www. NYLJ.com Corporate Update Volume 261—NO. 44 Thursday, March 7, 2019

Corporate Crime False Statements: Prosecutors By William F. Reload a Familiar Weapon Johnson

any remember that underlying crime being investigated. Overview of Statute home maven Martha Today, more than 10 years later, Stewart was convict- Special Counsel Robert Mueller’s In nearly any contact between an ed after trial for her probe into Russian interference in individual and the federal govern- involvement in an the 2016 U.S. elections provides the ment—and especially in any govern- Minsider trading scandal in the mid- most recent and visible proof that ment investigation—the federal false 2000s. What most do not know the false statements and obstruc- statements statute, 18 U.S.C. §1001, or remember is that she was not tion of justice weapon has been applies. Indeed, §1001 is implicated by actually convicted on insider trad- well maintained and remains fully any material statement to an official of ing charges—she was convicted of loaded. Counsel for witnesses in any branch of the federal government making false statements to govern- government investigations would on a matter they are investigating. ment investigators and obstruction be wise to place greater emphasis According to the text of the statute, of justice. That case illustrated, once §1001 makes it unlawful for an indi- again, that one of the most power- Special Counsel Robert Mueller’s vidual: “(a) … in any matter within ful weapons in the federal prosecu- the jurisdiction of the executive, probe into Russian interference in tor’s arsenal is the ability to charge legislative, or judicial branch of the witnesses in government investiga- the 2016 U.S. elections provides Government of the United States, [to] tions with making false statements the most recent and visible proof knowingly and willfully … (2) make to investigators and/or obstruction that the false statements and any materially false, fictitious, or of justice. These charges carry sig- obstruction of justice weapon fraudulent statement or representa- nificant penalties, and are always has been well maintained and tion … .” Unlike the statute governing available if a witness knowingly remains fully loaded. perjury, §1001 contains no require- and corruptly lies, covers up, or ment that the statement be under obstructs, regardless of whether on its significance when advising oath. Moreover, the language of the there is, or ever will be, sufficient clients. statute does not cabin “statement evidence to charge anyone with the This article provides an overview or representation” to strictly verbal of 18 U.S.C. §1001—the federal statute ones; §1001 implicates written rep- prohibiting false statements to federal resentations to the federal govern- William F. Johnson is a partner in the Special Mat- officials—before reviewing the Special ment as well (the statute can be seen ters and Government Investigations Practice Group at King & Spalding. Associate Joseph L. Zales assisted Counsel’s use of §1001 and exploring in the fine print on many standard in the preparation of this article. the future ramifications of its use. government forms). Thursday, March 7, 2019

