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.
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.