1001 is the Loneliest Number Material Matters in 18 U.S.C. § 1001, 0720 SCBJ, SC Lawyer, July 2020, #34

AuthorBy Louis Lang and Ian Duggan
PositionVol. 32 Issue 1 Pg. 34

1001 is the Loneliest Number Material Matters in 18 U.S.C. § 1001

Vol. 32 Issue 1 Pg. 34

South Carolina BAR Journal

July, 2020

By Louis Lang and Ian Duggan

“Saints may always tell the truth, but for mortals living means lying.”1

Example 1: During Prohibition, there is a party at a New York theater. The party includes a woman and a bathtub, the latter maybe containing the woman and some liquid, probably gin. After the party, the authorities investigate whether alcohol was served, a Volstead Act violation. When asked, Carroll, the host, tells authorities nobody got into the bathtub. Carroll is charged with lying.2

Example 2: Looking for a fugitive, federal agents knock on the door of the home of the fugitive’s girlfriend. Girlfriend “A” answers the door. The agents ask if the fugitive is in her house. She says no. They ask to look around. She says yes. The agents notice an upstairs bedroom door is shut and they hear a dog barking behind the closed door. They ask Girlfriend “A” to secure the dog so they can look in the bedroom. She agrees, enters the bedroom where the armed fugitive is hiding, removes the dog, but does not tell the agents the fugitive is in the bedroom and they enter. Girlfriend A is charged with lying.3

Example 3: Looking for another fugitive, federal agents knock on the door of the home of the fugitive’s girlfriend. Girlfriend “B” answers. The agents ask if the fugitive is in her house. She says no. The agents ask to look around. Girlfriend “B” says yes. No fugitive. The agents ask Girlfriend “B” what kind of car the fugitive is driving. She tells them. A few days later, the agents locate the car Girlfriend “B” told them about and put a GPS device on it (having secured a warrant to do so). The GPS device tracks the car to Girlfriend “B’s” home. Several days after that the agents again appear at Girlfriend “B’s” home. They ask if the fugitive is in the house. She says no. They ask to look around. She says yes. No fugitive. They ask Girlfriend “B” if the fugitive was at her house on the day the GPS device tracked the car Girlfriend “B” said the fugitive was driving to her home. She says no. Girlfriend “B” is charged with lying about the fugitive’s alleged visit to her house.4

Under 18 U.S.C. § 1001 making a materially false statement – lying – to a government agent, regarding anything within the jurisdiction of the executive, legislative or judicial branches, is a federal felony, subjecting the liar, if convicted, to a sentence of up to five years in prison, and fine in an indeterminate amount.5

Girlfriends “A” and “B,” Martha Stewart, Marion Jones, Henry Cisneros, Scooter Libby, Dan Johnson, Michael Cohen and countless others, prominent and unknown, have been accused of § 1001 violations, often with devastating consequences to their lives, families, and careers.

Many scholars and judges have expressed dismay over the reach of § 1001 and the possibility of its abuse by federal prosecutors and law enforcement. Justice Ruth Bader Gins-burg, in her concurring opinion in Brogan v. United States,6 observed the “extraordinary authority Congress, perhaps unwittingly, has conferred on prosecutors to manufacture crimes …,” under § 1001.7

The following (A) reviews the statutory history and case law of this remarkable section of our federal criminal code8, (B) discusses what case law instructs is a “material” lie under this section and C) provides an overview of recent United States Supreme and Circuit Court rulings treat “materiality” under § 1001 and in analogous civil contexts.

A.1. The history of § 1001

Like the False Claim Act,9 §1001’s ancestors date to the Civil War when witnesses, testifying in Congressional hearings, “painted a sordid picture of how the United States had been billed for nonexistent or worthless goods, charged exorbitant prices …, and generally robbed in purchasing the necessities of war.”[10] In 1863, Congress enacted legislation making it a crime to submit fraudulent claims and make false statements related to those fraudulent claim(s).11

In 1918, the statute was broadened to include false statements made for the purpose of “cheating and swindling or defrauding the government of the United States,” whether related to a false claim or not.12

The 1918 expansion of the statutory language was limited in 1926 by United States v. Cohn, which held that the 1918 amendment phrase “cheating and swindling or defrauding” applied only to acts of “cheating” the government “out of property or money.”13 Thus, to be guilty of a § 1001 type charge from 1863 until the 1930’s, the government had to show the statement was related to actual or possible pecuniary harm.

