Supreme Court Faults Use of Sarbanes-Oxley in Fisherman Case
WASHINGTON—On Wednesday a divided U.S. Supreme Court reduced the use of the Sarbanes-Oxley corporate governance law in cases that aren’t about corporate fraud, ruling it couldn’t be used to prosecute a fisherman for destroying evidence he illegally harvested fish.
The decision is a setback for the government because the Justice Department increasingly has sought to use a Sarbanes-Oxley prohibition on evidence destruction in cases outside the corporate realm.
The ruling, for example, could have an immediate effect on the high-profile cases of two men charged with obstructing the investigation into alleged Boston Marathon bomber Dzhokhar Tsarnaev. A judge had postponed their sentencing until the Supreme Court ruled in the fisherman case.
Arkady Bukh, a lawyer for Boston defendant Azamat Tazhayakov, said he was still studying the fisherman decision but likely would ask a judge to exonerate his client in light of the high court’s ruling.
A jury convicted Mr. Tazhayakov last year of a Sarbanes-Oxley violation for removing a backpack and other materials from Mr. Tsarnaev’s College dorm room that were being sought by federal authorities.
A spokeswoman for the U.S. attorney’s office in Massachusetts said prosecutors were studying the ruling and had no further comment.
Prosecutors in the fisherman case had charged John Yates with a Sarbanes-Oxley violation after a fish-and-wildlife officer boarded the fisherman’s boat in 2007 and found Mr. Yates had kept 72 grouper that were under the minimum size limit for catch. He issued the Florida fisherman a civil citation and told Mr. Yates to bring the undersized fish back to port for further inspection. Prosecutors alleged Mr. Yates instead told his crew to throw the fish overboard and replace them with bigger fish. He was convicted in 2011 and sentenced to 30 days in jail.
Wednesday’s Supreme Court ruling splintered the justices and scrambled their traditional ideological lines. Four justices, in an opinion by Justice Ruth Bader Ginsburg, said the 2002 Sarbanes-Oxley law, passed in the wake of accounting scandals at publicly traded companies, such as Enron Corp., bars the destruction of evidence, including business documents and records. It doesn’t apply to a fisherman’s alleged destruction of his catch, those justices said.
Congress in Sarbanes-Oxley made it a crime to knowingly destroy or cover up “any record, document or tangible object” with the intent to obstruct an investigation, with a maximum 20-year prison sentence.
Justice Ginsburg conceded a fish is a tangible object, but she said reading the corporate law that broadly would be to cut it loose “from its financial-fraud mooring.”
If the nation needs a broader “coverall” statute to prohibit evidence destruction, that is a decision best left to Congress, Justice Ginsburg wrote.
Justice Samuel Alito didn’t join that holding but provided a fifth vote, based on somewhat different legal reasoning, to toss Mr. Yates’s Sarbanes-Oxley conviction. Chief Justice John Roberts and Justices Stephen Breyer and Sonia Sotomayor joined the opinion by Justice Ginsburg.
A Justice Department spokesman in Washington didn’t respond to requests for comment. The department had argued the Sarbanes-Oxley provision was an important tool for prosecutors because it closed loopholes in federal law on destruction of evidence.
It said it had used the provision in cases prosecuting everything from the destruction of cocaine to the burning of a man killed by a police officer after Hurricane Katrina.
Mr. Yates’s lawyer, John Badalamenti, welcomed the ruling, saying the Supreme Court made clear Sarbanes-Oxley is “intended to target big corporate white-collar coverups,” not the destruction of any and all physical objects.
Four justices—Elena Kagan , Antonin Scalia, Anthony Kenn and Clarence Thomas —dissented from the ruling. They would have read the Sarbanes-Oxley evidence destruction provision more broadly to punish people who destroy any physical evidence to thwart a federal investigation.
The broadly written provision with its high maximum penalties may not be the wisest choice Congress could have made, but “this court does not get to rewrite the law,” Justice Kagan wrote in a dissent that included a citation to Dr. Seuss’s 1960 children’s book, “One Fish Two Fish Red Fish Blue Fish.”