X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Even the most na�ve of witnesses typically understands that lying to a prosecutor, FBI agent or regulator is a crime. What even sophisticated witnesses don’t tend to know, however, is that lying to private attorneys can also lead to criminal prosecution. Recent developments confirm that the U.S. Department of Justice views the obstruction of justice laws as reaching conduct that many had considered to be without criminal consequence. In September 2004, a grand jury in the Eastern District of New York indicted Sanjay Kumar and Stephen Richards, the former chief executive officer and head of worldwide sales at Computer Associates International Inc. Five months earlier, prosecutors had persuaded three other Computer Associates executives to plead guilty to a novel obstruction of justice charge, predicated on statements the executives had made to company counsel in the course of an internal investigation. Now the government had advanced that same theory to indict Kumar and Richards, both of whom seemed prepared to challenge it. The indictments alleged that Kumar and Richards had violated 18 U.S.C. 1512(c)(2)-an obstruction statute enacted in the wake of the Enron scandal-by lying to lawyers hired by Computer Associates after the U.S. attorney’s office and the U.S. Securities and Exchange Commission (SEC) had launched investigations. According to the indictment, when the defendants were interviewed by the lawyers, they “knew, and in fact intended, that the Company’s Law Firm would present [Kumar's and Richards'] false justifications to the United States Attorney’s Office, the SEC, and the FBI so as to obstruct and impede” the government’s ongoing and publicly disclosed investigation of Computer Associates. Given that internal investigations-and the practice of sharing information gathered during those investigations with federal regulators and prosecutors-have become a standard practice, the implications of the Computer Associates indictments were significant. The possibility that lying to an attorney, hired by a defendant’s employer and acting in a purely private capacity, could lead to criminal charges contributed to growing concern within the criminal defense bar that the government was effectively transforming company lawyers into an arm of the state. Two recent developments-a ruling on Kumar’s and Richards’ challenge to the obstruction of justice counts and an indictment in another case, containing a similar obstruction count, in the Southern District of Texas-confirm that this issue remains very much alive. As prosecutors increasingly rely on internal investigations to gather evidence, employees should be aware that statements made to company counsel could, under certain circumstances, expose them to criminal prosecution. The decision in ‘Kumar’ Kumar and Richards were charged with obstruction of justice under 18 U.S.C. 1512(c), a provision added to the obstruction laws in 2002 by the Corporate and Criminal Fraud Accountability Act, which was enacted as Title VIII of the Sarbanes-Oxley Act, Pub. L. No. 107-204 (2002). Section 1512(c) provides that “[w]hoever corruptly (1) alters, destroys, mutilates, or conceals a record, document, or other object, or attempts to do so, with the intent to impair the object’s integrity or availability for use in an official proceeding; or (2) otherwise obstructs, influences, or impedes any official proceeding, or attempts to do so, shall be fined under this title or imprisoned not more than 20 years, or both.” Subsection 1512(c)(2), it should be noted, criminalizes obstruction and attempted obstruction of “any official proceeding.” Section 1515(a)(1) defines “official proceeding” for these purposes as, among other things, “a proceeding before a judge or court of the United States . . . or a Federal grand jury” and “a proceeding before a Federal Government agency which is authorized by law.” Both men moved to dismiss the obstruction counts on the ground that there was an insufficient “nexus” between their alleged statements to the company’s attorneys and an official proceeding. (The defendants also argued that � 1512(c)(2) applies only to tampering with documents and physical evidence, an argument not addressed in this article.) Their argument drew on the U.S. Supreme Court’s decision in U.S. v. Aguilar, 515 U.S. 593 (1995), in which the court held that the defendant had been improperly convicted under a similar obstruction statute, 18 U.S.C. 1503, because there was no evidence that his statements to an FBI agent, at the time they were made, would likely be presented to a grand jury. The conviction was infirm, the court held, even though the defendant was aware that a grand jury was sitting, and even if the defendant had intended that his statements to the agent would obstruct justice. Without the requisite “nexus” between the defendant’s statements and a judicial proceeding-which the Supreme Court defined as a showing that the defendant knew that the “natural and probable effect” of his statements would be to interfere with the proceeding-the statute had not been violated. Id. at 599. Kumar and Richards argued that because the indictment alleged (in their view) only that they had “made false oral statements to [Computer Associates'] attorneys with the knowledge that those statements might be recounted in an official proceeding and thereby impede it,” the prosecution’s theory, like the theory advanced in Aguilar, was “legally invalid” and therefore should be dismissed. The government made three arguments in response. First, it claimed that it was “highly doubtful” that Aguilar‘s nexus requirement applied to � 1512(c)(2). Congress had enacted the provision, the government argued, “to eliminate ‘burdensome proof requirements’-including the nexus requirement-in obstruction prosecutions.” Second, the government contended that even if the nexus requirement applied, it is not an element of the offense and thus need not be alleged in the indictment. Finally, the government argued that even assuming that nexus had to be alleged in the indictment, the counts against Kumar and Richards did allege facts sufficient to support the indictment: According to the government, the indictment alleged, for instance, that the defendants “knew and intended” that their misrepresentations would be passed on to participants in the government investigations, including grand jurors and SEC staff members. The court’s