Lying on a Security Clearance Form: The Crime of False Statements

A number of Trump administration figures are under investigation for having contacts with Russian officials. Former National Security Advisor Michael Flynn allegedly had repeated contacts with the Russians during the Trump campaign and transition. Flynn was forced to resign and has asserted his Fifth Amendment right to remain silent in response to the ongoing inquiries.

At his confirmation hearing Attorney General Jeff Sessions denied having any contact with Russian officials, but he later admitted to having several meetings with the Russian ambassador. This led to allegations that Sessions may have committed perjury during his hearing testimony.

Most recently there were reports that Trump’s senior advisor and son-in-law Jared Kushner allegedly met with Russian officials about setting up some back channel communications through the Russian embassy. Kushner also is alleged to have had multiple contacts with other Russians, including a Russian banker closely tied to Russian intelligence.

The FBI, Special Counsel, and several Congressional committees are now investigating these various contacts. Some may turn out to be criminal, others may turn out to be simply unwise, and others may be perfectly innocent. But most have one thing in common: the administration officials who had the Russian contacts apparently failed to disclose them when they applied for a security clearance.

Even innocent contacts could result in criminal prosecution if people lied about them or failed to disclose them when required. The charge would be false statements, a key workhorse in the white collar crime stables.

False statements on a security clearance form may be a crime

SF-86: Questionnaire for National Security Positions

The Disclosure Requirement: Form SF-86

All those seeking a security clearance and access to classified information are required to complete a Standard Form 86, or SF-86. This lengthy (over 100 pages) questionnaire is painfully familiar to many government employees. The federal government uses the information in the SF-86 to conduct a background investigation and determine whether access to classified information is appropriate.

The SF-86 requires you to report detailed information about your personal background, employment history, education, marital status, family members, places you have lived, travel, and much more. It also asks about foreign contacts and foreign activities.

In particular, question 20B.6 asks whether the applicant has had any contact at all with any foreign governments or their representatives in the past seven years. If the answer is “yes,” the applicant must provide detailed information about those contacts.

All high-level members of the new administration would have filled out an SF-86. The allegation concerning Kushner, Flynn, Sessions, and others is that when completing the form they failed to report their various meetings with Russian officials.

The Relevant Statute: False Statements

The instructions for the SF-86 include the following warning:

The U.S. Criminal Code (title 18, section 1001) provides that knowingly falsifying or concealing a material fact is a felony which may result in fines and/or up to five (5) years imprisonment.

Many of us have seen similar warnings on other government forms. But what exactly is title 18, section § 1001, and what does it require the government to prove?

False statements, 18 U.S.C. § 1001, makes it a crime to knowingly and willfully –

1) falsify, conceal, or cover up by any trick, scheme, or device a material fact;

2) make any materially false, fictitious, or fraudulent statement or representation; or

3) make or use any false writing or document knowing that it contains any materially false, fictitious or fraudulent entry,

in any matter within the jurisdiction of one of the three branches of the federal government.

The false statements statute is extremely broad. It potentially applies to virtually any lie to the federal government. Unlike perjury, you don’t have to be under oath. The government does not need to be harmed or to have relied on your statement in any way. The lies may be written (as on an SF-86) or verbal.  (Martha Stewart and Scooter Libby were both convicted under 1001 for lying during FBI interviews.)

Sometimes the false statement itself is part of the central misconduct in a case. If I lie on an application for a government grant or contract, the lie is an integral part of my criminal scheme to cheat the government out of something. False statements may be one of the statutes used to prosecute such a scheme, along with mail or wire fraud or other appropriate charges.

But sometimes a violation of section 1001 falls into the category of a cover-up crime, similar to perjury or obstruction of justice. In such a case the false statement is a secondary offense that conceals some other underlying misconduct. That’s the allegation in the investigations involving Trump officials. The claim is they lied on the SF-86 in order to conceal underlying contacts with the Russians that may have been improper — or at the very least embarrassing.

False Statements on a Security Clearance Form

To convict under section 1001, the government must prove the following elements beyond a reasonable doubt:

1) The defendant made a false statement, used a false document or writing, or concealed facts through a trick, scheme, or device;

2) The false statements or concealed facts were material;

3) The statement or concealment took place in a matter within the jurisdiction of one of the three branches of the federal government; and

4) The defendant acted knowingly and willfully.

Let’s consider how these elements would be met in a hypothetical case involving failure to disclose foreign contacts on an SF-86.

1) False Statement, Writing, or Concealment

The first requirement is that the statement be false. That may seem a bit obvious. But as it is with the related crime of perjury, the requirement of actual falsity is important. It means there is no room for ambiguity or uncertainty. If a question or answer is open to different interpretations, a statement that initially appears false may not be.

The statute prohibits making false statements and using false documents. The SF-86 asks whether the applicant has had any contact with foreign representatives in the past seven years and asks the applicant to check “yes” or “no.” Checking “no” could be a false statement under section 1001(a)(2) if in fact such contacts had occurred.

Section 1001(a)(1) also prohibits concealing material facts through a “trick, scheme, or device,” even in the absence of outright lies. This portion of the statute likely would also come into play in a case involving failure to disclose meetings with foreign officials. The SF-86 requires the applicant to list the details about any foreign contacts. Failing to list those meetings could qualify as concealment of material facts.