The Great Depression spawned many new federal agencies overseeing New Deal economic recovery programs. To benefit from these New Deal programs, citizens had to submit all types of information to the government. Congress was concerned government interests could be subverted by the submittal of false or fraudulent information which, while maybe not directly related to possible or actual pecuniary harm, could nonetheless negatively impact government programs. In 1934, Congress responded to this concern by removing the requirement that a false statement have a real or possible financial impact.14 However, even with this expansion, the reach of § 1001 remained limited “to protect … [government functions] from perversion which might result from deceptive practices …”[15] [arising from] “affirmative, aggressive and voluntary actions of persons who take the initiative.”16

In 1948, the statute was divided into two statutes – one proscribing “false claims” (18 U.S.C. § 287) and the second, § 1001, proscribing “false statements.”17 The False Statements Accountability Act of 1996 made “materiality” an express element of a § 1001 violation,18 whereas previously it had only been a judicially implied element of a § 1001 crime.19 Section 1001 has remained substantively unchanged since.

A.2. The demise of the exculpatory “no” - Brogan v. United States

During the development of this law, there was an exception created in the lower courts for a naked denial of wrongdoing. The theory was that the government could not really be misled when a suspected wrongdoer simply denied that wrongdoing. This became known as the “exculpatory no.” Of course, if the suspect went beyond mere denial, the statute still applied.

This died in the Brogan case. Investigating the acceptance by union officials of cash gifts from companies with union employees federal law enforcement agents discovered incontrovertible evidence of cash payments made to Brogan, a union officer.20 The agents paid a surprise visit to Brogan’s home and asked Brogan if he had accepted cash payments from the company whose employees his union represented. Brogan said, falsely, “no.” Brogan was indicted and convicted of accepting unlawful cash payments and lying to federal agents.21 Brogan’s conviction was affirmed, and the Supreme Court granted certiorari to determine if Brogan’s “exculpatory no” was an implied exception to § 1001.22

Writing for the majority, Justice Scalia rejected the implied exculpatory “no” exception, saying, “…[b]y its terms, 18 U.S.C. § 1001 covers ‘any’ false statement – that is a false statement ‘of whatever kind…’”23

Brogan also argued § 1001 only criminalized statements which “pervert government functions” and simple denials of guilt do not do so.24 Justice Scalia rejected this argument saying, We cannot imagine how it could be true that falsely denying guilt in a Government investigation does not pervert a governmental function. Certainly, the investigation of wrongdoing is a proper governmental function; and since it is the very purpose of an investigation to uncover the truth, any falsehood relating to the subject of the investigation perverts that function.25

Justice Ginsburg’s concurrence expressed concern regarding the broad scope of this statute – “[§ 1001]… arms Government agents with authority not simply to apprehend lawbreakers, but to generate felonies, crimes of a kind that only a Government officer could prompt.”26

B. Materiality – the standard § 1001 formulation

For a false statement to be actionable under § 1001, it must be “material.” In Kungys v. United States, the Supreme Court reiterated the most widely accepted formulation of what § 1001 materiality means - a statement is material if it has a natural tendency to influence, or is capable of influencing, the decision-making body to which it was addressed.27

It is irrelevant whether the false statement actually influenced or affected the government decision in question.[28] Some courts have added qualifiers such as a material statement must be “predictably capable” of affecting government decision-making,29 or have a “propensity” to influence the decision.30

The Brogan Court did not directly address the materiality of an exculpatory “no,” However, in rejecting the exculpatory “no,” Justice Scalia said, “[i]t could be argued … that a disbelieved falsehood does not pervert an investigation [i.e. is not material]. But making the existence of this crime turn upon the credulousness of the federal investigator (or the persuasiveness of the liar) would be exceedingly strange….”[31]

The Fourth Circuit, pre-Brogan, had a reasoned view of instances where a criminal suspect, like Brogan, lies to police about his guilt or innocence: A trained agent cannot be overly surprised when a suspected criminal fails to admit his guilt … “[A] thorough agent would continue vigorous investigation of all leads until he personally was satisfied...

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