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The reversal of investment banker Frank Quattrone’s obstruction of justice conviction by the 2d U.S. Circuit Court of Appeals last week is anything but a reversal of fortunes for federal prosecutors in future cases, according to experts. The white-collar defense bar should take note of broader language adopted in the Sarbanes-Oxley Act of 2002 that pushes the law into a new area of anticipatory obstruction. The change eliminates the need for prosecutors to show that a defendant knew of a specific investigation prior to the shredding of documents, according to Patrick Robbins, former head of securities fraud prosecution in the San Francisco U.S. attorney’s office. The new law criminalizes pre-emptive actions taken by defendants to cover their tracks even before an investigation, said Robbins, now with the San Francisco office of New York-based Shearman & Sterling. Quattrone was charged under laws predating Sarbanes-Oxley. The 2d Circuit, relying on the Supreme Court’s reversal last year of an obstruction verdict against accounting giant Arthur Andersen LLP, voided Quattrone’s conviction on two counts of obstruction and one of witness tampering. The circuit said that faulty jury instructions had failed to inform jurors that they must find that Quattrone knew of, and had criminal intent to interfere with, the Securities and Exchange Commission investigation of stock allocations in initial public offerings when he sent an e-mail urging underlings to “cleanup” their files. In the Andersen and Quattrone cases “the biggest issue was nexus; the need to know what you’re destroying was likely to have an effect on the proceeding,” said Robbins. Now the statute in 18 U.S.C. 1519 says that it is sufficient if the act is done “in contemplation of” an investigation, and Section 1512 eliminates the requirement that a defendant “corruptly” persuade another to destroy documents. It is replaced with the word “knowingly,” a less nebulous and confusing term for jurors. In changing the language, Senator Patrick Leahy, D-Vt., then-chairman of the Senate Judiciary Committee, made it clear in 2002 Senate statements that the intent element was broadened by the “in contemplation of” language in the anti-shredding law to cover early criminal conduct. Leahy said that drafters of the new law intended it to apply broadly to document destruction and to be bound only by the element of intent. Section 1519 was drafted to avoid the requirement that a defendant know about a proceeding against him. “This statute is specifically meant not to include any technical requirement . . . to tie the obstructive conduct to a pending or imminent proceeding or matter by intent or otherwise,” he said at the time. But not everyone agrees on how courts will interpret the new obstruction language in Sarbanes-Oxley. “What is going to be viewed as obstruction is still largely up in the air in white-collar cases,” said Peter Henning, a professor at Wayne State University Law School in Detroit who teaches corporate fraud and white-collar crime. “These things will remain very difficult for the government to win,” he said. The cases center on intent, and that doesn’t change for the government, Henning said. Norman Abrams, a professor at the University of California, Los Angeles School of Law who specializes in federal criminal law and terrorism said, “I think the court is reading the obstruction statute to impose a burden on prosecutors . . . to ensure people destroying documents really are doing something evil at the time.” Abrams said that the high court seemed hostile to these prosecutions in the Andersen decision because obstruction appears to be a surrogate charge, not one related to what prosecutors really think people are guilty of, such as fraud. William Goodman, white-collar defense lawyer with San Francisco’s Topel & Goodman, said that as a practical matter, the court rulings will cause the “government to be more honest about how they present a case. They can’t get a conviction based on destruction of documents unless it is tethered to knowledge.” Robbins’ warning is not the first. A Cornell Law Review article in 2004, before the Andersen decision, cautioned that Sarbanes-Oxley had created the crime of anticipatory obstruction in the Section 1519 anti-shredding statute. Robbins said that there are no reported cases of any courts grappling with this new language yet, but he warned that Leahy’s comments indicate that he meant to cover even theoretical proceedings.

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