Because there is no general duty to speak to the government, the concealing material facts theory may be used only when the defendant is under a duty to disclose the facts in question. In this case the obligation to disclose is readily found in the requirements of the SF-86 itself. Those who choose to complete the application are required to provide all relevant information.

2) Materiality 

As with the related crime of perjury, the false statements or concealed facts must be material. The law does not punish lies that are trivial or irrelevant.

Materiality is defined very broadly. The statement need only have the potential to affect the decision of the agency to which it is made. There is no requirement that the statement actually affected any outcome, that it was believed, or that the government relied on it in any way. In other words, materiality is judged based on the nature of the statement, not on any actual impact that it had.

In this case materiality would be clear. A primary purpose of the SF-86 is to reveal any potential foreign entanglements that might pose a security risk. Information about contacts with Russian officials, especially so close to the election, would undoubtedly have the potential to affect the decisions of those doing the background investigation. Lying about or concealing that information could therefore violate the statute.

3) Within the Jurisdiction of the Federal Government  

The statement or concealment also must be in a matter within the jurisdiction of one of the three branches of the federal government. “Jurisdiction” is broadly defined. It simply means the agency or office to which the statement is made has some authority to act on the matter in question.

This requirement serves to establish a basis for federal criminal jurisdiction. The lies must be in connection with business of the federal government. Lying to your boss, or your neighbor, or even to a state agency is generally not going to fall within the statute.

In this case the jurisdiction requirement would be easily satisfied. The SF-86 is submitted to the Executive branch, which has the authority to act on the information and investigate whether to grant a security clearance. Any statements or concealment on the SF-86 are plainly in a matter within the jurisdiction of the Executive branch.

4) Knowing and Willful 

As with so many white collar offenses, the intent requirement is where the rubber meets the road. In any case involving an allegedly false SF-86, the key issue would be proving the defendant’s state of mind.

The knowing and willful requirement means the lies or concealment must be intentional and done with a bad purpose. The statute does not apply to mistakes or inadvertent failures to disclose. It doesn’t apply if a person was simply confused or misunderstood the question. It doesn’t apply if he failed to disclose the relevant information because he forgot it.

Courts generally interpret the “willful” requirement to mean the defendant knew not only that the statement was false but also that making the false statement was unlawful. That would not be much of a hurdle in an SF-86 case. The form itself warns that false statements or concealment can be a criminal offense. Any applicant would certainly know that foreign contacts are critical information when it comes to granting a security clearance.

The Defense: Lack of Criminal Intent

Attorney General Jeff Sessions

At this point it may be undisputed that SF-86 forms filed by various Trump officials are inaccurate. But filing a false form is not automatically a crime. The issue will be why the information was missing. The government would bear the burden of proving beyond a reasonable doubt that a defendant deliberately sought to lie about or conceal the foreign contacts.

Attorney General Sessions has claimed officials conducting his background investigation told him he did not need to report some of his contacts with foreign officials. If this is true, it could be a defense. It suggests Sessions did not act willfully because he did not believe failing to include that information was unlawful. Even if the advice were incorrect, that would not matter if Sessions believed he was properly filling out the form.

Jared Kushner apparently has claimed he forgot about some of his meetings with Russian officials. If he omitted foreign contacts because he honestly forgot about the meetings, that too would be a defense. Again, it demonstrates a lack of intent. If he did not recall the meetings when he completed the form, then he did not willfully conceal the information.

Michael Flynn may also claim he forgot about various Russian contacts. Or he may claim he did not believe they needed to be disclosed. His position is unclear at this point, because he has declined to speak with investigators unless he is granted immunity.

To prove a crime the government would need to establish that a defendant was not forgetful or acting on outside advice but was deliberately and wrongfully trying to conceal the information. Absent some direct evidence (such as statements by the defendant), the proof may consist of circumstantial evidence that ultimately makes innocent explanations completely implausible.

Whatever the outcome of the investigation into the Russian contacts themselves, the potential false statements are a separate investigative track. Even if the underlying contacts end up being perfectly innocent, lying about those contacts could be criminal.

People in D.C. are familiar with the maxim that sometimes the cover-up is worse than the original misconduct. The Independent Counsel will determine whether that’s the case here.

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Judge Gorsuch, White Collar Crime, and the Legacy of Justice Scalia

The confirmation battle over Neil Gorsuch, President Trump’s pick to fill the vacant seat on the U.S. Supreme Court, promises to be ugly. All aspects of his record will be thoroughly dissected — and likely distorted — by both political parties. Looming over the proceeding is Democratic anger over the Merrick Garland nomination and the threat of Republican Senators to invoke the “nuclear option” to break any Democratic filibuster. It’s destined to be one of those political knife fights that reminds everyone why they hate Washington.

Partisans on both sides will be trying to predict how a Justice Gorsuch might rule on any number of hot-button issues. But here at Sidebars we are particularly interested in how Gorsuch’s presence on the Supreme Court might influence the law of white collar crime. So I spent some time this week reading opinions written by Judge Gorsuch on the 10th Circuit Court of Appeals in cases involving white collar offenses such as mail and wire fraud, public corruption, obstruction of justice and money laundering, to see if I could glean anything from those decisions.

