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Supreme Court Justices Discuss Among Themselves If Sarbanes-Oxley Applies to Rioting

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h/t to the tipster who sent this over and also totally made my day. I only wish this story hadn’t come out on the same day we already published a Trump-adjacent article. Also warning: this is long.

Wanting nothing more than to never read political news in my life, I’ve been out of the loop on the post-storming of the Capitol aftermath. It has apparently made its way to the Supreme Court and ridiculously enough, justices are now debating whether or not January 6 participants can be charged with Sarbanes-Oxley violations.

Were some people secretly shredding government documents while the rest of the party was breaching barricades and causing mayhem? No. Not to our knowledge anyway. The government’s position is that January 6 rioters disrupted Congress affirming presidential election results, that this process of affirmation falls under “an official proceeding,” and thus January 6 rioters obstructed or impeded said official proceeding under 18 U.S.C. § 1512. The section of Sarbanes-Oxley at issue reads:

TITLE XI—CORPORATE FRAUD ACCOUNTABILITY

SEC. 1101. SHORT TITLE.
This title may be cited as the ‘‘Corporate Fraud Accountability Act of 2002’’.
SEC. 1102. TAMPERING WITH A RECORD OR OTHERWISE IMPEDING AN OFFICIAL PROCEEDING.
Section 1512 of title 18, United States Code, is amended—
(1) by redesignating subsections (c) through (i) as subsections (d) through (j), respectively; and
(2) by inserting after subsection (b) the following new subsection:
‘‘(c) Whoever 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.’’

Defendant Joseph W. Fischer, a former police officer, wants the obstruction charge thrown out and so the highest court of the United States debated today if the Sarbox “obstruction” clause applies in Fischer v. United States.

Justice Thomas wasn’t having it.

NYT writes:

Justice Clarence Thomas, who returned to the bench after an unexplained absence on Monday, asked whether the government was engaging in a kind of selective prosecution. “There have been many violent protests that have interfered with proceedings,” he said. “Has the government applied this provision to other protests?”

Justices Samuel A. Alito Jr. and Neil M. Gorsuch asked questions along similar lines.

But the justices mostly considered whether a provision of the Sarbanes-Oxley Act, enacted in the wake of the collapse of the energy giant Enron, covers the conduct of a former police officer, Joseph W. Fischer, who participated in the Capitol assault, on Jan. 6, 2021.

And a WSJ opinion piece credited to the Editorial Board published yesterday says:

Sarbanes-Oxley, though? Congress enacted Sarbox, as it’s often called, in the wake of Enron and other corporate scandals. One section makes it a crime to shred or hide documents “corruptly” with an intent to impair their use in a federal court case or a Congressional investigation. That provision is followed by catchall language punishing anybody who “otherwise obstructs, influences, or impedes” such a proceeding. Now watch, as jurists with Ivy degrees argue about the meaning of the word “otherwise.”

Here we go again.

In Mr. Fischer’s view, the point of this law is to prohibit “evidence spoliation,” so the “otherwise” prong merely covers unmentioned examples. The government’s position is that the catchall can catch almost anything, “to ensure complete coverage of all forms of corrupt obstruction.” The feds won 2-1 at the D.C. Circuit Court of Appeals.

Judge Gregory Katsas filed the vigorous dissent. The government “dubiously reads otherwise to mean ‘in a manner different from,’ rather than ‘in a manner similar to,’” he argued. The obstruction statute “has been on the books for two decades and charged in thousands of cases—yet until the prosecutions arising from the January 6 riot, it was uniformly treated as an evidence-impairment crime.”

Did the government not learn its lesson when it tried to charge the KPMG/PCOAB cheaters with wire fraud? The KPMG 5 case that got bazillions of headlines a couple years ago hinged on the determination that the confidential PCAOB audit inspection list was “intangible property” therefore the people at KPMG and formerly of the PCAOB deserved wire fraud charges for stealing and sharing it. Try again. The convictions of Cynthia Holder, Jeffrey Wada, David Middendorf, Thomas Whittle, and David Britt have all been thrown out.

Law Firm Zuckerman Spaeder has a compelling (and long) article about applying 18 U.S.C. § 1512 to the January 6 cases. I’m putting this at the end of the article so you guys are less likely to complain about having to scroll past it.

