Grouper was served with a side dish of the Sarbanes-Oxley Act of 2002 as the nine U.S. Supreme Court justices considered the appeal of Cortez fisherman John L. Yates.
Designed as a major overhaul of securities laws to protect investors in the wake of Enron and other corporate accounting scandals in the late 1990s and early 2000s, the act added broad corporate responsibilities and criminal penalties.
While sentenced to 30 days in jail, followed by three years supervised release, Yates had faced such a criminal penalty — 20 years in prison — for the destruction of grouper under an anti-shredding provision of the act.
Yates stayed home as his case was argued Nov. 5 before the highest court, appealing on principle — that he didn’t do it and not wanting to see fishing communities destroyed by overzealous federal prosecutors.
His wife Sandy Yates watched inside the chambers with a packed house — “it was take-your-daughter-to-the-Supreme-Court day,” she said.
She attended with her daughter and many attorneys’ daughters, as well as retired Supreme Court Associate Justice Sandra Day O’Connor. Sandy Yates estimated a crowd of more than 100.
“The best argument came out of the justices’ perception of prosecutors overcharging,” she said.
Sandy Yates said the justices related the case to one heard last term where prosecutors charged a “criminal penalty to something so minor.”
In that case, justices decided unanimously for a woman sentenced to six years in prison under a 1998 federal act designed to criminalize production, stockpiling and use of chemical weapons. She had been charged under that act for dusting a toxic substance on a doorknob, causing a minor burn to her husband’s pregnant lover.
Similarly, Yates’ appeal hinges on the applicability of criminal penalties in a major piece of federal legislation, Sarbanes-Oxley’s Section 1519, which provides that …
“Whoever knowingly alters, destroys … or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct … the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States … shall be fined … imprisoned not more than 20 years, or both.”
According to the oral argument transcript found at the official Supreme Court website, Yates’ attorney, Assistant Federal Defender John Badalamenti of Tampa, was first up.
He told the Court “it was implausible for Congress” to have intended “an all-encompassing obstruction statute buried within the altering-documents provision of the Sarbanes-Oxley Act.”
He argued the provision was improperly applied to Yates because grouper is not an object to which “a false entry in” can be made.
Badalamenti said the statute needs to be read in context while considering the backdrop of an expansive law targeting corporate fraud.
Associate Justice Elena Kagan interjected, “I would think that cuts against you … that this is about any matter within the jurisdiction of any agency in the United States shows it’s really not just about corporate fraud, that Congress had a broader set of things in mind. So I would think that’s quite the opposite, that everything about this statute, the ‘any matter,’ the ‘any record,’ suggests breadth.”
Not so, according to Badalamenti. He explained the law falls under sections only about altering documents and records.
For purposes of the anti-shredding statute, he said “tangible objects” should be limited to items inside which records are embedded, such as computers, laptops, hard drives and flash drives.
Representing the U.S. government, Assistant Solicitor General Roman Martinez urged the justices to determine that fish are indeed covered by the act, using the ordinary meaning of “tangible object.”
Martinez explained the anti-shredding obstruction charge is one of “general application,” and the knowledge requirement has no jurisdictional limits, after which Associate Justice Antonin Scalia said, “Wow.”
“And just to emphasize what happened here,” Martinez said, “Mr. Yates was given an explicit instruction to preserve evidence. …He directly disobeyed that. He then launched – a convoluted cover-up scheme to — to cover up the fact that he destroyed evidence.”
Chief Justice John Roberts interjected, “You make him sound like a mob boss or something.”
The justices engaged in a back-and-forth with Martinez about prosecutorial discretion and the 20-year prison sentence Yates faced.
Martinez said prosecutors are generally guided to charge the most severe offense possible under the law, and with Yates, Section 1519 was it.
Scalia retorted, “What kind of mad prosecutor would try to send this guy up for 20 years, or risk sending him up for 20 years.”
Martinez said not all fish disposal cases are prosecuted, only cases such as Yates, where there’s knowledge of a federal investigation.
“But the point is that you could,” Roberts responded, “and the point is that once you can, every time you get somebody who is throwing fish overboard, you can go to him and say: ‘Look if we prosecute you you’re facing 20 years, so why don’t you plead to a year,’ or something like that.”
Upon questioning from Associate Justice Stephen Breyer, Martinez agreed the Yates’ matter was civil.
He said the federal government did not have an obstruction charge against a person who destroyed evidence in civil matters before enacting the Sarbanes-Oxley Act.
The justices then explored the stretch of the Sarbanes-Oxley obstruction charges and criminal penalties against an unsuspecting American public.
They hypothecated the case of a single fish thrown back into the lake by the person who saw an inspector coming; a Supreme Court justice who hates postmen and rips up a letter; someone who kicks embers on campgrounds where fires are not permitted; and a person who unlawfully picks a wildflower.
Near the proceeding’s end, Associate Justice Anthony Kennedy quipped, “Perhaps Congress should have called this the Sarbanes-Oxley Grouper Act.”
In a final comment, the fisherman’s lawyer summed it up, “for more than 200 years, the United States has existed without this mega all-inclusive obstruction of justice statute … within the Sarbanes-Oxley Act and this court shouldn’t put it in there now.”’
A high court decision is anticipated before the end of June 2015.