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Federal Courts of Appeal Uphold Obstruction Charges for False Documents Created Pre-Investigation and Those That Are "Irrelevant"

May 5, 2009
George J. Terwilliger III

DOWNLOAD PDF: Federal Courts of Appeal Uphold Obstruction Charges for False Documents Created Pre-Investigation and Those That Are "Irrelevant"

The potential for federal obstruction of justice charges levied against companies has increased substantially with two recent decisions by federal Courts of Appeal.

The Sixth Circuit held in United States v. Carson that creating a document containing false information even long before a federal investigation is initiated (i.e., as much as six months prior to the investigation) may trigger obstruction of justice liability if the company reasonably knew or should have known that a federal investigation was possible or likely. The practical implications of this ruling require a company to enhance its internal controls and vigilantly monitor the management of corporate documents, regardless of whether the company believes or knows that a federal investigation may arise, in order to adequately protect against later facing charges that it should have known that an investigation into the underlying subject matter would be initiated.

In United States v. Erickson, the Tenth Circuit held that a company may be charged with obstruction of justice for producing a false document in response to a federal grand jury subpoena even where the document at issue was later shown to be irrelevant to the grand jury's investigation. The ramifications of this decision are significant for businesses—many of which are regularly required to respond to federal grand jury subpoenas due to the regulated nature of their industries—and suggest that companies should carefully examine every document produced to federal authorities to avoid production of false information, even if the document being produced appears to have little or no relevance to the matters under investigation.

Sixth Circuit Affirms Obstruction Charges for False Statements Made Six Months Prior to Federal Investigation

The US Court of Appeals for the Sixth Circuit ruled in United States v. Carson that a defendant had violated the federal obstruction of justice statute, 18 USC § 1512(b)(3), by creating a false report six months prior to the start of a federal investigation. The defendant, a police officer, had colluded with several other officers to falsely state in their police reports that an arrestee had been the aggressor, thus triggering the officers' use of force.

At trial, the prosecution established that the officers' training had included instruction that the use of excessive force could lead to criminal charges against them under federal or state law. The Sixth Circuit found that this satisfied the knowledge element of the federal obstruction of justice statute with which the defendant was charged, because "a reasonable jury could conclude that [the officer] knew that writing a misleading report to cover up the use of excessive force might result in a federal investigation."

Following decisions from the First and Eleventh Circuits, the Sixth Circuit further found that a federal nexus existed even though the false reports were initially submitted to state authorities based on "the possibility or likelihood that [the defendant's] false and misleading information would be transferred to federal authorities irrespective of the governmental authority represented by the initial investigators."

Distinguishing this case from the Supreme Court's interpretation of the requirements of § 1512(b)(2) in Arthur Andersen LLP v. United States, the Sixth Circuit rejected the argument that the mere potential for a federal investigation was insufficient to trigger liability because § 1512(b)(3) does not limit liability to conduct aimed at obstructing an "official proceeding." The government met its burden in proving a violation of § 1512(b)(3) because it had "presented sufficient evidence from which a reasonable jury could find that [the officer's] intent was to hinder the communication of truthful information to federal law enforcement officers when he provided misleading information to federal law enforcement officers."

The Sixth Circuit's decision increases the risk of federal criminal liability for obstruction of justice for companies operating in the United States. Like the police officer in Carson, American corporations operate in an environment where the specter of possible federal investigation is nearly always present and commonly understood. Particularly in heavily regulated industries, such as banking and energy, and at businesses that have received TARP funds, even routine business action can later be the subject of a federal investigation. The Carson case illustrates one reason why companies need to make certain that their business records are accurate: they may otherwise face the risk of liability for obstruction of justice. Experienced legal counsel familiar with a business's particular industry, the inclinations of federal investigators, and best practices for establishing internal controls can play an important role in protecting against such risk.

The Sixth Circuit's United States v. Carson decision can be found here.

Irrelevance Is No Defense to False Documents Submitted to Federal Grand Jury

The US Court of Appeals for the Tenth Circuit, in United States v. Erickson, held that "knowingly submitting fraudulent documents in response to a grand-jury subpoena constitutes obstruction of justice, when … a grand-jury proceeding is underway and the defendant knows of it." Agreeing with the Sixth Circuit and rejecting the position of the Ninth Circuit, the Tenth Circuit ruled that the falsified documents need not be relevant to the grand jury's investigation to trigger liability for obstruction of justice under 18 USC § 1503(a) because "one who falsifies documents provided in response to a subpoena may well be ‘endeavor[ing] to influence, obstruct, or impede' the grand jury." In light of the Supreme Court's holding in Osborn v. United States that impossibility is not a defense to a charge brought under § 1503, the Tenth Circuit rejected the argument that it would be impossible to influence or impede a grand jury investigation by submitting falsified documents bearing no relevance to the investigation. The court concluded that "it is difficult to imagine why one would falsify documents to be presented to a grand jury if one did not believe that the documents were relevant to the grand jury's investigation (and would affect that investigation)."

The Erickson case requires companies to take special care to ensure that no false documents are submitted in response to federal grand jury subpoenas. Companies need to have in place adequate controls to regulate the quality and accuracy of business information produced in day-to-day operations. Furthermore, legal advice should be sought in responding to grand jury subpoenas.

The Tenth Circuit's United States v. Erickson decision can be found here.

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