email by her counseling Duncan to revise a working draft of one of his memoranda to omit references to conversations he had with Enron executives about the company’s misleading statements in the balance sheet restatement issued on October 16. See Mary Flood, Court May Be Likely to Overturn Andersen Verdict, Houston Chronicle, Oct. 10, 2003; see also Andersen Appeal, 374 F.3d at 286. The facts just did not sit well with the jury. Finally, it found the prosecution met the burden to prove the firm had corrupt intentions when it advised its employees to destroy certain Enron-related documents. However, the prosecution never concluded that Temple should be charged with any crime.
The jury was unsettled by the course of conduct. Andersen was represented by Rusty Hardin, a tough and experienced advocate. He is the former assistant district attorney who prosecuted Karla Faye Tucker and who, while in private practice, worked on Kenneth Starr’s independent counsel team and provided a civil defense for Wade Boggs in a sexual harassment case. It seems troubling at best that the jury took a full 10 days of deliberation to decide whether anything actually illegal occurred. The issues that had been contested throughout the proceedings (namely, what exactly is “corrupt persuasion,” when does an“official proceeding” begin, and what was the relevance of Andersen’s good faith) now affected important details of the jury instructions and the jury’s application of the instructions to Temple’s email. Although the latter two issues concerning “official proceedings” and good faith are mostly beyond the scope of this report, the discussion below looks at whether Andersen should be held to have acted “corruptly.”
The prosecution team consistently argued to the courts and the jury that people violate § 1512(b)(2)(B) whenever they persuade others to destroy documents, while having both some “improper purpose” and at least some partial goal of making the materials unavailable for use in a proceeding. To the prosecution, anything fitting this loose definition amounts to the intentional, “corrupt” persuasion and inducement of others to destroy documents so as to preclude their availability for use in a later official proceeding. According to Andersen, the AUSAs rendered the term superfluous by maintaining that any intent to make a document unavailable in a proceeding (something already set forth as a separate element of the offense) also satisfies the “improper purpose” element because it obscures “the truth.” So, anyone who counsels another to destroy documents with even a partial aim of making the documents unavailable for some possible future proceeding is a criminal.
This broad interpretation is indeed troubling for civil lawyers and criminal defense attorneys who provide astute and appropriate advice to their clients about document retention policies. Rusty Hardin and the other members of Andersen’s defense team including Maureen E. Mahoney, the former Deputy Solicitor General and law clerk to Justice William Rehnquist, who argued the case before the Supreme Court, contended that the prosecution’s definition of the term “corruptly” is overbroad. A better definition would be that “a defendant acts corruptly where he ‘(1) uses an improper method, such as bribery or other unlawful means, to induce that person to act; or (2) persuades the other person to do something that they would not have had a lawful right to do had they been acting on their own.’ ” Andersen Trial I, 2002 U.S. Dist. LEXIS 26870, at *16–*17; see Andersen Appeal, 374 F.3d at 293. Rather than rendering the term superfluous, this interpretation gives it legally grounded content that is comprehensible to the ordinary person.
Rather than accepting Mahoney’s and Hardin’s approach, District Judge Melinda Harmon agreed with the prosecution’s broad interpretation. At least Judge Harmon had the opportunity to consider the cases that will be presented to the Supreme Court, and Andersen cannot be faulted for failing to preserve the issue for appeal. The same cases have been debated since before the jury instructions were given, especially as to the issue of what constitutes “corrupt persuasion” under the statute.
As to the element of “corrupt persuasion,” Andersen cited the majority opinion in United States v. Farrell, 126 F.3d 484 (3d Cir. 1997), in support of its position that the vague phrase “improper purpose” cannot adequately define “corrupt persuasion” because it adds nothing of substance to the interpretation.
In Farrell, the defendant was convicted of violating subsection 1512(b)(3), which establishes the punishment for those who corruptly persuade others to “hinder, delay, or prevent the communication” of information about possible federal crimes to law enforcement officers. 18 U.S.C. § 1512(b)(3). Farrell was a meat truck driver who was supposed to collect meat scraps for use in non-food products. Instead, he skimmed off some of the scraps and sold them to a local meat market for inclusion in hamburger meat provided to the public. When USDA investigators videotaped Farrell carrying a barrel of the meat into the market, he denied any wrongdoing, but upon seeing the same tape, the meat market cooperated with the investigation. United States v. Farrell, 126 F.3d at 486.