I didn’t find anything particularly remarkable. Most of the white collar cases where Judge Gorsuch wrote the opinion for a three-judge panel ruled in favor of the government, but that’s true of most criminal appeals. Most of the decisions were unanimous. That’s also not unusual, but at least it suggests a judge who generally colors within the lines of established precedent and is not a bomb-thrower writing dissents advocating extreme positions.

One thing I definitely learned is that Judge Gorsuch is indeed a terrific writer, as many others have noted. His opinions are clear, concise, and free of legal jargon. They are a pleasure to read, which is saying something when it comes to judicial opinions. In that regard he reminds me of Justice Kagan, in my view currently the best writer on the Court. That’s something I really admire — although I guess if you fear a Justice Gorsuch is going to gut your fundamental liberties it’s cold comfort to know he’ll do it with great style and clarity.

In any event, it appears unlikely that any of Judge Gorsuch’s opinions in white collar cases will be particularly controversial or a focus of his confirmation hearing. But that doesn’t mean there is nothing we can learn about how Justice Gorsuch might approach such cases at the high court.

Those who have studied or worked with Judge Gorsuch and know him best describe him as a judge in the mold of Antonin Scalia, the Justice whose seat he would assume. The opinions and other materials I reviewed certainly support that characterization. And if Justice Gorsuch does follow in the footsteps of Justice Scalia when it comes to criminal law, it could lead to some interesting and potentially surprising results.

Antonin_Scalia_Official_SCOTUS_Portrait

Justice Scalia’s White Collar Legacy

When it comes to Justice Scalia and criminal law, it’s complicated. Although conservative, he was definitely not a “hanging judge” ruling against criminal defendants at every opportunity. On the contrary, Scalia’s strict approach to statutory and constitutional interpretation often resulted in decisions that favored criminal defendants – and often led him to side with some of the most liberal members of the Court.

In constitutional law, Justice Scalia’s originalist approach made him suspicious of expansive notions of government power and protective of the rights of criminal defendants embodied in the text of the Constitution. In areas such as the right of defendants to confront witnesses against them (for example, Crawford v. Washington), the right to a jury trial (Blakely v. Washington), and the right to be free from unreasonable searches and seizures (Florida v. Jardines and Kyllo v. United States, for example), Scalia was a powerful voice warning against government encroachment on these fundamental constitutional liberties. On the other hand, when it came to doctrines he considered judicial inventions not found in the text of the Constitution – such as the exclusionary rule and right to Miranda warnings – he was much less sympathetic.

White collar cases more often involve the interpretation of statutes, not the Constitution. And white collar statutes are notorious for being broad and somewhat vague, using sometimes fuzzy terms such as “fraud” that are not otherwise defined. Justice Scalia authored a number of significant white collar opinions and dissents. His strict textualist approach generally led him to read white collar statutes narrowly. He was skeptical of prosecutors’ attempts to fashion expansive theories of criminal liability not directly spelled out in the statutes. Some Justices are much more willing to hold that courts should flesh out the parameters of broadly-worded criminal laws; Scalia insisted that crimes had to be specifically defined by Congress, not by judges.

For example, Justice Scalia was a long-time critic of a popular species of mail and wire fraud known as honest services fraud. Frequently used in prosecution of state and local corruption, it charges that victims were defrauded not of money or property but of their intangible right to the honest services of a politician or other individual who owed them a duty. Justice Scalia maintained throughout his career that the idea of “honest services” was too amorphous to support criminal liability and failed to provide adequate notice about what conduct was prohibited.

In Skilling v. United States in 2010 the Court responded to vagueness concerns by narrowing honest services fraud liability to cases involving bribes and kickbacks. Justice Scalia wrote a separate opinion arguing that the Court should go further and declare the honest services fraud statute unconstitutionally vague in all circumstances. (He even referred to it as “so-called honest services fraud,” a locution that President Trump might appreciate.)

In another leading mail fraud case, Schmuck v. United States (yes, that’s the real name), the issue was whether the mailings proved by the prosecution actually furthered the scheme to defraud as required by the statute. The majority adopted a broad reading of the “in furtherance” requirement and upheld the convictions. Justice Scalia dissented, criticizing the prosecution for what he deemed an overly-expansive view of the mail fraud statute. His opinion arguing that the defendant’s convictions should be reversed was joined by Justices Brennan and Marshall, two of the most liberal Justices of the 20th century.

Justice Scalia similarly favored a narrow reading of a public corruption theory called extortion under color of official right under the Hobbs Act. In 1992 in Evans v. United States, the majority held that extortion under color of official right was basically equivalent to bribery. Justice Scalia joined a dissent by Justice Thomas arguing that bribery and extortion are distinct crimes and that the majority opinion wrongfully resulted in a vast expansion of federal criminal law and the power of federal prosecutors.

Of course, strict interpretation of the statute sometimes meant the defendant lost. For example, Brogan v. United States involved the false statements statute that criminalizes lying to the government about material matters. Lower courts had created an exception to the statute, known as the “exculpatory no,” holding that prosecution could not be based on a defendant’s mere denial of guilt. Justice Scalia wrote the majority opinion holding the text of the statute contains no such exception and stating “[c]ourts may not create their own limitations on legislation, no matter how alluring the policy arguments for doing so . . . .” (He also noted the defendant’s concession that “under a ‘literal reading’ of the statute he loses.” If you had made that concession and then saw that Justice Scalia was writing the opinion in your case, you knew it was not going to be a good day.)

