Flaws in Federal Statutes Can Expose You to Legal Jeopardy

You can be criminally charged for inadvertently violating vague statutes or for making the kinds of reasonable mistakes that we all sometimes make in our professional lives, warn legal experts. Say, its time to do away with ambiguously defined laws such as Honest Services Fraud.

January 5 2010 by Fayazuddin A. Shirazi

If you think you are law abiding and can’t be touched, think again. Thanks to the flaws in the federal laws, routine exercises such as sorting your email contacts or storing some of them on your desktops can expose us to legal jeopardy.

Legal pundits point out that ambiguous expansion of federal laws is now affecting ordinary Americans as well. Overbroad federal laws are convicting Americans of “crimes” that are difficult to comprehend. For example routine exercises such as storing copies of client’s emails on your computer servers can also be treated as federal code violation and can put you behind bars, they say.

 “Activities such as unsuspectingly forwarding pharmaceuticals that were mislabeled by another company can also expose you to federal criminal charges,” notes Marie Gryphon, senior fellow at the Manhattan Institute’s Center for Legal Policy, discussing her recent paper on how flaws in federal statutes can affect ordinary businessmen with Chief Executive Online.

There are innumerable (and growing) instances of ordinary Americans falling prey to the shortcomings in the federal laws. Legal experts point out that these myriad legislations were all enacted in a haphazard manner by the Congress without conspicuously recognizing the potential flaws involved. The U.S. Congress mostly acts by the rationale that going tough on crime will be politically popular, says Gryphon.

 “Laws like this are dangerous in the hands of social engineers and ambitious lawmakers — not to mention overzealous prosecutors — bent on using government’s greatest civilian power to punish any activity they dislike,” observed Brian W. Walsh, Senior Legal Research Fellow in the Center for Legal and Judicial Studies at The Heritage Foundation wrote in his article with Fox News.

Legal experts believe prosecutors exert undue influence on the Congress to enact laws in a way that can help easy prosecution of wrong doers. The prosecutors want broad, vaguely-worded criminal laws; as such provisions may come handy for them to swiftly convict the accused. However, the same feasibilities often endanger ordinary businessmen and women who make honest mistakes, lament legal analysts.

Consider  the  recent case, Kirk Ellison, the owner of Lazy Double FF Outfitting,  a small tour company was convicted of three misdemeanors because his daughter failed to follow a couple of regulations applicable to Ellison’s Department of Agriculture’s special use permit.  While Ellison was away, his daughter who was overseeing the business affairs in his father’s absence booked three tourists on a $400 horseback ride without filing the required trip log.

Ellison was charged for the same. Fortunately, he didn’t receive any jail term, but his convictions on three counts couldn’t allow him to renew the special use permit essential to run his business, resulting in the closure of his business.

In a similar instance the owners of Puregro, a small pesticide company hired an environmental consultant to seek advice on how to dispose the remnant waste of water they used to rinse out empty pesticide containers. The executives at Puregro swiftly acted on the expert’s advice, but were held guilty under the Resource Conservation and Recovery Act.  Their consultant reportedly misinterpreted a provision in the Code of Federal Regulations. 

Speaking to Chief Executive Online, Marie Gryphon feels its high time U.S. Congress should initiate steps to limit the reach of these vague criminal laws by incorporating sunset provisions into them.

Additionally, she says statutes should be explicitly self explanatory besides clearly indicating the intention of the accused person. Every enactment should include words such as “knowingly” or “purposely,” which can help in determining the intention of the accused. This will ensure greater clarity for courts to understand that criminal sanctions should not be applied to federal code violations such as honest mistakes, Gryphon opines. 

More importantly, according to Gryphon, while the lawmakers should avoid drafting vague and ambiguously defined crimes such as honest services fraud,  the prosecutors should also stop initiating criminal proceedings for inadvertent regulatory violations. Rather than enforcing regulations criminally, they should be treated on par with civil cases, she says.

So how can individuals safeguard themselves from these absurd laws?

Unfortunately, there’s no way out, except that one can always have expert advice handy. Legal pundits believe there’s no mechanism through which individuals can safeguard themselves from being liable to federal crimes. “It’s frankly very difficult for business people to ensure that they aren’t inadvertently committing crimes,” admits Gryphon.

However, she believes executives working in industries falling under the purview of the Clean Air Act or the Clean Water Act, those in the pharmaceutical sector and those who are dealing with materials regulated by the EPA are particularly vulnerable.

Experts think every organization should have access to honest legal advice and expertise. “You always have to encourage your consultants to be fully honest with you in assessing the legal risks you face,” Gryphon points out, adding that having access to good legal advice cannot although be a premise to safeguard oneself, but it can prevent one from falling in unwarranted legal traps.

Citing an example, Gryphon warns that CEOs of public corporations can be particularly vulnerable to criminal charges. CEO Martha Stewart’s indictment for securities fraud demonstrates how obscure and equivocal some federal securities laws are.  Martha Stewart was charged for untrue statements in response to questions from the media about her sale of ImClone stock. 

Martha who was never charged for insider trading, was held responsible for misguiding the stock holders of ImClone by issuing false statements in a media briefing. Federal prosecutors argued that Martha lied on her ImClone stock sale with the intention of bolstering the value of her company, Martha Stewart Living Omnimedia (MSLO), even though she neither bought nor sold shares of her company while she made the alleged statements. 

The charge was eventually dismissed because the government couldn’t produce evidence indicating that she intended to affect shareholders with her statements, but the case demonstrates that pretty much any untrue public statement by the CEO of a public corporation can result in an indictment, cautions Gryphon.

Additionally, consider the case of former Enron CEO Jeffrey Skilling who has an appeal pending before the U.S. Supreme Court for his conviction under the ‘honest services fraud’, which Gryphon thinks is one of the vaguest federal criminal laws in the books.  The law criminalizes scheme to defraud someone of the intangible right to honest services, she says.

Under ordinary state fraud laws, a defendant is only guilty if he was motivated by prospects of personal gain, but the appeals court in Skilling’s case held that even if he was solely motivated by a desire to save his company, he could still be convicted of fraud under the provisions of the fraud federal law. 

 Court analysts think that the Supreme Court will either declare the honest services law void for vagueness or will aggressively limit its reach to a more conventional definition of fraud, Gryphon opined in her interview with Chief Executive Online.

She believes the Supreme Court’s decision to hear United States Vs Black and United States Vs Weyhrauch is a hopeful sign that help may be on the way.

Bruce Weyhrauch a former Alaska state legislator is in prison for federal mail fraud pending the outcome of his Supreme Court appeal. In 2006, Weyhrauch mailed his rÃ©sumÃ© to an oil and gas company called VECO Corp. in order to be considered for a job when his term in office was over. Weyhrauch was convicted of mail fraud for afterward voting on bills that affected VECO’s interests without disclosing his potential conflict of interest as an applicant for a future job with the company.

Weyhrauch was not accused of actually selling favors, but only of violating a pro forma disclosure requirement that Alaska had specifically declined to impose.

“The trial judge initially concluded that Weyhrauch could not have committed honest services fraud because he had done everything that the state of Alaska asked of him. The 9th Circuit reversed that decision, however, stating that the vague federal law protecting the “intangible right to honest services” imposed additional, undefined duties on state lawmakers — and by extension, private employees — over and above the expectations of those to whom the “honest services” are actually owed,” Marie Gryphon wrote in her article with Roll Call.

Related Stories

  1. Are You a Federal Criminal?
  2. You’re (Probably) a Federal Criminal