While the market ultimately faced no charges, Farrell was not so lucky. The investigators did not like being stone-walled. They found out that Farrell had called the market and said everyone involved “would be okay if they ‘stuck together.’ ” Id. He apparently tried to get the market to go along with a made-up story about the meat being for his dogs, and said “If you crucify me, I’ll have to turn around and crucify you.” Id. So the prosecution charged him not only with conspiring to sell adulterated meats and with selling the same, but also with witness tampering. Id., at 487.
Farrell pled to the meat-related counts but sought a bench trial as to the witness tampering count. The court found that the statement about crucifixion actually related to the parties becoming informers against one another, rather than some physical or other threat. It held, however, that although Farrell did not knowingly intimidate the owners of the market, he did “corruptly persuade” them to withhold information. Id.
On appeal, Farrell argued that in the absence of evidence of conduct like intimidation, the record simply did not support a finding of “corrupt persuasion.” A majority of the Third Circuit agreed. Writing the majority opinion, Circuit Judge Walter K. Stapleton, an extremely bright Reagan appointee who was only 36 when Richard Nixon first appointed him to a federal trial court , found the phrase “corrupt persuasion” to be vague. He observed that every statutory term, especially one stating an element of a crime, should be given meaning. Id. (citing Ratzlaf v. United States, 510 U.S. 135, 141 (1994)); see also Andersen Petition, at 20. A term should not be interpreted in a way that renders it superfluous. Unfortunately, the legislative history is unhelpful in determining any distinct meaning for the term. While the history reveals that “culpable conduct” can be prosecuted under the statute, it does not clearly define what “culpable conduct” means. Although Congress offered the examples of bribing someone in exchange for their silence or persuading them to lie as rendering a person “culpable,” that is the extent of the guidance. 126 F.3d at 488.
Unable to formulate a precise definition of corrupt persuasion, the Farrell panel contented itself to hold specifically that corrupt persuasion “does not include a noncoercive attempt to persuade a coconspirator who enjoys a Fifth Amendment right not to disclose self-incriminating information about the conspiracy to refrain . . . from volunteering information to investigators.” Id. More broadly, the court observed that the very “inclusion of ‘corruptly’ in § 1512(b) . . . necessarily impl[ies] that an individual can ‘persuade’ another not to disclose information to a law enforcement official with the intent of hindering an investigation without violating the statute, i.e., without doing so ‘corruptly.’ Thus, more culpability is required for a statutory violation than that involved in the act of attempting to discourage disclosure in order to hinder an investigation.” Id., at 489; see also Andersen Petition, at 19. Otherwise, the term “corruptly” would be devoid of content. Encouraging another person to assert their Fifth Amendment rights generally does not cross the line. If a person’s intent is a criminally culpable one, however, even types of persuasion that would ordinarily be legal, such as an attorney’s advising a client to take the Fifth, might be “corrupt persuasion” constituting obstruction of justice. See United States v. Cueto, 151 U.S. 620 (7th Cir. 1998) (Where an attorney-defendant had the intent to protect his own financial dealings with a client in relation to racketeering charges, “an individual’s status as an attorney engaged in litigation-related conduct does not provide protection from prosecution for criminal conduct [under the omnibus provisions of 18 U.S.C. § 1503].”), discussed in Can a Lawyer Be Prosecuted for Providing Traditional Legal Services? Two Steps Forward: RICO Report, The Champion (Aug./Sept. 2000).
Importantly, the Farrell panel rejected the notion that the phrase “motivated by an improper purpose” provides a helpful definition of the term, “corruptly.” Where, as in §1512(b), a statute specifically enumerates the sort of conduct that is improper and illegal, to construe the additional element of “corruption” as merely meaning “improper” is to render it meaningless. Id., at 490. The specific provision already defines what is improper, and construing “corrupt” as “improper” adds nothing.
Even so, the quality and degree of culpability amounting to “corruption” remains unclear. The Farrell panel specifically refrained from deciding whether a person persuading another (such as a non-co-conspirator) who has no privilege, thus preventing disclosure of the information, might evince the degree of “corruption” necessary to sustain a conviction under the statute. Id., at 490 n.3.