Recently in Yates v. United States the defendant was charged with obstruction of justice, a twenty-year felony, for throwing overboard some undersized fish that were evidence he had violated fishing regulations. During oral argument Justice Scalia expressed outrage that the government had brought such a case. But in the end he refused to join the five-Justice majority reversing the conviction on the questionable ground that fish were not “tangible objects” within the meaning of the law. Instead he joined with Justice Kagan in dissent, arguing that the plain wording of the statute compelled a ruling in favor of the government. He clearly thought the prosecution was misguided, but did not believe the solution was for the Court to adopt a strained interpretation of the statute that was contrary to its plain language.

gorsuch

Judge Gorsuch and White Collar Crime

Would Justice Gorsuch channel Justice Scalia when it comes to white collar crime? It’s always a bit dicey trying to predict how a judge would behave on the Supreme Court based on his appellate opinions. Appellate judges, of course, are bound by Supreme Court precedent, so they generally don’t have the same freedom and opportunities to decide novel legal questions. But there is reason to believe Justice Gorsuch’s approach would indeed look a lot like Justice Scalia’s.

Judge Gorsuch shares Justice Scalia’s belief in strict construction of the Constitution according to the intent of its framers. In a widely-quoted concurrence in Cordova v. City of Albuquerque, he wrote:

Ours is the job of interpreting the Constitution. And that document isn’t some inkblot on which litigants may project their hopes and dreams . . .  but a carefully drafted text judges are charged with applying according to its original public meaning.

Judge Gorsuch also appears to share the concerns of Justice Scalia about overcriminalization and sweeping criminal statutes that may place too much power in the hands of prosecutors. In a law review article in 2010 Judge Gorsuch wrote: “What happens to individual freedom and equality—and to our very conception of law itself—when the criminal code comes to cover so many facets of daily life that prosecutors can almost choose their targets with impunity?”

Judge Gorsuch’s strict textualist approach to statutory interpretation has occasionally led him, as it did Justice Scalia, to rulings that narrowly interpret criminal statutes and favor criminal defendants. One example involves a statute that makes it a crime for an individual with a felony conviction to possess a firearm, 18 U.S.C. § 922(g)(1). The 10th Circuit has agreed with the majority of courts of appeal that the government in such a case needs to prove only that the defendant knew he possessed a gun and does not need to prove the defendant knew he had a felony conviction.

Judge Gorsuch disagrees. In a classic Scalia-esque statutory interpretation argument, he has argued that the plain language of the statute requires the government to prove both – an interpretation that, if adopted, would favor defendants and place a heavier burden on the government. In one of the cases, United States v. Games-Perez, notice Judge Gorsuch’s language in his concurrence expressing disagreement with his colleagues:

Our duty to follow precedent sometimes requires us to make mistakes. Unfortunately, this is that sort of case. . . .

I recognize that precedent compels me to join the court’s judgment. But candor also compels me to suggest that we might be better off applying the law Congress wrote than the one [the court’s earlier decision] hypothesized. It is a perfectly clear law as it is written, plain in its terms, straightforward in its application. Of course, if Congress wishes to revise the plain terms of [the statute] it is free to do so anytime. But there is simply no right or reason for this court to be in that business.

Those final two sentences could have been lifted straight out of a Justice Scalia opinion: the statute says what it says, and if there’s a problem it is up to Congress to fix it, not the court.

But what a marked contrast to the writing style of Justice Scalia, who was famous for disagreeing with his colleagues in the most sarcastic and acerbic terms. In addition to being a gifted writer, Judge Gorsuch displays much more of a traditional judicial temperament than the man he would replace.

Later, dissenting from a denial of a rehearing en banc in the same case, Judge Gorsuch wrote a impassioned defense of the right of criminal defendants to be convicted only if the government proves every element of the offense: “There can be few graver injustices in a society governed by the rule of law than imprisoning a man without requiring proof of his guilt under the written laws of the land.”

Another 10th Circuit case, United States v. Makkar, involved a prosecution under the analogous drug act, which criminalizes selling substances that mimic a listed controlled substance. In another pro-defendant decision, Judge Gorsuch reversed the convictions and held that the plain language of the statute requires the government to prove the analogous substance had the same chemical structure as the controlled substance, not merely that it had the same effects on the user.

In addition to strictly interpreting criminal statutes, Judge Gorsuch, like Justice Scalia, has a history of holding prosecutors’ feet to the fire and insisting they play by the rules. For example, in United States v. Farr, a tax fraud case, Judge Gorsuch ruled in favor of the defendant and held that prosecutors had improperly convicted him under a theory of tax fraud different from the one that was charged in the indictment.

In a case that might be of interest in the current political environment, Judge Gorsuch also wrote the opinion in United States v. Hasan, reversing the perjury conviction of a Somali refugee. He ruled the trial court had erred by finding the defendant was not entitled to an interpreter when testifying in the grand jury. This was under the extremely deferential “plain error” standard of review, and it would have been easy for an appellate judge simply to defer to the judgment of the trial court. If opponents try to portray Judge Gorsuch as a cold-hearted conservative who cares nothing about the most vulnerable among us, we might see this opinion trotted out in response.

