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©2003 Copley News Service, 6/11/2003
Using a little-known federal statute (Title 18, Section 1001 of the U.S. Code), federal prosecutors are threatening to send Martha Stewart to jail for lying to government officials and for publicly declaring her innocence of insider trading even though the government refuses to charge her with the actual crime of insider trading. That's outrageous.
Today, the federal government regulates virtually every facet of our lives, and consequently there is hardly a crime conceivable that cannot be swept up in a federal indictment. This includes securities regulations that are so broad and vague that a determined federal prosecutor can literally convict you of making "misleading public statements." This is precisely what federal prosecutors are attempting to do to Stewart. So much for the First Amendment.
Everyone has the right to remain silent when questioned by the police. If police fail to read you your Miranda rights, the courts must exclude from evidence against you statements you made to the police, even a confession.
The rationale for such strict enforcement of the Supreme Court's Miranda decision rests on the premise that the Fifth Amendment right against self-incrimination is so fundamental to our freedoms that it must be protected against erosion and government encroachment, even at the expense of occasionally allowing obviously guilty defendants to go free on a technicality.
The problem is that this right can only be exercised once you are in the clutches of the government. Before that, if one stands on his constitutional right to silence and refuses to "cooperate" with authorities by not answering a single question or responding to a single allegation in the press, one's reputation can be ruined, his or her business can be destroyed and their lives can be made miserable by unrelenting, harassing government officials who leak harmful stories to the press and business associates.
The natural inclination is to "cooperate" with authorities and answer allegations levied in the press. Gotcha! The minute you open your mouth or allow your attorney to speak on your behalf, not only does the protection of silence go right out the window, you expose yourself to an assault by federal prosecutors who are given virtually limitless powers to intimidate you under Section 1001.
Sitting right alongside the Fifth Amendment and the Supreme Court's interpretation of it in its Miranda decision, Section 1001 makes it a crime to "knowingly and willfully make any materially false, fictitious or fraudulent statement or representation in any matter within the jurisdiction of the executive, legislative or judicial branch of the United States," even if you are not under oath. The sweep of Section 1001 and the unchecked discretion it gives to federal prosecutors are awesome.
Insider-trading regulations are so broad and vague that if someone comes to learn more than others about information relating to a particular firm or industry, then the Securities and Exchange Commission is perfectly able to rule that possessing - and acting upon - that knowledge is a crime. That's why it is impossible to draw a line around what is and isn't permissible under the regulations, which leaves anyone engaged in business open to the arbitrary whim of federal prosecutors.
Even though the federal government's indictment does not charge Stewart with the underlying insider-trading crime for which she was originally investigated, it is charging her under Section 1001 for lying to the FBI and the SEC during its investigation of those charges. On top of that, the federal government charges her with securities fraud for public statements she and her attorney made proclaiming her innocence of insider trading in efforts to halt the decline of her company's stock price.
I am not soft on corporate wrongdoers, and I agree with Michael Novak that "corporate corruption is a poison dart aimed right at the heart of capitalism." (In the spirit of full disclosure, it also should be known that I co-founded and chair Corporate Diagnostics, a firm that advises public and private company executives and their boards on the development of practical strategies and solutions to highly complex business issues.)
By the same token, rogue prosecutors are poison darts aimed right at the heart of our democracy. It's time for Congress to rein them in.
First, Congress should reform insider-trading laws. Second, Congress should tightly circumscribe prosecutors' ability to bring charges under Section 1001. The practice of intimidating and harassing individuals into violating Section 1001 should be stopped. The only way a person should be charged under Section 1001 is if he or she is also charged with the underlying crime that triggered the original investigation during which the alleged false statement or representation was made.
Third, government authorities should never be permitted to scare people into giving up their constitutional right to silence. Therefore, Congress should outlaw all statements by authorities relating to a person's refusal to talk, and the showing that any such statement occurred should ipso facto be considered intimidation and not only preclude the bringing of a Section 1001 charge against the person but also automatically trigger sanctions, and perhaps prosecution, of the government official who engaged in the intimidation. These would all be very good things for freedom.