Two years later, another panel of the Third Circuit led by another Reagan appointee, Chief Judge Edward R. Becker, provided additional insight into the meaning of “corrupt” in § 1512. United States v. Davis, 183 F.3d 231 (3d Cir. 1999), cited in Legal Representation, Bad Judgment or Obstruction of Justice: No Bright Line: RICO Report, The Champion (July 2001). In Davis, New York Transit Police Officer Vincent Davis had an adversary named Richard Sabol, a career criminal who had once dated Davis’s wife. Davis was preoccupied with Sabol and used police resources to keep tabs on him. Id., at 236. When Davis learned Sabol was released early on long-term drug charges, he knew he was a cooperating informer.
Later, Sabol arrived back on the scene to infiltrate a local crime family known as the Giampa Crew, and he began to commit crimes with its rising star, Gennaro Vittorio. Worried for his own safety, Davis indirectly contacted Vittorio and mentioned that Sabol was probably an informer. Davis told Vittorio that he should “do something about it,” and asked him for a gun. Id., at 237. After distancing himself from Sabol, Vittorio began to suspect that Davis might have been wrong. In a later drunken conversation, Davis reaffirmed that his information about Sabol was reliable and suggested that Davis receive a gun. Id., at 238.
Ultimately, Davis was convicted of, among other things, two counts of witness tampering under § 1512(b)(3), and more specifically of corruptly persuading another to prevent the communication to a law enforcement officer of information about federal crimes. While affirming the convictions and finding that Davis’s intent to persuade Vittorio to have Sabol killed was a “corrupt” motive, the panel rejected the prosecution’s attempt to limit the Farrell court’s opinion to a ruling about the Fifth Amendment. The Davis panel found that the term “corrupt” must add more to the statute than a mere rule that co-conspirators can persuade each other to invoke a privilege.
In particular, the panel held that a jury instruction stating, “ ‘[t]he word “corruptly” means having an improper motive or purpose of obstructing justice’ . . . provides insufficient guidance to the jury, as anyone with the intent to interfere with an investigation has ‘improper’ motives.” Id., at 250 n.6. According to Chief Judge Becker, even “Davis’s malicious purpose to expose an informant is insufficient under Farrell to justify a conviction.” Id., at 250. Absent more, general malice that puts someone in harm’s way is not sufficiently culpable to be corrupt.
Yet the meaning of “corrupt” remained elusive to the court. Assuming that it must have some meaning and cannot be superfluous, Davis observed that there are different types of meaning it could have. The court drew a distinction between the transitive and intransitive meanings of “corruptly” in the statute. While the intransitive sense of “corruptly” is independent from the person who is persuaded and means something like “wickedly” or “immorally,” the transitive sense of corruptly varies in reference to the person persuaded, so that the meaning of “corruptly” is limited to instances in which the action works a corruption upon the other person. Concluding that the intransitive “wickedly” or “immorally” would render the statute too vague to withstand constitutional review, the Davis panel ruled that corrupt persuasion must amount to something akin to bribery, intimidation or some other despicable type of persuasion, rather than mere persuasion alone or simple persuasion motivated by ill will. Id., at 249–50.
The inspiration for this distinction between the transitive and intransitive uses of “corruptly” came from what might be the leading opinion helping to resolve the meaning of “corrupt.” In United States v. Poindexter, 951 F.2d 369 (D.C. Cir. 1991), a panel of the District of Columbia Circuit split along party lines. In thoughtful majority and dissenting opinions, the judges set forth insightful arguments that will likely receive the careful attention of the Supreme Court.
In the Iran-Contra Affair, former-National Security Advisor and Admiral John M. Poindexter was convicted on five felony counts, including two counts of lying to Congress in violation of 18 U.S.C. § 1505. Congress banned intelligence agencies from providing the Contras in Nicaragua with military assistance. Before Poindexter took office, Colonel Oliver North hatched a plan to help the Contras. Upon taking office, Poindexter learned of the plan but later wrote letters to Congress denying that anyone under his authority was violating the letter or spirit of Congress’s ban. Poindexter also enabled North to meet with the House Intelligence Committee to falsely reassure it that no aid was underway.Id., at 371. Relatedly, when a scandal developed over the exchange of arms with Iran for the release of American hostages in Lebanon, Poindexter oversaw the shredding of a Presidential “finding” acknowledging the deal. President Reagan denied any such exchange and said the arms were sent merely to improve relations. Id., at 372.
An indictment charged Poindexter with, among other things, lying to and misleading Congress in violation of § 1505. In relevant part, the section provides a 5-year prison term and/or a fine for “[w]hoever corruptly, or by threats or force, or by any threatening . . . communication influences, obstructs, or impedes or endeavors to influence, obstruct, or impede the due and proper administration of the law under which any pending proceeding is being had before any department or agency of the United States, or the due and proper exercise of the power of inquiry under which any inquiry or investigation is being had by either House . . . .” 18 U.S.C. § 1505. Needless to say, he was convicted.
