by Nicholl B. Garza, a 2014 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech University School of Law.
Imagine if a commercial truck driver received a citation from the Federal Motor Carrier Safety Administration for failing to keep a record of his driving hours. Further suppose the truck driver lost some of his records, but decided to pay a civil penalty to dispose of the matter. Normal, right? Now imagine three years later the Department of Justice (DOJ) decided to prosecute that person, alleging that he intentionally discarded documents during a federal investigation (a crime under the Sarbanes-Oxley Act (SOX)). While this circumstance may seem absurd, a very similar situation is happening to commercial fisherman John Yates because he allegedly disposed of three fish after being stopped by an official from the Florida Fish and Wildlife Conservation Commission during a commercial fishing trip.
SOX was enacted in 2002. The intended purpose of SOX was to provide (1) criminal prosecution for persons who defrauded investors in publicly traded securities and (2) criminal prosecution for persons who destroyed or altered evidence in certain federal investigations. With regard to “certain Federal investigations,” the SOX Senate Report listed examples such as people committing securities fraud and auditors who intentionally fail to retain audit records. However, the statutory language in SOX does not integrate these specific examples and instead simply references “Federal investigations.” Nevertheless, the Senate Report and previous prosecutions under SOX illustrate that the purpose of the act is to provide a tool to prosecute those who commit financial crimes. Strangely then, in 2010, DOJ decided to prosecute Mr. Yates under SOX. DOJ asserts that in 2007 Yates violated SOX by discarding fish because a federal investigation was taking place.
Yates was ultimately convicted under SOX in 2012, and the U.S. Court of Appeals for the Eleventh Circuit affirmed his conviction in August, 2013. In affirming Yates’s conviction, the court explained that the fish in the investigation were, indeed, a “tangible object” under SOX. Mr. Yates sought review by the U.S. Supreme Court, and fortunately the Court granted it last April. Washington Legal Foundation filed an amicus brief in support of Mr. Yates on July 7.
The Yates case begs the question, “Why are we using taxpayer dollars to prosecute a man under a statute that was not intended to cover this type of behavior?” Prosecution of fish disposal under SOX is an overzealous attempt to criminalize behavior that would be more suitably settled by civil penalty. Yates’s prosecution serves no rational purpose other than, perhaps, to establish precedent enabling further expansion of SOX outside the financial sector.
The sponsors of SOX did not intend for the statute to reach this far. The “Oxley” in Sarbanes-Oxley—now-former Congressman Michael Oxley—argued that point in an amicus brief filed in support of Mr. Yates. SOX was created with the intention of bringing justice to those who defraud investors, not to prosecute an average citizen for actions taken during a commercial fishing trip. As absurd as a criminal prosecution in the truck driver example may seem, it actually makes more sense than the prosecution in Yates’s case because the hypothetical truck driver at least would have failed to destroy an actual document, albeit not one implicated in securities fraud or a related financial crime. Yates was prosecuted for throwing away fish, which SOX does not include in its statutory definitions.
Tax dollars are much better spent prosecuting crimes that cannot be adequately deterred through a civil or administrative fine. However, violations with little social or economic impact do not need to be prosecuted in the courts when a civil penalty can resolve the matter as well as deter similar behavior. DOJ would spend its time more effectively pursuing individuals who actually commit the kind of crimes SOX was enacted to combat.
Ultimately, the prosecution of John Yates does nothing to promote the goals of SOX. Yates’s prosecution does not protect the public from an economic crisis such as Enron, nor does it protect public investors from being defrauded by corporate executives. The main collateral effect of Yates’s conviction is to broaden the scope of SOX and further advance the trend of overcriminalization. A more sweeping SOX will unfortunately empower DOJ to continue prosecuting average citizens who are merely trying to make a living.