Editor: One of the most significant cases to focus on the former language of the obstruction statute was the criminal case against Arthur Andersen which triggered the collapse of that firm. The case was recently argued before the Supreme Court. The purpose of this interview is to permit our readers to benefit from the insights that you gained from a review of the transcript as well as get your thoughts about how corporate counsel can best protect their corporate client against obstruction charges under the revised statute. First, could you describe your background as a prosecutor?
Ray: I took my first job as a federal prosecutor in the U.S. Attorney's office in the Southern District of New York, just after Rudolph Giuliani's departure from that office. I tried a number of cases ranging from narcotics trafficking to organized crime and gang violence.
In September 1995, I joined the staff of Independent Counsel Donald C. Smaltz in the investigation of former Secretary of Agriculture Michael Espy. In a related prosecution of Sun Diamond Growers, I argued the case involving the federal gratuities statute on behalf of the government before the Supreme Court in March 1999. I completed my responsibilities in the Espy investigation in April 1999 and then joined Independent Counsel Kenneth W. Starr's investigation as his Senior Litigation Counsel to lead the prosecution of Webster Hubbell, the former Associate U.S. Attorney General. One issue in that prosecution, involving "act of production" immunity, eventually was decided by the Supreme Court in a case brought by my office. In October 1999, after Ken Starr resigned, I was appointed Independent Counsel and served in that position until March 2002. I have been in private practice with Pitney Hardin since June 2002.
Editor: What did you accomplish in your role as Independent Counsel?
Ray: I hope that what I accomplished, at least in part, was the restoration of the public's confidence in the integrity of federal law enforcement to credibly "get it right" in the investigation of President Bill Clinton. In addition, I was responsible for the timely conclusion of the FBI Files, White House Travel Office, Whitewater and Monica Lewinsky investigations. During that two-and-a-half-year period, my office issued final reports with regard to the conclusion of each of those investigations. Most significantly, following a meeting with President Clinton the month before, I announced on the President's last full day in office that I would exercise my discretion and decline criminal prosecution. I did so only after the President agreed to acknowledge, in writing, his responsibility for wrongdoing and to surrender his law license. After that announcement, my office completed and published final reports in the Whitewater and Lewinsky investigations. The last of those final reports was released in March 2002.
Editor: Could you give us some general comments about the argument of the Andersen case?
Ray: The Supreme Court obviously felt that this was a case of prosecutorial overreaching. The Justices' remarks during the Supreme Court argument have gotten a lot of recent attention from the press. However, prosecutors and defense lawyers have recognized for years that there is an anomaly in the obstruction of justice statute as it read at that time. They have long known that there is a problem with that statute and that problem unfortunately landed right in Arthur Andersen's lap.
A prosecutor like any attorney is an advocate for his or her client, the client in this case being the U.S. But prosecutors also have a responsibility to assure that justice is done. The problem in this case is the risk that prosecutors are prosecuting someone for telling others to follow a procedure that was part of a legitimate corporate document destruction policy that had previously been put in place for good business reasons.
As Justice Scalia pointed out, there is an oddity about the obstruction statute in effect at the time; that is, you can be prosecuted for corruptly instructing someone else to take an action that would not be a crime if you had taken the action yourself. At that time, you could be prosecuted for personally destroying documents only if there was in fact a pending proceeding. The destruction in the Andersen case occurred at a time before any grand jury subpoenas had been issued or other formal proceedings had been initiated against Andersen.
The result in Andersen likely will never recur because the statute defining "obstruction" has been changed. The problem was fixed under the Sarbanes-Oxley Act by removing the requirement that a proceeding be pending at the time the destruction occurs. The crime is redefined as "knowingly" destroying or falsifying records "in relation to or contemplation of any matter or case." The new statute also does not require that the destruction be done "corruptly," which implies an evil motive. Now, the conduct need only be "knowing" in the sense of knowing what one was doing - not that it was a violation of law. Ignorance of the law, as we all know, ordinarily is not a defense.
It would seem that corporations now are put in a particularly difficult position under the revised statute by virtue of the fact that the corporate entity is deemed under the "collective corporate knowledge" theory to know everything known to its agents. Therefore, obstruction can occur under the new statute even if the person involved in the destruction was unaware that someone else in the company knew of the violation of law.
Editor: Does applying the new obstruction statute to destruction "in relation to or contemplation of any matter or case" make it too vague to withstand Supreme Court scrutiny?
Ray: I don't think one should expect the Supreme Court to revisit this area until the federal circuit courts have had an opportunity to speak first on that issue. Overturning the new statute is unlikely because Congress gave a clear message that it wanted to penalize destruction where proceedings are reasonably imminent. Also, the concept of "collective knowledge" in the case of corporations has been a long standing principle. In a prosecution brought against a corporation under the new statute, the mere fact that the person who destroyed the records was unaware of the fact that a violation of law had taken place is immaterial if the records' relevance to the violation was known to another agent of the company. The corporation's knowledge is the sum of its parts. The corporation has the burden to see that those who might take such action are informed about the matter. I think it is unlikely under these circumstances that the Supreme Court will hold the revised statute to be unreasonably vague.
Editor: How can corporations cope with the "collective knowledge" issue and then be sure that those likely to destroy documents are informed?
Ray: When there is information anywhere within a company that proceedings are reasonably likely to occur, it is important that the general counsel's office be alerted. This is the only way that a company can cope with the "collective knowledge" issue. The general counsel should then take responsibility for seeing that those implementing, modifying or otherwise controlling corporate document management programs do not destroy documents that might be pertinent to those proceedings. It is very important that all those who might possibly destroy documents, including those in the field, be alerted. The situation becomes even more complex where the records are in electronic form and where the backup tapes are routinely erased or overwritten.
To avoid potential prosecution, a program needs to be developed not only for getting the information to the general counsel but also for preserving all relevant documents, including electronic media. The only way to deal with this issue is to channel information about likely proceedings to the counsel's office and then vest in that office responsibility for controlling the management and preservation of possibly relevant historical records.
Editor: Are there other advantages to centralizing responsibility in the general counsel's office?
Ray: If information is run through the general counsel's office and counsel then advises the company and its employees as to the proper response, that lays the groundwork for an advice of counsel defense if the decision to destroy documents is later challenged. Having that defense is important since the language of the revised obstruction statute is so broad. A prosecutor might argue, for example, that a passing mention - implicitly or explicitly - of the possibility of a proceeding in a newspaper, for example, triggers liability.
Editor: What impressed you most about the Justices' reaction to this case?
Ray: I was surprised by the level of unanimity among the Justices. It demonstrates that the Court will step in when it feels that an ambiguous statute is being read in a way that produces a fundamentally unfair result. Clearly, the Justices felt this was a case of prosecutorial overreaching. On the other hand, they also know that the obstruction statutes are written broadly for a reason, namely to cast a fairly large net over a wide range of behavior in order to deter wrongdoers. They hope that through prosecutorial discretion the language will not be used to create an unreasonable result. They obviously felt in this particular case that they needed to trim the prosecution's sails a bit. It would not surprise me if there were an overwhelming reversal in June 2005 of the Andersen verdict.
Published June 1, 2005.