On appeal, Poindexter argued “the term ‘corruptly’ renders the statute unconstitutionally vague as applied to his conduct.” United States v. Poindexter, 951 F.2d at 377. Writing for the majority, the conservative Judge Douglas H. Ginsburg, a former law clerk to Justice Thurgood Marshall and Harvard Law Professor, noted that if the term “corruptly” did not have some individual meaning, the statute would criminalize all attempts to influence congressional inquiries, which is absurd. Id., at 377–78. To comply with due process requirements, moreover, whatever meaning it has, it must be sufficiently definite so ordinary people will neither need to guess at its meaning nor be subject to arbitrary law enforcement. Id., at 378. Further, defining “corrupt” with other vague terms like “depraved,” “evil,” “immoral,” and “debased” does nothing to increase the definiteness of the conduct proscribed. Id., at 378.
To discern the meaning of the term, Judge Ginsburg carefully reviewed the legislative history and observed that references to force, bribery and intimidation favor a transitive reading of “corruptly,” in which the means of persuasion have a corrupting influence on the person who is persuaded. Since, at the time, neither the legislative nor the judicial history of the statute gave Poindexter notice that lying to Congress was the “corrupt influence” of Congress, the term was vague as applied. United States v. Poindexter, 951 F.2d at 384. In response, Congress amended the definitional provision of the obstruction chapter, namely § 1515(b), to criminalize lying to Congress. See Andersen Petition, at 18–19 n.19.
Importantly, the Poindexter majority remarked that a “ ‘subornation’ interpretation of § 1505, which would reach only a person who . . . influences another person (through bribery or otherwise) to violate a legal duty . . . may be useful as a description of the ‘core’ behavior to which the statute may constitutionally be applied,” even if the interpretation does not fully exhaust the scope of “corrupt” conduct. United States v. Poindexter, 951 F.2d at 385.
In dissent, Chief Judge Abner Mikva, a former member of the House of Representatives and law clerk to Justice Sherman Minton, found the majority’s fine-line distinction between transitive and intransitive uses of “corruptly” to be a confusing ruse glossing over Poindexter’s corruption. “It seems obvious to me,” he wrote, “that Poindexter ‘corruptly’ obstructed the congressional investigation when he lied to Congress.” United States v. Poindexter, 951 F.2d at 390 (Mikva, C.J., dissenting). Judge Mikva preferred the kind of intransitive interpretation under which people act “corruptly” when they violate a legal duty, regardless of whether they induce others also to violate a legal duty. Id., at 391. To him, this approach takes the words at their face value. The approach also makes sense of a fine point of legislative history from 1940, when an omnibus corrupt-influence clause was added alongside a subornation clause, suggesting that corrupt influence must include more than mere subornation of wrongdoing. Id., at 392.
By contrast, the Second and Eleventh Circuits arguably have concluded the element of “corruption” is satisfied whenever there is evidence of an “improper purpose.” In United States v. Thompson, 76 F.3d 442 (2d Cir. 1996), the defendant was a marijuana distributor in Moravia, New York. When a federal investigation into the drug network began, Everett Thompson, Jr. made the rounds among his buyers and co-conspirators, advising them not to talk to investigators. Id., at 447. For example, he arrived unannounced at the house of buyer William Wade on the morning of Wade’s grand jury testimony and advised him only to mention a couple of purchases, rather than the full extent of the buys and other activities. Id. Ultimately, Thompson was charged with drug and conspiracy offenses, as well as one count of witness tampering under § 1512(b) for his comments to Wade.
After a jury found him guilty, Thompson argued on appeal that, among other things, the statute is unconstitutionally vague. The panel’s analysis primarily concerned whether the term “persuasion” was adequately defined in a way that complied with both the First Amendment and due process. As to the kind of persuasion prohibited by the statute, Judge Amalya L . Kearse observed in a curt analysis, “[t]he inclusion of the qualifying term ‘corrupt’ means that the government must prove that the defendant’s attempts to persuade were motivated by an improper purpose.” Id., at 452. Since speech protected by the First Amendment is judicially deemed to be not corrupt and does not have an “improper purpose,” it does not run afoul of the statute. Further, the court opined that the corruption element provided enough of a scienter requirement so as to prevent “persuasion” from being unduly vague. Looking to prior precedent within the circuit, and without citing or discussing the Poindexter approach, the court rejected Thompson’s challenges to the statute without evincing any particular awareness of the related questions concerning the meaning of “corrupt.” Id., at 453.
