An Update on the January 6 Investigations

It’s been an eventful couple of months in the investigations of January 6, 2021. There are signs that DOJ’s criminal investigation is starting to close in on higher-level organizers and leaders of the attempt to overturn the election, including those in Trump’s inner circle. The aggressive Congressional investigation continues, with House attorneys alleging in federal court that they believe former president Trump himself committed crimes on January 6. And a federal judge recently ruled that civil suits seeking damages from Trump and others stemming from the Capitol riot may proceed. Overall, things definitely seem to be accelerating, and it’s a good time for an update on the January 6 investigations.

Attorney General Merrick Garland

The Department of Justice Investigations

Garland Vows to Pursue Those Responsible “At Any Level”

On January 5, 2022, Attorney General Merrick Garland gave a speech commemorating the one year anniversary of the assault on the Capitol. He said investigating those events was DOJ’s highest priority, and vowed to pursue those responsible “at any level.” He shared some remarkable statistics about the scope of the investigation, the largest in DOJ’s history.

Garland also appeared to respond to critics complaining that DOJ was charging mostly misdemeanors and did not seem to be pursuing the higher-level organizers or more serious charges. He said that, by disposing of the less serious cases first, prosecutors were following “well-worn prosecutorial practices.” He noted that in large, complex investigations, prosecutors begin with the easier, more overt cases and then work their way up the ladder to higher-level players and more serious charges as they gather more information.

Garland vowed that “the actions we have taken so far will not be our last.” And he said that although he understood the possible frustration with the lack of public information and the time it takes to investigate such cases properly, that was how DOJ must proceed: “We will and we must speak through our work.”

Stewart Rhodes, Founder of the Oath Keepers

The Oath Keepers Indictment

One week after Garland’s speech, a new indictment demonstrated that the criminal investigation was indeed moving up the ladder to more serious charges and actors. On January 13, DOJ announced the indictment of eleven members of the right-wing militia group the Oath Keepers, including its founder, Stewart Rhodes. The lead charge in that indictment is Seditious Conspiracy, 18 U.S.C. 2384, which makes it a crime to conspire to use force to overthrow the U.S. government or interfere with the execution of federal law. This was the first time any Capitol riot defendants had been charged with sedition, which essentially accuses the defendants of taking up arms against the United States to prevent the peaceful transfer of presidential power.

The Oath Keepers indictment goes into great detail about the group’s activities leading up to January 6. Using encrypted messaging apps and online forums, they formulated their plans to travel to Washington and use force to stop Congress from certifying that Joe Biden won the election. The indictment also describes how members of the group helped lead the assault on the Capitol, using military gear and tactics. Others stockpiled weapons in the D.C. suburbs and served as a “Quick Reaction Force” ready to deploy those weapons to support the attack. They even planned how they might use boats to get weapons across the Potomac if the government closed the bridges. The Oath Keepers were not mere attendees at the White House rally who later got swept up with the mob. They were organizers and leaders of the assault on the Capitol.

Joshua James, Leader of the Alabama Oath Keepers

The First Guilty Plea to Sedition

The Oath Keepers indictment represented the first time DOJ filed charges of sedition against any of the rioters. On March 2, it secured the first guilty plea to that charge. Joshua James, one of the eleven Oath Keepers named in the Rhodes indictment, pleaded guilty to seditious conspiracy and obstruction of Congress. James also agreed to cooperate with prosecutors in the ongoing investigation.

James’s plea and cooperation could be a major breakthrough. He can provide information not only about the Oath Keepers conspiracy but potentially about the involvement of other, higher-level participants in the events of January 6. In particular, James and other Oath Keepers are known to have provided personal security on January 5th and 6th for Trump advisor and confidant Roger Stone.

Stone, of course, is a well-known figure from the Trump years. The Mueller investigation revealed that Stone acted as a conduit between the 2016 Trump campaign and Wikileaks and Julian Assange for information about the release of stolen Democratic emails in the weeks leading up to the 2016 election. Stone was convicted of lying to Congress about his role in those events and was sentenced to nearly four years in prison, but was later pardoned by president Trump.

