Lies, Damned Lies, Audited Statements

admin   March 12, 2010   Comments Off on Lies, Damned Lies, Audited Statements

“Who ya gonna believe, me or your own lying eyes?”

That’s a Richard Pryor line, reflecting a decidedly modern sensibility — lying as personal foible, the correct response to which is a tolerant, ironic grin. We’re supposed to laugh, not judge. And if we do judge secretly, it’s a judgment leavened with a dose of understanding. 

That, perhaps, is what three executives at Computer Associates, the computer services giant, assumed when they misled lawyers investigating allegations of accounting irregularities. To their chagrin and to the anguish of their families, they discovered that federal prosecutors did not share their taste for Pryor’s comic shtick. Prosecutors accused the group of obstruction of justice and extracted guilty pleas that will send each to jail for up to 10 and, in one case, possibly 20 years. 

Perjury, the crime of lying to a court, is rooted in British common law, and the crime has been extended, in modern times, to knowingly false statements made in any official setting, including unsworn statements to government investigators. What is distinctive about the criminal plea obtained from the Computer Associates executives is that the false statements were made not to a government official, but to an attorney hired by Computer Associates to conduct an internal investigation. 

While some criminal law experts have expressed surprise at what they view as an unprecedented extension of theories of criminal liability, the theory is in fact rooted in existing practice and statutory law. 

Here’s how my criminal law professor put it: 

City Slicker goes on a Sunday drive through the countryside. He pulls up to a fruit stand, points to a basket of peaches and asks Country Rube, who is sitting in the shade next to the display of fruit, “How much for that basket of peaches?”

Three dollars,” drawls Country Rube. 

City Slicker pulls out his wallet, hands Country Rube a $5 bill and says, “Keep the change.” 

As Country Rube folds the sawbuck and stuffs it into his overalls, City Slicker picks up the basket, carries it to his car and drives off. 

So where’s the crime? Well, it turns out that Country Rube didn’t own the fruit stand and didn’t own the basket of peaches. He sold somebody else’s property. If we can find all of the elements of the crime of larceny in that story, then he, Country Rube, is a thief. The problem is that an essential element of the crime of larceny is “asportation,” which means carrying away or transporting. To qualify him as a thief, therefore, we have to show that Country Rube carried off the peaches.

On the facts given, City Slicker, the innocent third party, carried away the goods without any physical participation by Country Rube. Result? Country Rube is guilty as charged. City Slicker is considered an agent, albeit unwitting, of Country Rube, and all elements of the crime of larceny, including asportation, are present. 

What about the slick Computer Associates execs who, knowing that lying to a government official is a crime, took care to keep their lie in-house, to company lawyers only? 

The problem for the executives was that Computer Associates was under investigation by the Securities and Exchange Commission. The executives were presumed to know that the lawyer hired by their employer to conduct an internal investigation would — or at least might — provide the results of that investigation to the SEC. The executives were like Country Rube in the criminal law class study who tricked City Slicker into providing the missing element of the crime. 

Benjamin Disraeli once famously declared that there were three kinds of lies: lies, damned lies and statistics. In the age of Enron, Sarbanes-Oxley, the federal Obstruction of Proceedings Before Departments, Agencies and Committees Statute and its numerous state counterparts, both Richard Pryor’s antics and Disraeli’s sensibility fall on the ear with a worn, antediluvian innocence. Consider, in addition to the manipulators at Computer Associates, the unfunny fate of a mid-level oil services company executive convicted recently of accounting fraud. His sentence? Twenty-four years in prison with no possibility of parole. Twenty-four years! 

© Maryland Gazette. Reprinted with permission.