Since then, a panel of the Eleventh Circuit including Judges Susan H. Black, James C. Hill and Albert J. Henderson has applied the Thompson court’s ruling to hold that the meaning of “corrupt” in § 1512(b) is not unconstitutionally vague if it means “with improper purpose.” See United States v. Shotts, 145 F.3d 1289, 1300 (11th Cir. 1998).
Even with all these precedents available to her in the Andersen case, District Judge Harmon unfortunately rejected the Poindexter/Farrell approach to the issue and instead held that the term “corruptly” simply means with improper purpose. She explained to the jury, “An improper purpose, for this case, is an intent to subvert, undermine, or impede the fact-finding ability of an official proceeding.” Andersen Appeal, 374 F.3d at 293. While Andersen asked for the inclusion of the phrase “for this case,” the prosecution argued for the inclusion of the verb “impede” so as to lower its hurdle before the jury.
Although Judge Harmon might be excused in her opinion for demonstrating proper deference to the Fifth Circuit precedent suggesting the result she reached, see Andersen Trial I, 2002 U.S. Dist LEXIS 26870, at *17–*18 (citing United States v. Partin, 552 F.2d 621, 641–42 (5th Cir. 1977)), the Fifth Circuit itself cannot be so easily excused for adopting this flawed analysis. Rather than improving upon Judge Harmon’s analysis, the Andersen appellate court provided, at best, a flat response to the issues.
In writing for the unanimous panel, the widely respected Judge Patrick E. Higginbotham looked only to the Farrell panel’s opinion, limited it narrowly to its facts without citing or distinguishing Davis, and failed even to cite Poindexter. Instead, in a footnote, the court simply referred to the Thompson-Shotts line of cases and wrote, “The majority of circuits interpreting the term as used in § 1512(b) have reached a similar result [to one reached by the Fifth Circuit in cases like United States v. Haas, 583 F.2d 216, 220 (5th Cir. 1978)], defining ‘corruptly’ in terms of improper purpose despite the dim light it casts upon its meaning, its circularity aside.” Andersen Appeal, 374 F.3d at 294. The court also superficially charged the Andersen lawyers with limiting their analysis of “corruption” to the use of corrupt means of persuasion (like bribery), which completely misses Andersen’s point that “corruption” could be defined both in terms of using illegitimate means (like bribery) and in terms of seeking illegitimate ends (like persuading someone to falsify documents).
Rather than confront the problems of vagueness and circularity, the court simply adopted the sort of I-know-it-when-I-see-it analysis that leaves the meaning of the law highly uncertain. The opinion essentially takes the everyone’s-doing-it approach, rather than reaching a deeper analysis of the majority and dissenting opinions so carefully set forth in Poindexter. Like “[t]he Fifth Circuit’s discussion of one of the evidentiary issues — whether the trial court erred in allowing the government to introduce evidence of two prior SEC proceedings against Andersen — [its analysis of the term “corrupt”] can most charitably be described as a reach to justify its affirmance[,] barely conceal[ing] the court’s condemnation of the overall conduct of Andersen.” Kathryn Keneally,
Destruction of a Business by the Destruction of Documents: White Collar Crime, The Champion (Jan./Feb2005). Worse, the court largely admits that it leaves the reader no better off in trying to clarify the constitutionally questionable vaguaries of the meaning of “corrupt.”
Following the trial court’s instructions in this case, if a jury were to find beyond a reasonable doubt that corporate officers persuaded someone to destroy a document with the intent to impairits availability in a future SEC investigation, 18 U.S.C. § 1512(b)(2), what does it practically add to say to the jury that it must also find the act was done with the intent to impede the fact-finding process? At least in the eyes of the court and the prosecution, what is an investigation but a “fact-finding” process? It goes without saying that intent is intent, and as a practical matter if the jury finds you impaired a document’s availability in the process, it will find that you have impeded the process.
The Andersen panel tries artfully to deny this point, saying “impede” means “ ‘to interfere with or get in the way of’ or to ‘hold up.’” Andersen Appeal, 374 F.3d at 295. This, however, is little help; if one has impaired the document’s availability, one has “held up” the fact-finding process on some level.
