Arthur Andersen’s Records Management Crime
The US legal system is giving all enterprises (whether public corporations, private LLCs or otherwise) reasons to be more liberal in their retention of records, especially e-mail. One reason is a change in obstruction of justice law.
The traditional obstruction of justice statute, 18 U.S.C. §1512(b), punishes anyone who corruptly persuades another person to destroy documents to impair their use in an official proceeding. Under that traditional statute, a criminal court convicted Arthur Andersen for destroying Enron-related papers and electronic records. The jury in Andersen’s trial said Andersen’s internal record management practices violated the statute.
But one month after Andersen’s jury trial, Congress adopted the Sarbanes-Oxley Act (SOX). SOX modified obstruction of justice law by making it easier to convict people who destroy records. SOX included new 18 U.S.C. §1519, which now punishes anyone who destroys, conceals, or covers up any record to impede or influence a federal lawsuit or an investigation by any federal agency, or in relation to or contemplation of any such matter or case.
Notice the differences between the traditional §1512(b) and new §1519. Under traditional §1512(b) a crime was committed only if the defendant "corruptly persuaded another person" to destroy documents. It might be hard for a prosecutor in a criminal trial to show corrupt persuasion of a second person. Further, the exact words of §1512(b) seem not to apply if the defendant directly destroyed documents. In new §1519, Congress omits the traditional “corruptly persuades another person” element. Further, new §1519 employs expansive language -- “in relation to or contemplation of any such matter or case” – to stretch the law to cover destruction of records in any way connected to a specifically anticipated lawsuit or investigation.
Enterprises be aware. The effect of §1519 is powerful. To win an obstruction of justice conviction, the prosecutor does not have to work as hard as he or she did in the Andersen case. The prosecutor no longer has to show the defendant acted "corruptly" to "persuade" someone else to destroy documents. Now, it is enough for the prosecutor to simply show that the defendant intended to destroy records with federal litigation in mind.
With new §1519, Congress emphasized its intolerance of people who mulch records in view of a lawsuit or investigation, even one that is not pending or imminent. Hear how Senate Report 107-146 interprets new 18 U.S.C. §1519: “This statute is specifically meant NOT to include any technical requirements, which some courts read into other obstruction of justice statutes, to tie the obstructive conduct to a pending or imminent matter. It is also meant to do away with the distinctions, which some courts have read into obstruction statutes, between court proceedings, investigations, regulatory or administrative proceedings . . . and less formal governmental inquiries. The intent of the provision is simple: people should not be destroying, altering or falsifying documents to obstruct any governmental function.”
Think about that statement from a record management perspective at a complex enterprise. The statement seems to imply that the enterprise must implement a litigation hold with respect to future (specifically-anticipated) lawsuits/investigations, even though they are not pending or imminent. For an enterprise, it is tough to know what is and is not anticipated somewhere out there in the future. But the risk is that later, after the lawsuit gets going, the court may judge the enterprise's decisions retrospectively, with the benefit of 20-20 hindsight. The court may determine, "Oh, you could have seen this coming (even though it was not imminent), so you should have implemented a legal hold."
Given that it is now easier to be convicted for destroying records, the logical response for an enterprise is to keep more records longer . . . to give itself a wider margin for error.
SOX’s new contribution to obstruction of justice law should be viewed in the context of recent cases punishing premature destruction of electronic records. In that context, one sees a whole legal system that expects more lavish record retention than in the past.
Mr. Wright teaches cyber security and investigations law at the SANS Institute.
Reference: B. Wright, “Shredding Documents Post-Arthur Andersen: Reforming Corporate Record Retention Policies for the Information Age,” a paper published 2002.