Stone was part of the group of close advisors to president Trump who gathered in Washington in the days leading up to January 6. A recent detailed report in the Washington Post described an upcoming documentary that will highlight Stone’s work with the Trump team to overturn the results of the election.

With the James guilty plea, prosecutors have now secured the cooperation of someone who was close to Stone during those pivotal days. That potentially allows investigators to move beyond the actual rioters and into a broader conspiracy involving those close to Trump who planned and organized from a distance. And as investigators move up that ladder, those senior Trump advisors are only one rung below Trump himself.

The Proud Boys Indictment

On March 8, DOJ announced the indictment of Enrique Tarrio, the former leader of another militia group, the Proud Boys. He and five other members of the Proud Boys are charged with conspiracy, obstruction of Congress, assaulting law enforcement officers, and destruction of federal property. The Proud Boys are another of the leading militia groups involved in organizing and carrying out the assault on the Capitol.

The Proud Boys featured prominently in an incident from the 2020 presidential debates. When the moderator asked president Trump whether he was willing to denounce right-wing extremist groups, he asked who he should denounce. Joe Biden suggested the Proud Boys. Trump responded, “Proud Boys, stand back and stand by.” Tarrio then Tweeted in response, “Standing by, sir.”

As with the Oath Keepers case, the Proud Boys indictment details how the members of the group planned and then participated in the assault on the Capitol. It describes how they breached the outside barriers and assaulted police officers. One of the defendants allegedly used a riot shield taken from a police officer to break a window in the Capitol that rioters then used to make their first entry into the building. After entering the building, one posted on social media, “We’ve taken the Capitol.”

Tarrio is not charged with entering the Capitol himself but with helping to coordinate the Proud Boys activities. On January 4, Tarrio had been arrested in D.C. on local charges stemming from his participation in an assault on Black Lives Matter protestors in December. As part of his conditions of release, he was ordered to stay out of D.C. Before leaving, however, the indictment alleges that on January 5 he met in a parking garage with Stewart Rhodes of the Oath Keepers and others – more evidence of a potentially broader conspiracy. He then traveled to Baltimore, where he stayed in communication with the Proud Boys who actually participated in the assault.

The Proud Boys indictment does not include the Seditious Conspiracy charge used in the Oath Keepers indictment. It’s not clear to me why that’s the case. One difference is that the Proud Boys indictment lacks any reference to gathering and bringing firearms to DC, which is a big part of the Oath Keepers case. Firearms would not be necessary for a sedition charge, but perhaps that is a discretionary distinction DOJ is drawing about when to use that charge.

Guy Reffitt

The First Conviction at Trial

Also on March 8, the first Capitol rioter to go to trial was convicted on all counts. Guy Reffitt, a member of a Texas militia group called the Three Percenters, was charged with five felonies, including obstruction of Congress and carrying a firearm during a civil disorder. He traveled to D.C. with an assault rifle and handgun. He carried the handgun with him during the assault on the Capitol, along with zip ties, a helmet, and body armor. Prosecutors alleged that he led one wave of the assault on the Capitol and served as the “tip of the spear,” helping break through police barricades before being repelled by pepper spray.

Reffitt was also convicted of obstruction of justice for threatening potential witnesses: his own children. After returning to Texas, he became paranoid about being arrested. He told his 18-year-old son and his younger sister, “If you turn me in, you’re a traitor. And traitors get shot.” His son, who does not share his father’s political views, did in fact turn him in and testified at his trial. (And you thought your Thanksgiving dinners were awkward.)

This first conviction was an important milestone for the government. Prosecutors put on an overwhelming case. It only took about a week to pick a jury and try the case, and the jury only deliberated for about three hours. This sends a strong signal to other January 6 defendants about the government’s ability to try these cases quickly and effectively. The Reffitt conviction will likely convince other defendants to plead guilty and cooperate rather than challenge the prosecution at trial.

Judge Nichols Ruling on Obstruction

Along with all these positive developments, there was one recent setback for prosecutors. On March 7, U.S. District Judge Carl Nichols ruled that prosecutors could not charge a Capitol rioter with obstruction of a Congressional proceeding under 18 U.S.C. 1512(c)(2). The ruling came in the case of Garrett Miller of Texas. Nichols ruled that this portion of the statute applies only to obstructive conduct that is similar to document shredding or other destruction of physical evidence. Because Miller was not charged with that kind of conduct, Nichols dismissed the obstruction charge. Miller remains charged with multiple other crimes.

