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Living in a Material World



Following recent precedent, I am making my own sacrifice for the country and bowing out of further political commentary. This week's entry will stick closer to things I am arguably more qualified to discuss.

 

The Supreme Court has been busy taking away many of DOJ's favorite toys. The mail and wire fraud statutes, the honest services fraud statute, key statutes on bribery of federal and state/local officials--the government had used them for years as Swiss-Army knives of white collar crime enforcement, until the Court began imposing stricter limits on each of them.

 

It may soon be the false statement statute's turn.

 

18 U.S.C. § 1001 makes it a crime, in any "matter within the jurisdiction of the executive, legislative, or judicial branch" of the federal government, to "knowingly and willfully"(1) falsify, conceal, or cover up a material fact; (2) make a materially false, fictitious, or fraudulent statement; or (3) make or use a false writing or document containing such a statement. Whenever someone makes a false statement--including checking a "no" box when the answer to a question is "yes"--on a form relating to a federal program, or makes an inaccurate claim in an interview with a federal agent, the government may allege that it was done knowingly, and pursue a § 1001 charge.

 

DOJ often charges § 1001 when it has come up short on more substantive charges in an investigation. For example, while investigating suspected illegal campaign donations to then-Congressman Jeff Fortenberry, DOJ had a cooperating witness make a recorded phone call to Fortenberry, telling him that illegal contributions had probably been made. FBI agents then interviewed Fortenberry, who told them he was not aware of any illegal contributions. He said the same in a later meeting with agents and prosecutors. The government did not charge him with any campaign finance violation, but instead charged him with false statements under § 1001, based on the interview statements. He was convicted, though the conviction was later vacated, and DOJ has re-charged the case.

 

You could see how the government might get carried away with these kinds of charges.

 

One protection against that is supposed to be the requirement that the false statement be "material" (important) to the government matter--e.g., the federal investigation. But in reality, courts take a fairly broad view of what is "material." It does not matter whether the false statement actually causes the government to change its decisions or behavior in any way. It is enough if the statement has a "natural tendency to influence, or was capable of influencing" the decision.

 

But what does that mean? In Fortenberry's case, the prosecutors and agents already knew what information Fortenberry had about the campaign contribution, because the government (through a cooperator) had secretly fed that information to him. One might ask how hearing him later deny having that information could possibly cause the government to do anything differently. How would it be capable of influencing the government?

 

Courts have responded to these types of arguments by pointing out that the materiality of a statement is based on the "intrinsic capabilities of the false statement itself," and does not depend on the context in which it is made--such as what the government already knows. This is not so easy to wrap one's head around, but it seems to mean that you look at the statement in a vacuum--in a hypothetical situation in which the government does not already have the relevant knowledge and has not yet acted--and consider whether a statement of that type could ever affect the government's decision. If yes, then it is material.

 

Or maybe not? In United States v. Tao, the 10th Circuit recently took a somewhat different approach to materiality in reversing a false statements conviction. In that case, a University of Kansas professor had applied for and obtained federal research grants, and then later accepted money and other benefits from a Chinese university as well. In a subsequent update form he submitted to the university (related to the government program), the professor failed to disclose the relationship with the Chinese university as required, but certified that he had made all necessary disclosures. DOJ charged him with false statements under § 1001, and he was convicted.

 

The 10th Circuit held that the above facts were not enough to show the false statement was material. This was mainly because the government had already given him the grant money before he made the statement; there were no further grants after that. As the court explained, "without evidence of an actual decision capable of being influenced by the statement, the government cannot establish materiality."

 

This seems like common sense. Absent a modified DeLorean, how could a statement made at one time affect a funding decision that had already been made in the past? But recall that the general rule had been that you don't look at the context of the statement, just the contents of the statement itself, and you ask whether that statement is the type that could influence the government in some situation. In Tao, the court seems to have taken a different (and more rational) approach, recognizing that it would seem facially absurd not to consider the context of the statement in the government proceeding, at least in some sense. Without looking outside the statement to that context, how could one tell whether there was an "actual decision capable of being influenced"?

 

Transmuted to other cases, one could argue that this approach means that when the government already knows the truth about something and intends to file charges based on it, then asks the investigation target about it just to see whether he will lie, the answer cannot be material--the charges were going to be filed either way. Or in Fortenberry's case, no other charges were going to be filed either way.

 

It is still not a good thing to lie to federal agents or on federal forms. And if you are charged with a different crime, then such lies--whether material or not--can also be powerful evidence demonstrating your criminal state of mind and lack of credibility. But Tao suggests that a different approach to materiality could make it harder for the government to turn just any false statement into a federal crime of its own.

 

If SCOTUS is not finished building guardrails around some of DOJ's favorite white collar statutes, it may want to save a few rivets for § 1001.

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