Overall, Judge Gorsuch’s opinions related to criminal law are largely uncontroversial and closely adhere to governing precedent. He definitely takes a strict approach to the interpretation of texts. He does not appear to be results-oriented and will not hesitate to rule against the government and in favor of a criminal defendant if he believes that is required. His approach to criminal law in general and white collar crime in particular does seem to be very similar to Justice Scalia’s.

At least as far as criminal law is concerned, Democrats thinking about opposing his nomination should probably consider they could do a lot worse.

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Cover-up Crimes

What do one of baseball’s greatest players, a former senior White House official, a domestic diva and Fortune 500 CEO, and a former Speaker of the House all have in common?

This is not the beginning of some bad joke about how they all walk into a bar. Barry Bonds, Scooter Libby, Martha Stewart, and Dennis Hastert all were investigated for possible criminal misconduct and ended up being charged not with that misconduct but with other crimes they committed to try to conceal their actions or thwart the investigation.

Barry Bonds was implicated in baseball’s steroids scandal. He ended up being indicted not for using illegal steroids but for perjury and obstruction of justice after allegedly lying in the grand jury about his steroid use. (He was found guilty of one count of obstruction, but that conviction was recently overturned on appeal.)

I. Lewis “Scooter” Libby, who was Chief of Staff to former Vice President Dick Cheney, was implicated in the potentially illegal leak of the identity of a covert CIA agent, Valerie Plame. He was ultimately not charged with the leak but was convicted of perjury, obstruction of justice, and false statements for lying to the grand jury and the FBI about his actions.

Martha Stewart was suspected in 2002 of insider trading after she dumped her stock in a company called Imclone the day before bad news from the FDA caused the stock’s price to plummet. She and her broker Peter Bacanovic ultimately were not indicted for insider trading, but were convicted of multiple counts of false statements, perjury, and obstruction of justice for concocting a phony story about why she sold the stock and then lying to the FBI and SEC.

And Dennis Hastert, the former U.S. Speaker of the House, allegedly had sexual contact with students decades ago while he was working as a high school teacher and coach. He was recently indicted not for any sexual misconduct but for lying to the FBI about his apparent hush-money payments to one of his victims and for structuring his bank transactions to conceal those payments. (Hastert recently pleaded guilty to one count of structuring bank transactions and is awaiting sentencing.)

It’s a legal maxim, particularly in the post-Watergate era, that often the cover-up is worse than the crime. But cover-up crimes are the Rodney Dangerfield of the white collar world: they don’t get any respect. You frequently hear them derided as “gotcha” crimes, or as something prosecutors charge only when they can’t “get” a defendant for anything else. There is a widespread perception that these crimes are somehow less serious than many other white collar offenses.

But the truth is that prosecution of cover-up crimes is vitally important to the proper functioning of the justice system. It’s time these crimes got the respect they deserve.

fingers crossed 2

The Leading Cover-up Crimes

Perjury – 18 U.S.C. §§ 1621, 1623:  Perjury, or lying under oath, is the classic cover-up crime. There are two principal federal statutes: 18 U.S.C. § 1623 applies only in federal judicial and grand jury proceedings, while 18 U.S.C. § 1621 applies in any proceeding where an oath is authorized by law, including Congressional hearings and investigations by agencies such as the SEC.

Perjury requires that the defendant was under oath, made a false statement about something material to the proceeding, and knew that it was false at the time. Mistakes or innocent failures of recollection are not perjury; it requires a knowing lie.

Perjury is the narrowest of the cover-up crimes because of the oath requirement, which sharply limits the types of proceedings in which it applies. It is also notoriously difficult to prosecute. Perjury requires strict proof that the defendant was deliberately lying and that there was no room for confusion, misunderstanding or ambiguity. Pinning down evasive witnesses is not easy. As a result, testimony that is unresponsive or even misleading may not be perjury because nothing is said that is provably false.

A well-known example of this occurred during the investigation of President Bill Clinton, when he denied under oath ever having “sexual relations” with Monica Lewinsky. It was later determined, of course, that the two did have a relationship that was sexual in nature. But the questioner’s convoluted definition of “sexual relations” coupled with a failure to pin Clinton down with follow-up questions resulted in sworn testimony that was potentially misleading but likely not perjury.

False Statements – 18 U.S.C. § 1001:  The false statements statute is perjury’s more sweeping cousin, and broadly criminalizes lying to the government. The statement must be knowingly false, must be in a matter within the jurisdiction of one of the three branches of the federal government, and must be material, or potentially important. Most notably, there is no requirement that the statement be under oath. False statements can also apply to defendants who do not actually lie, but who conceal material facts from the government through a trick, scheme or device when they were under a legal obligation to reveal those facts (such as a reporting requirement created by statute, for example).

Martha Stewart, Scooter Libby, and Dennis Hastert all were charged with false statements for lying to the FBI in unsworn interviews. Lies in government contracting documents, in reports to administrative agencies, in applications for government programs, and in any other communication with the federal government may potentially result in false statements charges.

Obstruction of Justice – 18 U.S.C. §§ 1503, 1505, 1512, 1519:  A number of different statutes apply to obstruction of justice; I’ve listed only the principal ones. They differ in the types of proceedings to which they apply and in some other particulars, but also overlap a great deal. In general, obstruction of justice means the defendant knowingly and wrongfully endeavored to impair, obstruct or impede the due administration of justice in some proceeding.

