A Fish Tale: The Supreme Court Clarifies the Obstruction Clause in the Sarbanes Oxley Act

For centuries, people have embellished the truth to suit their needs or stroke their egos when it comes to the spoils of the hunt. A recent SCOTUS case (Yates v. United States) started with a subtractive twist when a commercial fisherman cited by a federal agent for an undersized catch returned the runty loot to its watery source on his way to shore to evade prosecution.

When Captain John Yates and his crew were fishing for grouper in the Gulf of Mexico, they were spotted with a haul that included dozens of fish under the 20 inch legal minimum and ordered back to port. Prosecutors determined that when Yates had his men toss the undersized fish back, he effectively had destroyed evidence in a federal investigation. Prosecutors relied upon a section of the Sarbanes-Oxley Act devised to prevent obstruction most closely associated with records and documents.

Following a jury trial, Yates was found guilty of violating 18 U.S.C. §1519, the “anti-shredding” provision of the Sarbanes-Oxley Act. Such section provides: “Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration [of federal law] shall be fined under this title, imprisoned not more than 20 years, or both.” Yates’ conviction, upheld by the Eleventh Circuit, hinged on having destroyed a “tangible object,” the term which, the lower court concluded, includes a fish. In its 5-4 decision, the Supreme Court clarified the application of the term “tangible object” to be read in a more contextual manner – one that attempts to consider the legislative intent of the Sarbanes-Oxley Act. Justice Ginsburg, joined by Chief Justice Roberts, Justice Sotomayor, and Justice Breyer, concluded that “‘tangible object’ in §1519 is better read to cover only objects one can use to record or preserve information, not all objects in the physical world.” 574 U.S.___ (2015) (opinion of Justice Ginsburg).

Beyond narrowing the definition of what is in essence “obstruction of justice” under the so-called Enron law, this case sheds an interesting light on how prosecutors exert their considerable discretion in making charges. Was assignment of a financial fraud statute for this type of infraction intended to increase the chances of a guilty plea? Many great legal minds, including Justice Elena Kagan in her dissent, consider §1519 “a bad law—too broad and undifferentiated, with too-high maximum penalties, which give prosecutors too much leverage and sentencers too much discretion.” However, the increasing tendency of prosecutors to shop far and wide for creative angles puts the onus on astute defense counsel to think outside of the box.

Think what you will about the commercial fisherman’s actions – and as Justice Kagan pointed out that he is “no less blameworthy” – this case’s downfall resulted more from the prosecutor’s choice to charge Yates under this particular obstruction clause, rather than one more fitting to the crime. From the standpoint of the legal defense team, this overreach opened a door. The defense team’s ability to unpack the relevance of the statute’s clause was pivotal.

Should you be in need of clever defense, whether you have already been charged, are being investigated, or are facing regulatory challenges, we have the experience and resources to protect your freedom, your livelihood and your long-term best interests.

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