Upon these bare statutory terms, officers who partly desire to render documents unavailable for unknown future litigation and who knowingly persuade others to follow a periodic document destruction policy will be at risk of prosecution, even if their main aim is simply to clean up their shelves. This, of course, seems unrealistic because no self-respecting prosecutor will actually prosecute a case of “innocent” shredding. But the requirement of due process mandates that a person cannot be left to the arbitrary discretion of the prosecutor to decide what shredding is “corrupt” and what is not.
What’s At Stake
Bad cases make bad law, and the political climate surrounding the Enron scandal combined with Andersen’s history and the massive destruction of documents surely make this a bad case in which to decide whether the term “corrupt” should receive a more limited definition here than the Fifth Circuit was prepared to provide. With the massive fraud at Enron, the extensive cross-pollination between Enron and Andersen and the complicity of some Andersen partners in the fraud, it is difficult to deny that at least some element of the firm was corrupt. But a corrupt part of a business is not the same thing as a corrupt business as a whole, and even a corrupt business does not necessarily act corruptly in a given situation.
Andersen was a public accounting firm entrusted with the responsibility of providing the public market consumers with fair data upon which to assess companies and base investment decisions, and some people at the firm undeniably let the public down. Even if Andersen or some part of it was corrupt as an organization, however, that does not mean it actually committed the “corrupt persuasion” for which the jury found it guilty. It does not mean, moreover, that the entire firm deserves to be destroyed for the impermissible actions of a few people. Especially in these tough cases where emotions run high, the appellate courts are there to make the tough legal decisions even if they are unpopular. A failure to provide a thorough analysis of the issue in such an important case nearly amounts to an abdication of judicial responsibility.
In United States v. Davis, supra, the Third Circuit noted that, much like the prosecution in Andersen, “[t]he government has understandably attempted to find a law that criminalizes the conduct of [the] defendant . . . which is as reprehensible as it is unusual. In the process, however, the government has stretched several laws beyond their breaking points.” 183 F.3d at 236.
So far in Andersen, the prosecution has persuaded the courts to interpret § 1512 to include any persuasion revealing a so-called “improper purpose,” under a reading so broad that conduct earlier considered entirely legal and proper now might be considered criminal. Unless the Supreme Court provides a better definition in this muddled mess, defense lawyers and other professionals could be in danger of facing criminal charges for providing what earlier would have been seen as the most excellent and ethical sort of representation on behalf of their clients.
As detailed in an amicus curiae brief filed by the NACDL, Robert N. Weiner, a seasoned lawyer and former law clerk to Justice Thurgood Marshall, if the Supreme Court upholds the Fifth Circuit’s tortured understanding of witness tampering, the ramifications for businesspeople and criminal defense lawyers could be substantial. See February 22, 2004 Brief of Amicus Curiae NACDL in Support of Petitioner [hereinafter “NACDL Amicus Brief”].
Weiner fleshes out scenarios once mentioned on the pages of this magazine; namely, that “the statutes threaten to punish a wide range of legitimate conduct, see 18 U.S.C. § 1512. An aggressive or overzealous prosecutor could easily rationalize characterizing many aspects of the customary practice of law — informing a witness of their Fifth Amendment privilege against self-incrimination, attempting to quash subpoenas that might produce incriminating evidence, encouraging a witness to retract testimony the lawyer believes is erroneous, failing to voluntarily inform prosecutors of information they would want to know if they thought to ask for it — as forming the actus reus of the obstruction of justice statute . . . .” Legal Representation, Bad Judgment or Obstruction of Justice: No Bright Line: RICO Report, The Champion (July 2001).
The critical question now concerns the mens rea the Court will deem necessary to render a conviction legitimate. As for the definition of “corruptly,” courts might or might not agree whether Andersen vicariously had a criminally culpable and “corrupt” state of mind, given some evidence that its members sent emails back and forth evincing a keen awareness of the similarities between the formal complaints in Waste Management and Sunbeam and the proceedings in Enron. Perhaps Temple and the others really thought an imminent formal investigation was a foregone conclusion and they were simply “burning the files.”
