In the wake of the Enron collapse, the WorldCom fiasco, and the various other corporate scandals that occurred in the late 1990s, Congress enacted the Sarbanes-Oxley Act, which made it a crime to knowingly destroy or conceal “any record, document, or tangible object” with the intent to obstruct an investigation into potential wrongdoing. Seems straightforward enough, right? A statute aimed at preventing cover-ups of corporate fraud? Well, maybe not. It seems the statute is also being used to pursue all manner of fishy business.
The U.S. Supreme Court recently tackled argument in the case of Florida fisherman John Yates v. United States. In a bit of turnabout, it was Yates who got caught this time—by a fish-and-wildlife officer who found Yates had 72 undersized grouper on his boat. He issued Yates a civil citation and told him to bring the fish back to port. According to prosecutors, Yates played hard of herring and instead dumped the undersized fish, replacing them with others that met the size limit. A jury convicted Yates of a Sarbanes-Oxley violation—destroying evidence on porpoise—and he got 30 days in the tank, plus three years of supervision.
Now, Sarbanes-Oxley carries with it some pretty harsh penalties. It seems it was meant for the slippery eels and the real sharks, not small fry like Yates. That motivated Justice Antonin Scalia to carp about the wisdom of the prosecution. Justices Kennedy, Alito, and Breyer also seemed ready to school the U.S. Attorney. Nevertheless, Justice Department lawyer Roman Martinez pointed out that it was not the Court’s plaice to decide that obstruction-of-justice should be applied differently between minnows and whales. Justice Kagan also pointed out that Sarbanes-Oxley’s language does not necessarily contemplate corporate fraud as its sole target.
The Court will mullet over for now and decide whether Yates is on the hook or will be the one that got away. A decision is expected in the summer of 2015.
Tip o’ the hat to Mary Flood.