I think Judge Nichols is wrong. I wrote here last fall about why I believe the obstruction of Congress charge does apply to the conduct of the Capitol rioters. Ten other district court judges, faced with similar motions, have ruled that the statute does apply – you can find a list here. Nichols is really out there on his own.

Nevertheless, the decision does cast a shadow over the more than 200 cases where the obstruction charge has been filed. The Proud Boys and Oath Keepers indictments discussed above include that charge. Reffitt was just convicted of it, and James pleaded guilty to it. Some defendants may now be reluctant to plead to the charge if there are doubts about its legal validity.

I see this as a speed bump for DOJ, not a major roadblock. This legal issue was always destined to be decided by the D.C. Circuit, and potentially even by the Supreme Court. DOJ will probably pursue an immediate appeal of Nichols’ order, hoping to get a relatively quick decision from the Circuit court. But in the meantime, given the overwhelming approval of the charge by every other judge to look at the issue, I expect DOJ will continue to pursue it in appropriate cases.

Members of the House Select Committee

The Congressional Investigation

The investigation of January 6 by the House Select Committee is churning along. They have hired a number of former federal prosecutors and appear to be conducting a thorough and painstaking investigation. The Committee has spoken to nearly 600 witnesses and has gathered a huge amount of evidence. They have announced plans to hold public hearings in the near future. They are continuing their efforts to gather information from very high-level people close to Trump, including his family members and senior staff.

In contrast to the DOJ criminal investigation, the House Committee is free to make its findings public. It already has released some information, such as the text messages to Trump during the riot from his family, Fox News hosts, and members of Congress, all pleading with Trump to call it off, and the draft of a proposed executive order (never signed) directing the department of defense to seize voting machines in key states. The Committee reports and hearings ultimately will provide the most detailed public findings to date about January 6 and what caused it.

Allegations Regarding John Eastman

The Committee made headlines recently based on allegations it made in litigation with former Trump attorney John Eastman. Eastman was the architect of the universally-discredited theory that on January 6 vice president Mike Pence could simply reject the electoral votes of certain states that Joe Biden won and declare Trump the winner. He was one of the Trump advisors who occupied the “war room” at the Willard Hotel in early January. The House Committee subpoenaed Eastman’s emails and he has withheld thousands of them, claiming they are protected by attorney-client privilege because he was acting as Trump’s lawyer.

In a federal court filing last week in California (where Eastman lives), attorneys for the Committee argued the emails are not protected. One of their arguments rests on the rule that communications with an attorney are not privileged if made in furtherance of a crime or fraud. They allege that Trump was communicating with Eastman in order to help Trump commit at least two federal felonies: conspiracy to defraud the United States and obstruction of a Congressional proceeding.

The judge held a hearing on the attorney-client privilege issues on March 8, and on March 9 ruled that he will review the documents to determine whether any privilege applies. The judge may order that the emails be turned over for other reasons, including that there was not a true attorney-client relationship between Trump and Eastman. But even if the judge does not rule that the crime-fraud exception applies, the implications for the criminal case are clear. Government attorneys have, for the first time, told a federal judge they believe Trump himself may have committed crimes in connection with January 6.

LIkely Criminal Referral of Trump

It now seems almost certain that the House Committee will make a criminal referral of Trump to the Department of Justice. In terms of possible crimes by Trump, attention seems to be coalescing around the two charges contained in the Eastman pleadings: conspiracy to defraud the U.S. and obstruction of Congress. In a recent “prosecution memo” published on Just Security, law professor and former U.S. Attorney Barbara McQuade argued for the application of those same charges to Trump’s efforts to overturn the election.

Conspiracy to defraud the United States prohibits interfering with lawful functions of the federal government by deceit, trickery, or other dishonest methods. It was the charge used by special counsel Robert Mueller to indict the Russians accused of interfering with the 2016 presidential election through phony social media campaigns and other methods. Obstruction of Congress is the charge discussed above, that was recently called into question by Judge Nichols.