ruling This past February, the district court denied the defendants’ motions. See Order Denying Motion to Dismiss Counts Six and Seven of the Superseding Indictment as to Sanjay Kumar, Stephen Richards, U.S. v. Kumar, No. 04-cr-846, slip op. (E.D.N.Y. Feb. 21, 2006). The district court appeared to accept, at least implicitly, the defendants’ view that � 1512(c)(2) did contain a nexus requirement, and that that nexus had to be alleged in the indictment. Nonetheless, the court concluded that because the indictment alleged that the defendants “knew” their statements “would have the effect of obstructing and impeding Government investigations,” it was legally sufficient and that a challenge would therefore have to await a trial. Id. at 9. In reaching this conclusion, the court pointed to several paragraphs of the indictment in which the government had alleged that Kumar and Richards had made certain misrepresentations, not merely to company lawyers, but directly to representatives of the SEC, FBI and U.S. attorney’s office. The court thus allowed the case to proceed, but did not specifically address whether the defendants could be held accountable under � 1512(c)(2) for those statements they had made solely to company counsel. Two months later, in April 2006, Kumar and Richards pleaded guilty to all counts in the indictment. ‘U.S. v. Singleton’ Following the indictments in the Computer Associates case, prosecutors in the Southern District of Texas charged Greg Singleton, an employee of El Paso Corp., with violating � 1512(c)(2) based on statements he made to El Paso’s outside counsel in the course of an internal investigation. See U.S. v. Singleton, No. 4:04-cr-514-1 (S.D. Texas filed Nov. 17, 2004). El Paso had been served with subpoenas from a federal grand jury and the Commodities Futures Trading Commission (CFTC), and had received a data request from the Federal Energy Regulatory Commission (FERC). Each of these sought information about natural gas trades entered into by the company’s traders. Soon thereafter, El Paso retained a law firm to determine whether traders at the company had been misreporting gas trades to industry publications in order to manipulate the price of natural gas-an issue that had apparently become the focus of the CFTC and FERC investigations. The law firm interviewed Singleton. During this interview, the indictment alleges, Singleton “did not disclose, falsely denied, and otherwise concealed that he had provided false information to trade publications.” Second Superseding Indictment, at Count Ten � A.14. The indictment further claims that Singleton “believed that El Paso’s Outside Lawyers would inform government agencies of his statement during the interview.” According to the indictment, El Paso did in fact give a memorandum summarizing Singleton’s interview to the CFTC, FERC and U.S. attorney’s office. The Singleton indictment does not claim that Singleton “intended” or “knew” that his statements would be supplied to a government agency conducting an official proceeding, but it asserts that he “believed” they would be, and thus alleges a link between his interview with company counsel and an official proceeding similar to that alleged in Kumar. As of this writing, Singleton has yet to challenge the government’s theory that this allegation is sufficient to support an indictment under � 1512(c). The future of 1512(c)(2) Until an obstruction case containing allegations such as those in Kumar and Singleton reaches trial, it will be unclear what lasting effect the government’s use of � 1512(c)(2) will have on internal investigations and white-collar prosecutions. Given the limited grounds for challenging an indictment, arguments regarding “nexus” will be better made at trial, when the strength of the government’s evidence is at issue and the question of what the government must prove is more closely considered by the courts. If, however, the government successfully argues that it does not have to prove, with respect to � 1512(c)(2), that the defendant knew that the “natural and probable effect” of speaking with his employer’s lawyer was to obstruct an official proceeding (i.e., that there was a “nexus”), the statute may have a dramatic impact on the government’s ability to oversee and influence internal investigations. Without a nexus requirement, defense counsel will be forced to develop alternative arguments for a narrow construction of the word “corruptly,” which is the only adjective in � 1512(c)(2) that describes the mens rea element limiting the provision. The jurisprudence interpreting “corruptly” is not consistent, and will therefore be cold comfort to employees who want to understand their potential criminal exposure before they speak with company counsel, or, for that matter, with fellow employees who have agreed to provide assistance to the government as cooperating witnesses. For now, what is clear is that the Department of Justice appears willing to test the limits of � 1512(c)(2). This is no surprise. With increasing frequency, prosecutors and regulators rely on the work of privately retained internal investigators to supplement the government’s own efforts. Yet those internal investigators have neither the power to subpoena nor the power to prosecute perjurers. For a prosecutor or regulator to rely on an internal investigation, he or she must be able to trust the statements that are made to counsel conducting the investigation. The government’s extension of � 1512(c)(2) to false statements given to internal investigators is one way to ensure that the gathered information is indeed trustworthy. Of course, if the statute is applied too aggressively, and is deemed to capture conduct that is, at least in the defendant’s mind, only tenuously connected to an official proceeding, the government’s approach may ultimately prove self-defeating. The indictment of an employee based on statements to his or her employer’s lawyers works to elide the distinction between private counsel, retained to serve the interests of the company, and governmental bodies, charged with enforcing criminal and regulatory laws. If employees believe that they cannot speak freely with company counsel, they may-even at the risk of losing their jobs-choose to speak to no one at all. Timothy P. Harkness is a partner, and Darren LaVerne is an associate, in the litigation department of New York’s Kramer Levin Naftalis & Frankel.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.