Day before yesterday, the Supreme Court heard oral argument on November 5, 2014 in the case of Yates v. United States. The Supreme Court is being asked to answer the question: “Whether petitioner’s efforts to thwart a government investigation by dumping undersized fish at sea violated the criminal prohibition on “knowingly … destroy[ing] … [or] conceal[ing] … any … tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States,” 18 U.S.C. 1519. Although the Sarbanes-Oxley Act, when enacted, was concerned with corporate fraud, the Yates case reflects that it may be used to sweep in all kinds of trivial forms of noncompliance–and subject an individual to felony prosecution. For example, Justice Breyer has observed that the Sarbanes-Oxley Act could apply to throwing away an EPA questionnaire about a company’s waste recycling activities. The Supreme Court’s ruling in Yates likely will have some impact on company’s routine records management practices.
John Yates, a Florida commercial fisherman, was prosecuted under the criminal provisions of the Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, § 802(a), 116 Stat. 800, for allegedly destroying evidence that he had caught undersized red grouper, a fish protected by federal regulations promulgated by the National Marine Services agency. Under the law, he was subject to a maximum of 20 years federal imprisonment, but in the end, the presiding judge sentenced him to 30 days. He is being defended by the Tampa, Florida Federal Defenders Office.
The Supreme Court was clearly troubled by the government’s zeal in using the Sarbanes-Oxley Act, which was understandably enacted in the wake of the Enron collapse, to prosecute something other than the destruction of financial records involved in a federal investigation. The government argued that since the Sarbanes-Oxley Act addresses the destruction of a “tangible object”, this provisions clearly applies to undersized fish. The defense argued before the court that “everything about this case is absurd”, and Justice Scalia stated “What kind of mad prosecutor will try to send this guy up for 20 years?” The government replied that this prosecution was consistent with the DOJ’s charging policy, which also created considerable comment by the Justices.
The amicus briefs made the point that this case illustrates the threats embedded in the over criminalization of federal regulation — and there may be as many as 300,000 rules on the books affected by this use of the Sarbanes Oxley Act — a claim which may be somewhat dubious.