A Congressional referral to DOJ does not mean DOJ must prosecute; Garland will still have to make that decision. And despite the Committee’s bipartisan makeup, any referral will be dismissed by many as merely political. But any formal announcement that a Congressional committee believes the former president committed crimes would still be a significant development.

The Civil Lawsuits        

A final important recent development related to January 6 involves civil suits filed by Members of Congress and Capitol Police officers against Trump and others. The plaintiffs sued Trump, the Proud Boys, the Oath Keepers, Rudy Giuliani, Donald Trump Jr., and others, seeking damages for their physical and emotional injuries stemming from the assault. The defendants moved to dismiss the lawsuits on a number of grounds. On February 18, U.S. District Judge Amit Mehta ruled the lawsuits can go forward against Trump and the militia groups, although he dismissed the cases against Giuliani and Donald Jr.

These are civil suits for damages, so they will not result in any criminal charges. But Mehta’s opinion is worth a read for the detail it provides about Trump’s encouragement and incitement of the Proud Boys, Oath Keepers, and others who engaged in the riot. Notably, he concluded that the plaintiffs, at this stage, have alleged evidence sufficient to demonstrate a civil conspiracy between Trump and the rioters to obstruct the Congressional proceeding. Mehta cited all the steps that Trump took to encourage the rioters to attend on January 6 and try to stop Congress from acting. He noted that Trump’s repeated use of the word “we” during his speech to the mob on January 6 suggested they were engaged in an enterprise together.

Mehta also observed, when discussing the Oath Keepers, that evidence of their connection to Roger Stone may end up being significant in terms of proving a larger conspiracy. As discussed above, this could be true for the criminal investigation as well.

The civil lawsuits will now proceed to the discovery phase. That could unearth yet more information about January 6 and could include efforts to take depositions from Trump himself. Proving a civil conspiracy by a preponderance of the evidence is a far cry from proving a criminal one beyond a reasonable doubt. But the facts all overlap, and the different lawsuits and investigations have the potential to help unearth more of those facts.

Garland Reaffirms DOJ’s Commitment

Attorney General Garland gave an interview just yesterday on NPR, where he reaffirmed his commitment to follow the facts and law wherever they lead and said he would not shy away from cases that may be politically controversial. He vowed the investigation will continue “until we hold everyone accountable who committed criminal acts with respect to January 6.” I take him at his word, and I think the signs we are seeing are consistent with his vow.

Things are definitely heating up. Between the DOJ criminal investigations, the House Committee investigation, and the civil lawsuits, it looks like 2022 will be an eventful year when it comes to holding accountable those responsible for the attempt to overthrow the election.

Like this post? Click here to join the Sidebars mailing list.

Coronavirus, Congress, and Insider Trading

There were reports last week of potential insider trading by members of Congress. Several of them sold millions of dollars in stocks as the coronavirus crisis was just beginning to unfold, before the major stock market decline. At the time, they were receiving regular, confidential briefings on the dangers of the virus. Some were publicly downplaying the severity of the problem while they privately unloaded their stock holdings. But although some of these stock trades may have been deplorable, proving they were criminal would likely be an uphill battle.

The Law of Insider Trading

Insider trading is the purchase or sale of securities based on material, nonpublic information, in violation of a duty of trust and confidence. Classic insider trading involves corporate executives or other company insiders trading their own company’s stock based on nonpublic information, in violation of the duty they owe to their shareholders not to exploit company information for their own private gain. A simple example would be a CEO who knows her company is about to be acquired and purchases large amounts of stock in the company before that information becomes public.

Under the much broader misappropriation theory, an individual is liable for insider trading if he trades stock based on material nonpublic information in violation of a duty owed to the source of that information. In the leading Supreme Court misappropriation theory case, United States v. O’Hagan, the defendant was an attorney whose firm represented the acquiring company in an unannounced takeover bid. He bought large quantities of stock and options in the company that was going to be acquired, and made several million dollars once the deal became public. As an outsider, O’Hagan didn’t owe any duty to the shareholders of that company. But he did owe a duty to his own firm and its client not to misappropriate the client’s confidential information for his personal gain. His trades in violation of that duty thus constituted insider trading.