Obstruction of justice covers a wide variety of conduct, including tampering with witnesses, threatening or injuring judges or jurors, and destroying, altering or concealing evidence. It may also apply to lying to investigators or in official proceedings with the intent to obstruct, and to that extent can overlap with both perjury and false statements. In the cases of Scooter Libby and Martha Stewart, for example, the defendants were charged with false statements for lying to investigators and were also charged with obstruction of justice for an overall pattern of conduct during the investigation that included, among other things, telling those lies.

Decorative Scales of Justice in the library

Prosecution Priorities and Cover-up Crimes

Cases charging cover-up crimes are often met with a reaction that ranges from skepticism to outrage. When Barry Bonds was prosecuted for perjury and obstruction of justice, there was a lot of commentary suggesting that the case was just an attempt by the prosecutors to “get” Bonds for something trivial because they didn’t like him. When Hastert was recently indicted, some suggested the charges were not appropriate and that Hastert was being unfairly singled out. And even more than a decade after her trial, it’s not unusual to hear someone express outrage over the fact that Martha Stewart was prosecuted.

The sense that these are not serious crimes is widespread. I’ll never forget seeing a sitting U.S. Senator on cable news, when the Scooter Libby case was going on, saying something like, “If there are indictments, I hope it’s for a real crime, and that the prosecutors don’t just go after someone on some technicality like perjury.”

But prosecutors certainly don’t see cover-up crimes as mere technicalities or trivial offenses. These often-maligned charges play a number of important roles.

First, when included in a case with other charges, cover-up crimes may provide valuable evidence of criminal intent. In many white collar cases, proof of intent is the critical issue. It’s often pretty clear what happened and who did what; in a contracting fraud case, for example, the paper trail may easily establish that the defendant overbilled the government. The key issue is likely to be not what happened, but why: the defense will claim it was just a mistake or accounting oversight, not a fraud.

Cover-up crimes may provide powerful evidence of intent in such cases: people generally try to conceal their activities when they realize they’ve done something wrong. If the defendant in our contracting case shredded documents when they were subpoenaed, or tried to intimidate a witness, or lied to investigators, those cover-up crimes provide strong evidence of guilty knowledge. The argument is simple: if they thought they did nothing wrong, why did they try to cover it up?

In other cases, cover-up crimes may serve the interest of justice by ensuring that defendants who engaged in criminal conduct that cannot now be prosecuted are still punished. For example, a defendant may have committed crimes that are now outside the statute of limitations, a key witness may have died making prosecution impossible, or some other critical piece of evidence may be unavailable. If during an investigation of that other criminal activity the defendant engages in a cover-up crime, bringing those charges can ensure that the defendant does not entirely escape the criminal consequences of the earlier activity.

Charges in such a case do not unfairly circumvent the statute of limitations. The defendant is not being charged for the original misconduct. But the cover-up crime can be seen as part of an ongoing course of conduct that includes the earlier bad acts; without those acts, there would be nothing to cover up. It’s perfectly appropriate to hold the defendant accountable for the cover-up that arises from earlier misconduct that cannot now be punished — particularly when, as in the Hastert case, for example, that prior misconduct was particularly egregious.

But more fundamentally, even when such considerations are not in play, pursuing cover-up charges plays a crucial role in the criminal justice system. Prosecuting such crimes is important because these offenses strike at the very foundation of the justice system.

The justice system, of course, depends upon the ability of finders of fact to receive all relevant and appropriate information necessary to decide a particular case. Cover-up crimes undermine that ability.

If witnesses lie in the grand jury, lie on the witness stand, destroy evidence, tamper with witnesses, lie to investigators, or otherwise interfere with the due administration of justice, there must be consequences. If not, such behavior becomes the logical choice of anyone who has some reason to fear the truth.

Prosecution of cover-up crimes, by seeking to deter such behavior, preserves the fundamental operation of the justice system itself.   If these crimes took place with impunity it would become impossible to investigate or prosecute anything effectively, whether white collar crime, violent crime, or terrorism. The effective functioning of the justice system depends upon people telling the truth and complying with the system’s lawful demands — and knowing they will pay a price if they do otherwise.

You can bet that every CEO knows what happened to Martha Stewart when she tried to lie her way through an SEC and FBI inquiry. Every government official knows what happened to Scooter Libby when he tried to obstruct an FBI investigation at the highest levels of government and lied about it in the grand jury. Such prosecutions can have a tremendous deterrent effect, and for that reason are tremendously important.

These crimes are not mere technicalities; they seek to preserve those aspects of our justice system upon which all else rests. That’s why prosecutors, who make their living within the justice system and working to further its goals, take these crimes so seriously, even if others do not always agree. And that’s why prosecution of cover-up crimes deserves a little more respect.

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From Speaker to Smurf: Examining the Charges Against Dennis Hastert

The criminal charges against Dennis Hastert include structuring and false statements

Former Speaker of the House Dennis Hastert

The criminal charges against former Speaker of the House Dennis Hastert have raised some interesting questions, including questions about whether the case should have been brought at all. Hastert was arraigned last week in Chicago on an indictment charging him with one count of illegal structuring of bank transactions and one count of lying to the FBI. Hastert served in Congress from 1981 to 2007 and was Speaker from 1999 to 2007.