The Supreme Court, however, must find language to articulate whatever it is that amounted to criminal intent. Otherwise, not only businesses, but also lawyers and other professionals are unfairly at risk. The idea that a lawyer might be charged under the statute for traditional representation is not merely a hypothetical scenario. Although not ultimately charged, Nancy Temple came under scrutiny and she might have honestly thought she was providing traditional representation. Other lawyers actually have been prosecuted for good faith representation. See Can a Lawyer Be Prosecuted for Providing Traditional Legal Services? Two Steps Forward: RICO Report, The Champion (Aug./Sept. 2000). Reliance upon such vague notions as “corrupt intent” to decide who will be and who will not be charged is unhelpful. For example, “[t]hough [the Seventh Circuit in United States v. Cueto, supra, 151 F.3d 620] note[d] that [attorneys’] ‘otherwise lawful conduct’ taken in defense of a client must be done with a ‘corrupt motive’ to be criminal, this provides little protection since such ‘corrupt motive’ is ill-defined and subject to an equally overbroad interpretation.” Can a Lawyer Be Prosecuted for Providing Traditional Legal Services? Two Steps Forward: RICO Report, The Champion (Aug./Sept. 2000).
This ethical dilemma imposed on lawyers by the interpretation adopted by the Fifth, Second and Eleventh Circuits is perhaps what is most immediately disturbing about it. As discussed by Weiner, lawyers have the ethical duty to provide the most zealous representation possible within the confines of the established laws and rules. Part of zealous representation for a criminal defense attorney is helping a client appropriately control the flow of information before or during the preliminary stages of an investigation. If the Supreme Court were to interpret the statute to subject lawyers to criminal charges whenever they make the prosecution’s task more difficult, it would undermine the attorney-client relationship and the client’s ability to trust in the confidentiality of his or her communications and interactions with the attorney.
The Supreme Court is not without an easy out on the issue. More than likely, it will reinterpret a provision in 18 U.S.C. § 1515(c) to exempt lawyers from liability for bona fide representation. Section 1515(c) provides, “This chapter does not prohibit or punish the providing of lawful, bona fide, legal representation services in connection with or anticipation of an official proceeding.” Until now, it seemed that the section already provided lawyers with a safe harbor. For example, in United States v. Kloess, 251 F.3d 941 (11th Cir. 2001), Branch D. Kloess was charged with obstructing justice under 18 U.S.C. § 1512(b)(3) when he knowingly enabled a client to use a false name in pleading guilty to a minor offense in state court. The ruse allowed the client to delay others’ discovery of the offense, which was a violation of his federal probation. Ultimately, the court held that when an AUSA charges a lawyer like Kloess with obstructing justice and the lawyer shows that he or she was licensed to practice law and was validly retained in a case, the prosecution must affirmatively prove that the representation was not lawful and bona fide. In so holding, the panel observed, “[s]ection 1515(c) provides a complete defense to the statute because one who is providing bona fide legal representation does not have an improper purpose.” Id., at 948; see NACDL Amicus Brief, at 14; see also Can a Lawyer Be Prosecuted for Providing Traditional Legal Services? Two Steps Forward: RICO Report, The Champion (Aug./Sept. 2000).
Andersen and the NACDL observe, however, that the provision’s requirement that the representation be “lawful” might undermine its protections. “Under the jury instruction upheld by the [Fifth Circuit], any advice rendered with the intent to ‘impede’ and investigation is ‘improper;’ that which is improper is ‘corrupt;’ and that which is corrupt is not lawful.” NACDL Amicus Brief, at 14.
Good faith, traditional representation is no longer safe. Only such representation as does not “impede” some investigation, which is essentially worthless for a criminal defense attorney, can take shelter in the provision. To protect traditional legal services, the Court must either read “lawful” out of the safe harbor or find a way to reinterpret it so that alleged violations of the chapter itself do not undermine its protections. It seems likely that the Court will accept the latter option, although this comes as little solace to the other professionals and businesspeople left exposed to a charge under the statute.
A Better Interpretation
So, aside from the attorneys’ safe harbor, how should the courts interpret the statute? Rather than running for cover and punting the question to the Supreme Court, the Fifth Circuit in Andersen should have taken a more careful look at Andersen’s argument and the Poindexter panel’s opinion. In both the Poindexter majority opinion and the dissent are the seeds of an acceptable solution.
As Rusty Hardin and Maureen Mahoney have argued throughout this case, the better interpretation of “corrupt” is one criminalizing conduct that either is independently illegal or that persuades someone else to commit a crime. For all the same reasons given by Judge Ginsburg, it makes sense that the core meaning of the witness tampering statute be one governed by reference to subornation of illegal conduct. To force, persuade or trick another into infecting the legal system with error or wrongdoing is surely, at its heart, to do so “corruptly.” At the same time, Judge Mikva is correct that it is equally corrupt to violate a law while persuading another to take actions in the legal process, even if the latter actions themselves are legal. To avoid circularity, the Court need only hold that “corruption” involves the breaking of some independent , non-circular law or rule.