A key in any insider trading case, therefore, is identifying the relevant duty. Trading on material nonpublic information is only insider trading if using that information for a personal benefit violates a duty the trader owes to someone. If you acquire material, nonpublic information through diligent research and hard work, or even by overhearing two corporate insiders talking on an airplane, it’s not insider trading for you to trade based on that information. There must be a violation of a duty.

The Impact of the STOCK Act

Members of Congress, by the nature of their work, necessarily learn a great deal of information that could impact the stock market. In 2012, in response to concerns about Members profiting off such information, Congress passed the Stop Trading on Congressional Knowledge, or STOCK Act. The Act prohibits Members of Congress and their employees from using information learned during the course of their duties for private profit. It directs the Ethics Committees of both Houses of Congress to issue guidance concerning this prohibition. The Act also states that “Members of Congress and employees of Congress are not exempt from the insider trading prohibitions arising under the securities laws.” The Act specifies that Members and Congressional employees owe a duty “arising from a relationship of trust and confidence” to the Congress and to the American people.

This legislative recognition of a duty is significant for insider trading purposes. As just noted, the existence of such a duty is a prerequisite for insider trading liability. The STOCK Act makes it clear that Members of Congress owe a duty of trust and confidence to Congress and the American people not to personally profit from information they learn in the course of their duties. If Members trade stock in a company based on material, nonpublic information learned through their work, they may be liable for insider trading for breaching that duty.

Senator Richard Burr
Senator Richard Burr

The Congressional Trades and Insider Trading

The allegation concerning several Members of Congress is that they received nonpublic information during briefings about the Coronavirus and traded stocks based on that information in anticipation of the coming market crash. Not all such transactions involved stock sales; for example, Senator Kelly Loeffler bought stock in a company that specializes in software that allows people to work from home, and other congressional aides reportedly bought stock in companies such as Clorox, Inc.

To prove insider trading, prosecutors would have to establish that these purchases and sales were based on material, nonpublic information learned during the course of Congressional duties. If they were, then the STOCK act makes clear that such transactions for private gain would violate a duty owed to Congress and the American people and therefore would potentially be insider trading. But there are several factors that suggest establishing insider trading could be challenging.

1) Was the Information Truly Nonpublic?

To evaluate any claims of possible insider trading, it is critical to know exactly what information was relayed at the Congressional briefings. Prosecutors would need to show the briefings included information that was not yet public and that would likely lead those who received the information to conclude the stock market is going to decline. Any investigation into these Congressional trades, criminal or civil, therefore would have to explore what exactly the Members were told in these briefings.

There was a lot of public information already floating around about the coronavirus at the time of the briefings in January and February. Were Members really given information that was not otherwise publicly available? Or did the briefings simply serve to educate the Members and try to get them to focus on the problem, without necessarily relying on material nonpublic information?

The answer may vary depending on the briefing. At least some of the briefings reportedly were classified, which suggests a greater likelihood that they contained information not otherwise publicly available. But as to a more routine, unclassified briefing, it may be that any diligent researcher could have readily come up with the same information that was being given to the Members. And if that’s the case, then acting on that information would not be insider trading.

2) Was the Information Material?

Even if the briefings contained nonpublic information, that information must have been material. Information is material if it is likely to be deemed important to a person deciding whether to buy or sell the stock. One issue here would be that even if some of the information in the briefings was nonpublic, was it so different from what was already available that it would materially influence anyone’s decision to buy or sell? In other words, there was already so much information available that any additional information received in the briefings, even if not otherwise public, may not have made a material difference to a potential trader. Was there actually something disclosed in the briefings that was both nonpublic and so dramatically different from the other available information that it would have tipped the scales on whether to buy or sell?

Another wrinkle when it comes to materiality is that this information likely did not relate to any particular company, or even any particular industry, but to the risks to the country and economy as a whole. Insider trading cases usually involve nonpublic information that relates directly to the stock that was traded. Charging insider trading based on information suggesting that the overall economy in general is going to decline would be unusual. Even if there is information suggesting that the economy as a whole might suffer, how does one prove that information was material to the stock price of any one company? You could try to argue that certain industries seemed more likely to suffer or to profit, and focus on trades based on those industries (such as sales of hotel or airline stocks), but it still could be challenging to prove materiality as to any particular trade.

