By: Andrew Burrows
One of the most
interesting and amusing cases on the docket for the U.S. Supreme Court this
coming term has some fishy implications. In Yates v. United
States, the Supreme Court will contemplate the application
of 18 U.S.C. § 1519, a provision of the
Sarbanes-Oxley Act, to the alleged destruction of evidence in violation of this
provision by a commercial fisherman.
What
is the Sarbanes-Oxley Act?
The Sarbanes-Oxley Act
or “SOX” was enacted in late 2002 in the wake of several large-scale accounting
fraud scandals in the early 2000s, which involved high profile corporations
such as Enron, Tyco, and WorldCom and the Arthur Andersen Accounting Firm. SOX
was enacted with the broad purpose of protecting investors from the fraudulent
acts of accounting firms and businesses. The act requires these companies and
firms to adhere to stricter standards regarding their financial information and
documents. One of the many ways this goal is achieved is the broad prohibition
against the knowing destruction of any tangible objects with the intent to
impede an investigation under §1519 of SOX.
Why
does SOX matter?
While largely in place
to regulate public companies, SOX has several provisions that apply to private
companies as well. Section 1519 of the Act, regarding liability for the
destruction of records, documents, or tangible objects is one of these
provisions. Thus, §1519 is applicable to every company, whether public or
private, large or small.
How
does SOX apply to Yates?
Yates, a commercial
fisherman and boat captain was issued a citation by a Florida wildlife deputy
for catching fish that were smaller than legal size. Upon receiving a citation
for the undersized fish and being directed to return to shore, Yates ordered his
crew to throw the fish overboard in an attempt to thwart the investigation into
the violation, and for all practical purposes, to destroy the evidence. At
trial, Yates was found guilty under §1519 of SOX for destroying or concealing a
“tangible object with intent to impede, obstruct, or influence” the
government’s investigation into his catching of undersized fish. On appeal, the 11th Circuit
affirmed this conviction, stating that a fish is, in fact,
a “tangible object” under the plain meaning of §1519. Thus, the ultimate
question for the Supreme Court is whether, under the plain meaning of §1519, a
fish is a “tangible object”, or if §1519 simply applies to tangible objects
relating to recordkeeping materials, such as computers or storage drives.
What
are the Implications of Yates?
Due to the importance
of SOX from a regulatory standpoint, the outcome of Yates has implications for businesses of all types and sizes, not just
those who happen to be commercial fishermen. If the Supreme Court affirms the
ruling of the 11th Circuit, it would strengthen the overall power of SOX and,
in turn, increase its regulatory power over public and private businesses. More
narrowly, if throwing away fish is deemed equivalent to shredding a document, businesses
will need to be much more careful with what they throw away.