The Department of Justice’s ual §911 (2012); United States v. Special Counsel’s Use of §1001 Justice Manual provides guidance Lueben, 838 F.2d 751, 754 (5th Cir. to prosecutors on the intent and 1988). Having led the Federal Bureau of materiality requirements of §1001. Before turning to the Special Investigation, held senior positions On intent, the statute requires that Counsel’s recent use of §1001, it is in the Department of Justice, and the false statement be knowingly important to note that although a defended individuals in white-collar and willfully made. Put another false statement under §1001 does investigations, Special Counsel Muel- way: “The statement must have not always rise to level of obstruc- ler is undoubtedly intimately familiar been made with an intent to tion of justice, it can. Indeed, if with §1001. He appears to be bring- deceive, a design to induce belief a knowing and willful false state- ing that familiarity and experience in the falsity or to mislead, but ment of material fact is also made to bear: to date, each of the seven §1001 does not require an intent with an objective to corruptly Trump campaign associates charged to defraud—that is, the intent to influence, obstruct, or impede in Mueller’s investigation has been deprive someone of something by an investigation, the maker of charged with violating §1001. These means of deceit.” Dep’t of Justice, the statement may find himself individuals are: Former Trump cam- U.S. Attorneys’ Manual: Criminal or herself charged with obstruc- paign foreign policy adviser George Resource Manual §910 (2012); tion of justice (under §1505) in Papadopoulos; former White House United States v. Lichenstein, 610 addition to a false statements National Security Adviser Michael Fly- F.2d 1272, 1276-77 (5th Cir.), cert. charge under §1001. (Under 18 nn; former Trump personal attorney denied, 447 U.S. 907 (1980). In two U.S.C. §1505, a felony offense is Michael Cohen; former Trump cam- briefs filed in the Supreme Court committed by anyone who “cor- paign chairman Paul Manafort; former in 2014, DOJ articulated further ruptly, or by threats or force, or associates of Manafort—Alex van der guidance on the willful require- by any threatening letter or com- Zwaan and Rick Gates; and informal ment by expressing its view that munication influences, obstructs, presidential adviser Roger Stone. the maker of the statement must or impedes or endeavors to influ- For almost half of those individuals have known that his or her con- ence, obstruct, or impede the due (Papadopoulos, Flynn, and van der duct was unlawful. Br. in Opp., and proper administration of the Zwaan), §1001 was their only charge. Ajoku v. United States, No. 13-7264 law under which any pending pro- In addition to interview statements (March 10, 2014) 2014 WL 1571930 ceeding is being had before any made to federal officials in the course at *10; Br. In Opp., Russell v. Unit- department or agency of the Unit- of the investigation, the Special Coun- ed States, No. 13-7357 (March 10, ed States, or the due and proper sel is likely also probing federal forms 2014), 2014 WL 1571932 at *6-17. exercise of the power of inquiry filed by those associated with the As for materiality: “It is suffi- under which any inquiry or inves- Trump campaign, including Form cient that the statement have the tigation in being had by either SF-86, the Questionnaire for National capacity or a natural tendency to House, or any committee of either Security Positions. (In a March 21, 2017 influence the determination House or any joint committee of Hearing of the House Intelligence Com- required to be made” at the rel- the Congress.” The accompany- mittee, Ranking Member Adam Schiff evant government agency. More- ing §1515(b) defines “corruptly” requested that Director Comey pro- over, the test for materiality under as “acting with an improper pur- vide a copy of former National Security §1001 is “not whether the false pose, personally or by influencing Adviser Michael Flynn’s SF-86.) Form statement actually influenced a another, including making a false SF-86 includes questions seeking infor- government function, but whether or misleading statement, or with- mation on the preparer’s interactions it had the capacity to influence.” holding, concealing, altering, or and/or paid work on behalf of foreign Dep’t of Justice, U.S. Attorneys’ destroying a document or other governments, entities, or individuals. Manual: Criminal Resource Man- information.”) Relevant to the present discussion, the Thursday, March 7, 2019 questionnaire section of Form SF-86 Yet, §1001 remains one of the fed- such individuals should be reminded begins with the following attestation: “I eral prosecutor’s most reliable and to refrain from speaking with federal have read the instructions and I under- often-used tools. By catching the tar- agents without counsel present, espe- stand that if I withhold, misrepresent, get, subject, or even mere witness in cially when the agents have paid a sur- or falsify information on this form, I a lie to a federal official, a prosecutor prise home visit in the early-morning am subject to the penalties for inac- gains leverage over that individual. or late-night hours hoping to catch the curate or false statement (per U. S. In the blocking and tackling of a fed- witness off guard. The witness often Criminal Code, Title 18, [S]ection 1001) eral investigation, a prosecutor will makes the mistake of providing off- … .” Form SF-86, the Questionnaire for then use that leverage to persuade the-cuff answers to deflect the federal National Security Positions. the individual to plead guilty, or, bet- officials, but those tactics rarely work ter yet, to “flip” and cooperate against because the questioning officials usu- Observations others, ideally those who are more ally have the advantage of examining To the casual observer of the Rus- culpable. Indeed, many have specu- documents and speaking to others sia investigation, Special Counsel lated that the Special Counsel has about the issues before approach- Mueller’s heavy use of—and appar- used §1001 to do just that. ing the witness. As evidenced by ent reliance on—§1001 may seem certain of the charges arising out of like a poor substitute for charges of the Mueller probe, false statements substantive crimes for the under- The lessons that can be gleaned can also be used as “consciousness lying conduct at issue. Key allies from Special Counsel Muel- of guilt,” which is an inference that of President Trump have derided ler’s recent use of §1001 apply when a witness makes a false state- such charges as merely “process to all individuals who may be ment that can be easily disproved, the crimes.” (After Michael Cohen involved—however seemingly witness is trying to conceal involve- pleaded guilty on Nov. 29, 2018 tangentially—in a government ment in the conduct under investiga- to lying to Congress, Sen. Lindsey investigation. tion. Prosecutors often point to such Graham called it a “process crime.” false statements to bolster their proof See Garrett Haake, et al., Democrats Outside of the Mueller probe, high- of the underlying substantive crime. Pounce After Cohen Admits He Lied profile examples of prosecutions in Such lies underscore the old maxim to Congress about Trump Tower which §1001 featured prominently that the “cover up is worse than the Project in Russia, NBC News, Nov. include those of Congressman Chris- crime.” Finally, individuals who make 29, 2018. Rush Limbaugh similarly topher Collins (charged with insid- a false statement with the purpose of stated that “every one of Mueller’s er trading and making false state- confounding investigators may find indictments is a process crime.” See ments); former Governor of Illinois themselves facing charges of §1505 Rush Limbaugh, Facebook (Nov. Rod Blagojevich (found guilty of (obstruction of justice) as well as 29, 2018).) Even Supreme Court making false statements and corrup- §1001. Time will tell what comes out of Justice Ruth Bader Ginsburg has tion charges); and, as noted above, the Special Counsel’s Russia investiga- cautioned that §1001 provides pros- Martha Stewart (found guilty of con- tion and the other ongoing investiga- ecutors “extraordinary authority” spiracy, making false statements, and tions, but recent events have served to “manufacture crimes.” Brogan obstruction of justice, but acquitted to illustrate, yet again, the significance v. United States, 522 U.S. 398, 408 of securities fraud). of §1001 and its prominence in the (1998) (J. Ginsburg, concurring) The lessons that can be gleaned federal prosecutor’s arsenal. (“I write separately, however, to from Special Counsel Mueller’s recent call attention to the extraordinary use of §1001 apply to all individuals authority Congress, perhaps unwit- who may be involved—however Reprinted with permission from the March 7, 2019 edition of the NEW YORK tingly, has conferred on prosecu- seemingly tangentially—in a gov- LAW JOURNAL © 2019 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 tors to manufacture crimes.”) ernment investigation. For instance, or [email protected]. # 070-03-19-11