Once again, what was said at the briefings could be key; for example, if a briefing focused specifically on likely damage to the airline industry, that might support allegations of subsequent insider trading in airline stocks. But if a briefing was focused more on the overall health risks to the country and less on the economic impact, then proving the materiality link to trading stock in any particular company could be much more challenging.

3) Were the Trades Actually Based on the Information Received?

Another possible defense would be that even if there was nonpublic information provided during the briefings, the trades were not based on that information. In the wake of the insider trading allegations, Senator Richard Burr put out a statement claiming his trades were based only on public information, such as reports on CNBC. Burr is claiming, in other words, that even if he received nonpublic information, his trades were based not on that information but on other information that was widely available to the general public.

If there was material, nonpublic information provided at the briefings, then it likely will not be enough for Burr just to claim he relied on other, public information when making the trades. Under SEC Rule 10b5-1, if a person possesses material, nonpublic information at the time of a purchase or sale of a security, there is a presumption that the trade was based on that information. The purchaser can rebut that presumption, but only by showing that there was a pre-existing, written plan or order to sell the stocks that predates the receipt of the nonpublic information. Absent such a pre-existing order, a Member or staffer will be presumed to have relied upon any material nonpublic information received when making a trade.

A related issue will be whether the Member or other individual who received the information actually ordered the trades in question. Senator Kelly Loeffler, for example, has claimed on Twitter that she does not make decisions about her stock trades and that those decisions are made by third-party advisors without her input. Senator Diane Feinstein has claimed that her stocks are held in a blind trust and that this particular trade was made in her husband’s account, and so any trades were made without her knowledge or participation. If trues, these would be defenses to any claim of insider trading.

One question raised by Senator Loeffler’s defense is whether she had any communications with those “third party advisors” where she shared information learned during the briefings. She may not make the decisions herself, but if she passed along material, nonpublic information and her advisors traded on that information then she could still be liable for insider trading as a “tipper” or for aiding and abetting. The same would be true if she passed the information to her husband, who happens to be Chairman of the New York Stock Exchange, and he then relied on that information to trade or to direct others to trade on their behalf.

Representative Chris Collins

The Case of Representative Chris Collins

These allegations have led some to compare these Members of Congress to Representative Chris Collins, who was recently sentenced to 26 months in prison for insider trading. But the cases have almost nothing in common. Collins served on the board of a pharmaceutical company and sold stock in that company after receiving confidential information from the board chairman that a major drug trial had failed. The Collins case differs from these current allegations in two important respects. First, the inside information Collins gained was not as a result of his work on Capitol Hill. His status as a Congressman was irrelevant to his insider trading case, as was the STOCK Act. Collins could have been just any board member, trading on confidential information received from the chairman. And second, the information Collins received was specific to the one company in whose stock he subsequently traded – it wasn’t information about a potential overall market decline.

The Appropriate Remedy

These stock trades deserve to be investigated. Some certainly seem to violate the spirit of the STOCK Act. But given the issues described above, it seems unlikely that any will result in a criminal case. And a criminal remedy is not necessarily the answer; there are many possible consequences for these actions besides a criminal prosecution. The SEC may pursue civil insider trading charges, where the penalties may include fines and disgorging of profits. Other shareholders in companies that were dumped may sue for civil stock fraud. The Ethics Committees can explore the allegations and impose sanctions as well; Senator Burr, for example, has already requested an Ethic Committee investigation of his own stock trades. Members of Congress could face calls to resign, as some already have. And of course, voters have the ultimate political sanction at the ballot box for any offenders who run for re-election.

One good outcome would be for this scandal to lead to reforms that include a requirement that every Member of Congress hold their stocks and other assets in blind trust, with absolutely no control over investment decisions. Until that is the norm, allegations like this will continue to arise and there will always be suspicions that some Members are using the power of their office unfairly to line their own pockets. Such conduct may not always be criminal, but it’s always wrong.