For example, bribery or extortion are obviously corrupt means, prohibited elsewhere in the statutes, of obtaining a witness’s assistance even if such cooperation might, in all other respects, be legal and even if the witness would have helped the party anyway. See, e.g., Can Prosecutors Buy Testimony?: RICO Report, The Champion (May 2005). Judge Mikva was only wrong in that he apparently interpreted the majority opinion to hold that persuading others to break the law is all that constitutes “corruption.” In other words, people corrupt the legal process when either they or the people they influence engage in illegal activity.
This reading of “corruptly” in §1512(b) makes sense. What the courts must accept is that the term “corrupt” is used in this statute as first and foremost a legal, rather than a moral term. To corrupt the legal process is to act in violation of the law, rather than simply to be a bad or underhanded person in the eyes of one’s neighbors. By its plain meaning, “to corrupt” also means to introduce an outside or inimical influence into a system. What is inimical to the law is, quite simply, whatever is illegal, rather than primarily what is vaguely immoral or “wicked,” whatever that means.
Such a holding by the High Court would be preferable for several reasons. First, it accords with the principles of Due Process more fully discussed in the Poindexter/Farrell/Davis line of cases. A person would have adequate, clear notice in § 1512 that they cannot break the law or persuade others to do so, and, under traditional doctrines, they would be presumed to have adequate notice of the underlying, independent laws that they could not break. Similarly, the rule would accord with other traditional doctrines of inchoate crimes like conspiracy, which requires an intent to achieve either an unlawful objective or a lawful aim by unlawful means. See Walter R. Lafave & Austin W. Scott, Jr., Criminal Law § 6.4 (1986).
Second, the rule accords with the rule of lenity. The burden is upon Congress to clarify for ordinary citizens what conduct is permitted and what is prohibited. “Under th[e] rule [of lenity], when ambiguity in a criminal statute cannot be clarified by either its legislative history of inferences drawn from the overall statutory scheme, the ambiguity is resolved in favor of the defendant.” United States v. Pollen, 978 F.2d 78, 85 (3d Cir. 1992). Since the term “corruptly” is ambiguous, the ambiguity must be construed against Congress and in favor of criminal defendants. The narrower reading of “corruptly” offered here resolves the ambiguity in a way that is fair to criminal defendants.
Third, insofar as corruption amounts to “having an improper purpose,” the holding would allow the overruled circuits to save as much face and precedent as possible, even if much reasoning would have to go. The Court would be providing an acceptable definition of corruption, which equally provides an acceptable definition of the “improper purpose” that amounts to criminally culpable mens rea. The Second, Fifth and Eleventh Circuits would simply be left to reconstrue and amend their prior decisions to come into compliance with the new interpretation.
Picking Up The Pieces
Of course, this solution will not put Humpty Dumpty back together again. Regardless of the Court’s opinion, Andersen is gone for good. And while the Court will preoccupy itself, at least on the surface, with purely legal issues, the question remains what good a law serves that empowers some prosecutors to arbitrarily pick which companies and people to destroy with a mere charge, even before any conviction is returned.
Obstruction of justice is usually the appropriate charge when a prosecutor either cannot prove the accused committed any underlying offense or is mad that the accused lied to investigators. Neither sort of charge seems particularly independently compelling or noble. Although the prosecution team here ostensibly was a good one motivated more by professional pressure and sincere belief in the wrongdoing of its target, ultimately it inexplicably chose not to prosecute the corrupt individuals involved but rather to take down the entire firm. In so doing, it bent and stretched a statute almost beyond repair.
That is a dangerous policy. To give prosecutors the nuclear option when they cannot successfully fight more run-of-the-mill battles is bad policy at best. This is especially unfortunate in Andersen since under the interpretation that seems most defensible, Andersen simply did not tamper with witnesses. Temple and the others took actions they probably actually believed to be legal, and their actions mostly appear to be legal except under the strained definition of “corruption.” It is essentially uncontroverted that the document shredders actually complied with the law. Despite how underhanded or unpleasant the tactics of Temple and the others might seem to some, they could be considered lawful. The collateral damage in this case illustrates how far wrong a prosecution team can go when it sets its sights on a target, even a respected, powerful and well established one.
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