The indictment charges that over several years Hastert withdrew large amounts of cash in order to make payments to someone identified only as “Individual A.” Hastert allegedly had agreed to pay Individual A $3.5 million to compensate for, and keep concealed, prior misconduct by Hastert against Individual A. Although the indictment does not reveal the nature of the misconduct, several news outlets have reported that it involved Hastert sexually abusing a male student when Hastert was working as a high school teacher and wrestling coach in Yorkville, Illinois between 1965 and 1981.

From June 2010 through April 2012, Hastert allegedly made fifteen separate withdrawals of $50,000 in cash from several different banks and gave that cash to Individual A. Federal regulations require banks and other financial institutions to report any cash transactions in excess of $10,000, and in April 2012 the banks apparently questioned Hastert about the large cash withdrawals.

After the banks started asking questions, Hastert allegedly began withdrawing cash in amounts just under $10,000, in order to avoid the bank reporting requirements. The indictment charges that he made at least 106 such withdrawals between 2012 and 2014, again providing all the cash to Individual A. Hastert is alleged to have paid a total of $1.7 million in cash to Individual A over more than four years.

In December 2014, the FBI interviewed Hastert concerning his unusual banking transactions. During that interview, Hastert told the FBI agents he made the withdrawals because he did not trust the banking system and that he was keeping the cash for his own use.

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The Criminal Charges Against Dennis Hastert 

Structuring: The structuring statute that Hastert is charged with violating, 31 U.S.C. § 5324, is part of the system of laws and regulations used to combat money laundering. In today’s economy, legal transactions involving large amounts of currency are relatively rare. But certain kinds of criminal activity, such as narcotics trafficking and organized crime, may generate enormous quantities of cash.

Having all of this cash is no fun if you can’t spend it without arousing suspicion. Criminal operations therefore need to get their cash into the legal financial system and make it appear legitimate. That’s where the money laundering laws come in. Money laundering takes aim at criminal activity from a different direction: it focuses not on the crimes that generate the money but on trying to freeze criminal proceeds out of the banking system and make it impossible for criminals to enjoy the fruits of their illegal activity.

As part of this effort, banks are required to file a Currency Transaction Report (“CTR”) providing details about any cash transaction in excess of $10,000. This allows the government to track large flows of currency through the economy – not because dealing in cash is illegal, but because it is unusual and suggests potential criminal activity. The filing of a CTR does not mean a crime has been committed. It is simply a flag that something is going on that might merit a closer look.

Criminals would obviously prefer that CTRs not be filed, because they do not want to draw attention to themselves and their large, unexplained piles of cash. Thus the crime of structuring was born.

Suppose I am a drug dealer with $100,000 in cash from my illegal drug operations. I’d like to get that cash into a bank account so I could write checks, make wire transfers, and otherwise spend it without arousing suspicion. But if I take my duffel bag full of $100,000 in white-powder-encrusted tens and twenties and plop it down on the bank teller’s counter, people are (hopefully) going to start asking uncomfortable questions – not to mention filing CTRs.

One way I can avoid this problem is to get eleven of my associates to take $9,000 each and deposit the money in eleven different banks. No CTRs will be filed, and all of my money is now in the banking system ready for me to enjoy. This is the crime of structuring: designing your bank transactions specifically to avoid the filing of CTRs.  It applies to both deposits and withdrawals.

Structuring is also known as “smurfing,” from the cartoon involving those cute little blue creatures, “The Smurfs.” I’m not sure how this nickname arose, but it may have to do with the image of many people scurrying around town to different banks to make deposits, just as the Smurfs used to scurry around their little Smurf village doing . . . whatever Smurfs do.

Hastert appears to have been engaged in textbook smurfing. He was withdrawing $50,000 in cash at a time, until the bank started asking questions. Then he deliberately reduced the amount of his withdrawals to just under $10,000, in order to avoid any more questions and to avoid the filing of CTRs.

False Statements:  The other charge in the indictment is a violation of 18 U.S.C. § 1001, false statements. This is a widely-used white collar statute that prohibits knowingly providing material false information to the government. It differs from, and is much broader than, perjury, because statements do not need to be under oath. Lying to the FBI during an interview about something material to their investigation falls squarely within § 1001, and that is the basis of the charge against Hastert.

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Issues Raised by the Hastert Indictment

One thing I find remarkable about this and many other white collar cases is that an accomplished and savvy person – in this case, someone who for years was third in line to be U.S. President — ends up committing such a dumb crime. As a former Member of Congress, Hastert had to know that his cash transactions would raise flags. Even if he were determined not to leave a paper trail by simply writing checks, he could have used any number of more sophisticated and still secret ways to pay off Individual A. And when the FBI comes calling, why not decline to be interviewed, or simply call your lawyer? Is there some hidden, psychological desire to be caught involved here? If Dostoevsky were still around and had a blog, he’d have a field day.

An interesting question that remains unanswered is: how did the government learn about Individual A and his deal with Hastert? A bank report likely led the FBI to focus on Hastert’s financial transactions, but how did they progress from learning about the cash withdrawals to learning what Hastert was doing with the money? Did Individual A came forward independently (seems unlikely) to report the arrangement to the FBI? Did they tail Hastert and witness him making a payment to Individual A? Did they use phone records or some other investigative tool? We don’t yet know.

