Obstruction of Justice

ACCOUNTING AND insider trading scandals of recent years have, to some extent, centered around the issue of obstruction of justice. Obstruction of justice may be defined as “the crime of offering interference of any sort to the work of police, investigators, regulatory agencies, prosecutors, or other officials.” The offense is specifically defined by the United States Code as a violation of 18 U.S.C. 73, sections, 1501 through 1519.

The sections covering obstruction of justice include crimes such as: assault on a process server; obstructing examinations of financial institutions; resistance to extradition agent; influencing or injuring an officer or juror generally; influencing juror by writing; obstruction of proceedings before departments, agencies, and committees; theft or alteration of record or process; false bail; picketing or parading; obstruction of court orders; tampering with a witness, victim, or an informant; and obstruction of criminal investigations of health care offenses.

Historically, the sections of 18 U.S.C. 73 that have applied primarily to white-collar crimes have been sections 1503 and 1505. Section 1503 makes it a crime to illegally influence a grand juror, petit juror, or court officer by threats, force, or threatening letters, as well as protecting the “due administration of justice.” Section 1505 criminalizes the same behaviors and makes them applicable to proceeding of federal regulatory agencies. In United States v. Aguilar, the Supreme Court ruled that to be convicted of obstruction of justices, the defendant had to form specific intent to obstruct a federal judicial or grand jury proceeding.

The Sarbanes-Oxley Act of 2002, was enacted by Congress to amend and extend 18 U.S.C. 73 as a response to numerous cases of accounting fraud in which records of suspect corporations were shredded, altered, or otherwise disposed of to hide illegal behaviors, including criminal facilitation by auditors. The Sarbanes-Oxley Act amended Section 1512 to include “alters, destroys, mutilates, or conceals a record, document, or other object, or attempts to,” as an act of obstruction of justice. The Sarbanes-Oxley Act also created Section 1519 that bars similar destruction of documents “in relation to or contemplation of … any matter within the jurisdiction of any department or agency of the United States.

Arthur Andersen

Of the numerous cases of obstruction of justice brought against corporations and their officers in recent years, perhaps the most prominent has been that against the Arthur Andersen accounting firm. [Page 574]Arthur Andersen was an international accounting and consulting firm that, until its demise in 2002, was responsible for auditing the accounting records of scores of large corporations and organizations, such as Featherlite, Landry's Restaurants, and Enron Corporation. It was in the context of its relationship with Enron that Andersen was caught obstructing justice.

Pressing the “delete” key on accounting records during an investigation can constitute obstruction of justice.

Enron was a conglomerate that was based on a classic “house of cards,” in which uncollected revenues were treated as profits in ledgers, even if the revenue never was received, and losses were hidden from regulators and stockholders through elaborate partnerships with ghost corporations created by the firm's officers. The collapse of Enron's shell-game brought questions of where the checks and balances had failed. Investigators repeatedly found corporate officers to have illegally profited on the company's malfeasance. The board of directors, which was meant to supervise the officers as a fiduciary responsibility to the stockholders, were found to be nothing more than figureheads who rubberstamped officer's actions without question. The greatest blame, however, appeared to rest on Arthur Andersen as Enron's auditor, which did little, if anything to reign in the voodoo accounting practices at Enron, and may have indeed facilitated part of the fraudulent bookkeeping.

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