As discussed below, January 6 cases have exposed a significant lack of clarity around the meaning of “corruptly.” Why should white collar defense lawyers care? For one thing, they might find themselves in the position of representing a defendant charged with acting “corruptly” under § 1512(c)(2). Before its time in the spotlight for its use in January 6 cases (including Mr. Trump’s), § 1512(c)(2) figured prominently in white collar cases, such as the prosecution of a lobbyist involved in the Jack Abramoff scandal for allegedly causing the submission of misleading information to a Senate committee and a grand jury. United States v. Ring, 628 F. Supp. 2d 195, 204 (D.D.C. 2009). For another, the statutory language of a “corrupt[]” mens rea is not limited to § 1512(c)(2). Far from it: “there are around 50 other references to ‘corruptly’ in Title 18 of the U.S. Code.” United States v. Fischer, 64 F.4th 329, 341 (D.C. Cir. 2023) (opinion of Pan, J.). Many of these “corruptly” statutes might well ground the sorts of charges even more likely to cause a client to turn to a white collar attorney. These include corruptly obstructing a regulatory examination of a financial institution, 18 U.S.C. § 1517; bribery involving public officials, 18 U.S.C. § 201(b); offering gifts in connection with procuring loans or influencing other business of financial institutions, 18 U.S.C. § 215(a); and impeding the FDIC when acting as conservator/receiver, 18 U.S.C. § 1032(2), (3).

Courts analyzing the meaning of “corruptly” as used in January 6 cases have settled upon three possible definitions. As Judge Pan summarized in Fischer, past decisions have suggested that “corruptly” might mean: 

  • “[W]rongful, immoral, depraved, or evil.” See 64 F.4th at 340 (opinion of Pan, J.) (quoting Arthur Andersen LLP v. United States, 544 U.S. 696, 705 (2005). 
  • Acting “with a corrupt purpose, through independently corrupt means, or both.” Id. (internal quotation marks and citation omitted). This is the interpretation the government urged in Fischer.1  
  • Acting “voluntarily and intentionally to bring about either an unlawful result or a lawful result by some unlawful method, with a hope or expectation of either financial gain or other benefit to oneself or a benefit of another person.” Id. (quoting United States v. Aguilar, 515 U.S. 593, 600 (1995) (Scalia, J., concurring and dissenting in part)).   

To Judge Pan’s list, we might add a fourth potential definition, which at least in the past has been the position of the United States Department of Justice: “The word corruptly simply means with a bad or evil purpose. It is also frequently defined to mean the same thing as willfully, and thus to connote specific intent.”

And here’s a paper from Northwestern’s School of Law’s Journal of Criminal Law & Criminology that suggests prosecutors are misusing and courts misinterpreting the Sarbanes–Oxley obstruction of justice statute, 18 U.S.C. § 1512(c)(1). This thing is 12 years old.

A proper statutory construction that explores the statute itself, related provisions, canons of construction, the legislative history, and the investigatory process at the Securities and Exchange Commission shows that Congress could not have intended the limitless sweep of the statute that some courts and prosecutors have fashioned. In fact, an expansive definition of the terms within § 1512(c)(1) carries with it a host of unintended and unwanted results. Specifically, such an interpretation is at odds with congressional intent, creates absurdities and unfair sentencing disparities, renders the statute void for vagueness, and encourages judicial and executive legislating. Courts should recognize and limit efforts to expand § 1512(c)(1)’s reach.

Congress could not have been clearer about the behavior it intended to capture under the Sarbanes–Oxley criminal provisions. The Act’s preamble explicitly states that the bill was designed to “protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to securities laws.” Although some courts may give short shrift to an Act’s preamble, it nonetheless represents the very first words out of Congress’s mouth about the purpose and scope of the Act. In this case, the preamble explicitly refers to the limited types of behavior captured by the criminal provisions in Sarbanes–Oxley.

Ya know, like Big 5 accounting firms shredding documents.

Further reading for the five of you who didn’t hit the back button long ago:

  • Supreme Court Appears Skeptical of Using Obstruction Law to Charge Jan. 6 Rioters [New York Times]
  • Supreme Court casts doubt on obstruction charges against hundreds of Jan. 6 rioters [Los Angeles Times]
  • The Jan. 6 Riot Reaches the Supreme Court [WSJ Opinion]

From the Going Concern archive:

4 thoughts on “Supreme Court Justices Discuss Among Themselves If Sarbanes-Oxley Applies to Rioting

  1. Yeah, applying Sarbanes-Oxley in this case is bullshit. And I’m the biggest Trump hater I know. I guarantee that no one hates Trump more than I do.

    I blame Congress for not foreseeing that a sitting president might refuse to accept election results and send an angry mob to the Capitol to prevent the certification of the duly-elected winner. This lack of foresight has resulted in a lack of available options to throw the book at people who smeared their own feces on the Capital walls on 1/6.

  2. > Congress enacted Sarbox, as it’s often called,

    I have never heard anyone call it anything other than SOX. Am I out of the loop on “Sarbox”?

    1. Nah you’re right, whoever wrote that is the one out of the loop. I recall the media and non-professionals using it for the first few years after it was enacted, practitioners not so much. We used it a few times casually but not since 2012.

      Google Trends shows “Sarbox” dropped off in the early 00s:

      Google searches for

      It’s SOX.

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