Sarbanes-Oxley vs. the free press: how the government used business regulations to strong-arm the media

Reason, Jan, 2006 by John Berlau

This is what Time Inc. faced, and that is why comparisons to The New York Times aren't completely fair. Fitzgerald could go after Time as a corporation. But Miller, who never filed a story about Plame, "apparently kept personal possession of her notes and the Times' view is it never had them," The Wall Street Journal reports. Since it seems there were no corporate documents to be surrendered, Fitzgerald never had the opportunity to ask the court to hold officers and directors of the New York Times Co. in contempt. Time Inc. wasn't so lucky.

The Sarbanes-Oxley Act includes provisions that, even if they weren't a factor in Time Inc.'s decision, will almost surely affect the use and protection of anonymous sources in the future. The law was passed right after the Enron and WorldCom bankruptcies. Like the PATRIOT Act, it was rushed through after a crisis, and many provisions weren't scrutinized. Right now businesses are struggling with the costly Section 404, which mandates that accountants certify "internal controls" that are only tangentially related to a company's financial statements. (See "You Can Be Too Careful," page 40.)

But it's the law's broad definition of "obstruction of justice" that has First Amendment and civil liberties experts concerned. Because of the media coverage of accounting firm Arthur Andersen's memo shredding during the Enron scandal--shredding the Supreme Court has now said was not necessarily improper--Sarbanes-Oxley increased penalties and created new offenses related to document concealment. Section 802 applies not just to corporate fraud but to "the investigation or administration of any matter within the jurisdiction of any department or agency of the United States" It punishes a person who "knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document or tangible object" with new penalties of up to 20 years in prison. The record tamperer need not have a "corrupt" motive.

Corporate Reform vs. a Free Press

Spokespeople for Fitzgerald and Time Inc. declined to say what role, if any, Sarbanes-Oxley played in the events leading to Time Inc.'s surrender of Cooper's documents. But even if Fitzgerald did not directly threaten Time with Sarbanes-Oxley, it's not a stretch to say that good lawyers would take the law and its sentencing provisions into consideration. "You have a risk that a vigorous prosecutor will think of that act as obstruction of justice, and you don't know what a jury will do," says Ronald Rotunda, a professor at the George Mason University School of Law who specializes in legal ethics.

And for the press, the "obstruction of justice" provision may cover more than just withholding notes from the government once an investigation has begun. It may also endanger the common practice of routinely destroying notes to protect anonymous sources. For decades, newsrooms have shredded or thrown away notes some time after using them both to save space and to prevent prosecutors like Fitzgerald from demanding them as part of an investigation. This "routine expungement is a longstanding practice in many news organizations," says Sandra Davidson, a professor of communications law at the University of Missouri School of Journalism. Sarbanes-Oxley, because it covers document destruction even "in contemplation" of a federal investigation, could apply to the press's "routine expungement" practices, scholars say. "If you're destroying documents to prevent them from being subpoenaed," says Rotunda, "you have a risk that a vigorous prosecutor will think of that as obstruction of justice."