U.S. Supreme Court Finds That SOX’s Anti-Shredding Provision Does Not Apply To Fish

When one thinks of the Sarbanes-Oxley Act of 2002 (SOX)—a law created to restore trust in the financial markets following the collapse of Enron—red grouper is not usually the first thing that comes to mind. Nevertheless, the Supreme Court recently decided whether the polychromatic ocean fish is considered a “tangible object” under SOX’s document shredding provision.

In 2007, an officer with the Florida Fish and Wildlife Conservation Commission boarded John Yates’ fishing vessel off the Florida coast in the Gulf of Mexico and found Mr. Yates had illegally reeled in a number of undersized red grouper. The officer ordered Mr. Yates to segregate and preserve the undersized fish from the rest of the catch and proceed to port where he would be issued a citation for his transgression. Once the officer departed the vessel, Mr. Yates had the diminutive fish thrown overboard and replaced with properly sized fish. The officer uncovered Mr. Yates’ actions, and Mr. Yates was charged with destroying, concealing and covering up the undersized fish to impede a federal investigation, in violation of § 1519 of SOX.

SOX’s § 1519, known as the “anti-shredding provision,” provides that a person may be fined and/or imprisoned up to 20 years if he or she “knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or make a false entry in any record, document or tangible object with the intent to impede, obstruct or influence” a federal investigation. (Emphasis added.) Clearly, shredding financial documents to cover up a white collar crime fits within § 1519. Over the past several years, however, federal prosecutors have applied an expansive interpretation of § 1519 to charge individuals outside of the white collar criminal context with destroying physical evidence to cover up a crime. For instance, federal prosecutors have prosecuted a wide array of crimes—ranging from terrorism to violations of workplace safety laws—under § 1519 for covering up various forms of physical evidence unrelated to objects used to preserve or record information (e.g., destroying cash, automoniles, guns, etc.)

The issue before the Supreme Court was whether the meaning of “tangible object” within § 1519 should be limited only to things used to preserve or record information or, as the government contended, all physical evidence. While the Court acknowledged that the dictionary meanings of “tangible” and “object” would evoke the more expansive interpretation, the Court went on to affirm that the phrase must be read within the context of SOX’s intent. The Court reasoned that SOX’s clear focus and intent was to deter and remedy corporate and accounting malfeasance and cover-ups. Upon this rationale, Justice Ginsberg, writing for the Court in a five-four decision, concluded that the meaning of “tangible object” within § 1519 applies only to those objects used to record or preserve information.

While fisherman around the country can now rest easy knowing that they will not be prosecuted under SOX for destroying evidence of undersized fish by throwing them overboard, the ruling serves as a reminder to those in the corporate and accounting worlds that § 1519 still applies to them if they destroy hard drives, documents and other recording and preservation devices with the intent to cover-up wrongdoing and impede, obstruct or influence a federal investigation. Justice Kagan’s dissent further highlighted § 1519’s “tangible object” definition following the Court’s ruling: a fisherman who dumps undersized fish overboard to avoid a fine cannot be punished under § 1519, yet a fisherman who shreds his vessel’s catch log to avoid a fine for the same reason is culpable under § 1519.