A related question concerns the treatment of Individual A by the prosecutors. Will he be charged with any crimes? Has he already pleaded guilty, with the proceeding under seal? Or did the government conclude that he committed no crime, or agree to grant him immunity?

Some have argued that Individual A was plainly guilty of blackmail or extortion, and some (including Hastert himself) have suggested that Hastert was a victim, too. But we would need to know a lot more about the dealings between Hastert and Individual A, and how their arrangement came about, before making such a judgment. A mutual, consensual agreement, similar to an out-of-court settlement, would not amount to extortion.

Although there are lots of questions, it appears we won’t learn much more about Individual A any time soon, if ever. Prosecutors apparently have sought a protective order to cover any information they provide to the defense, to ensure that no one not involved in the case can see the material. If prosecutors have some kind of agreement with Individual A, it appears to include preserving his privacy for as long as possible.

Another interesting aspect of the case is the somewhat unusual application of the structuring laws. The money involved in Hastert’s cash transactions was not generated by criminal activity; this was “clean” money that legitimately belonged to Hastert. To that extent, the structuring charge falls outside of the heartland of activity at which the statute was primarily aimed.

Nevertheless, Hastert’s actions are a clear-cut case of smurfing. Unlike some other money laundering statutes, structuring does not require that the money involved be criminal proceeds. The purpose of the law is simply to enable the government to track large flows of cash through the banking system. Structuring thwarts that government interest, whether the money is clean or dirty. Even if the source of the cash is perfectly legal, large withdrawals may be a sign of other criminal activity.

The government had legitimate reasons to be questioning Hastert’s cash withdrawals. The transactions could have indicated that he was being extorted, perhaps even over something related to his time in Congress, or that he was involved in some other kind of criminal activity.   That the government was asking these questions does not indicate any kind of overreach.

Should Hastert Have Been Prosecuted?

The issue then becomes whether, once the nature of the transactions was revealed, criminal charges should have been filed. In the wake of the indictment, some have questioned the decision to prosecute. They argue that Hastert appears to be a victim, that as a former powerful politician he has been unfairly singled out, and that the case is not a wise use of prosecutorial resources.

It’s certainly true that not every instance of structuring results in a criminal prosecution. And if every witness who lied to the FBI during an interview were charged with false statements, federal prosecutors would have time to do little else.

Deciding whether to file charges in such a case requires the sound exercise of prosecutorial discretion. On this point I agree with another former AUSA, Jeffrey Toobin, who wrote in the New Yorker that he would not have hesitated to bring this case.

A number of factors would enter into the charging decision. One would be the length of time and the number of violations – more than a hundred structured transactions over more than two years. This was not a one-off situation; Hastert knew what he was doing and did it repeatedly over a long period of time.

Another factor would be the nature of the misconduct that Hastert was concealing. Any sexual abuse that took place while he was a high school teacher could almost certainly not be prosecuted now due to the statute of limitations. But if Hastert committed more recent crimes in order to cover up that activity, prosecuting those crimes can serve the interests of justice.

Prosecution of cover-up crimes such as false statements or obstruction of justice does sometimes serve to ensure that defendants who committed crimes that are too old to be prosecuted do not entirely escape punishment. Particularly where the past criminal conduct was so egregious, that would weigh heavily in the decision about whether to prosecute. To me, at least, as a prosecutor this charging decision would feel very different if Hastert had been covering up past conduct that was legal but just embarrassing, such as an extra-marital affair.

Another factor in the charging equation would be Hastert’s outrageous lies to the FBI. This was not a hapless, unsophisticated defendant ensnared by some wily FBI agents. A former Member of Congress knew what he was doing, knew his legal options in terms of talking to the FBI, and knew the potential consequences of lying.

It’s also worth noting that the prosecutors, if they were truly vindictive and out of control, could have been a lot harder on Hastert. They likely could have charged him with more than 100 counts of structuring, one for each withdrawal. Instead they chose to charge the entire two-year structuring scheme as a single count, exposing him to a maximum of five years in prison for structuring rather than more than 500.

Personally I find it hard to feel sorry for Hastert. But to the extent the critics are correct and Hastert deserves some sympathy for the situation he was in, those considerations may be taken into account when it comes to sentencing, or in fashioning an appropriate plea agreement.  That doesn’t mean the charges themselves were not fully appropriate.

And finally, speaking of plea agreements, a quick guilty plea is by far the most likely outcome in this case. There’s not much in the way of a defense apparent from the indictment, and Hastert will almost certainly want to avoid a public trial where Individual A would testify about the past misconduct and their agreement. Hastert’s best chance to avoid that information becoming public is to take a quick plea.

But whether or not that happens, information like this has a way of coming to light. I expect before the case is over we will know a great deal more about Individual A and the circumstances that brought Hastert to this unhappy point.

Update 10/28/15:  Hastert today pleaded guilty to one count of structuring his banking transactions. 

Update 4/27/16: Hastert was sentenced today to fifteen months in prison, followed by two years of supervised release. He was also ordered to receive sex-offender treatments and pay $250,000 in fines. 

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