Stevens Verdict Offers Clues on Disclosure Liability

Posted November 3, 2008 at 3:11pm

Q: I am a staffer for a Senator and help prepare his annual financial disclosure report. I have been watching closely the trial of Sen. Ted Stevens (R- Alaska) and am concerned about his conviction for filing false financial disclosure reports. It seems to me that lots of Members file financial disclosure reports that may contain inadvertent errors. Are all such Members now vulnerable to criminal convictions? Or, is there something different about Stevens’ situation?

[IMGCAP(1)]A: Given your role in assisting with financial disclosure reports, it is certainly understandable that you are troubled by Stevens’ conviction. The good news is that, while Members should certainly make every effort to ensure the accuracy of their disclosure reports, not every error will expose them to criminal liability. Indeed, indictments based on false reports are extremely rare. The bad news, however, is that Stevens’ case shows that it is at least possible for errors to lead to a conviction. While the line between innocent errors and criminal ones is not always clear, Stevens’ case does offer some clues.

As you probably know, the Ethics in Government Act of 1978 requires all Members to file annual financial disclosure reports. The reports contain information regarding Members’ assets, liabilities, income, gifts and other financial matters. Next to the signature block, the report states: “Any individual who knowingly and willfully falsifies … this report may be subject to civil and criminal sanctions.” The report then cites 18 U.S.C. 1001 — the federal statute that the jury said Stevens violated.

Specifically, Stevens’ conviction was based on his statements that he had received no gifts when in fact he had benefited from home improvements, an automobile exchange and household goods that the government alleged totaled more than $250,000 in value. Prior to the jury’s verdict, the judge instructed the jury on what the government had to prove in order for the jury to find Stevens guilty. Typically, jury instructions like these are based on legal principles that are established by statutes, court rules and prior cases. While the Stevens jury’s instructions could be subject to appeal, even as written they appear to rule out criminal liability for certain types of inadvertent or insignificant errors.

For example, the judge’s instruction that Stevens could be found guilty only if the government proved that he acted “knowingly and willfully” suggests that inadvertent errors are not criminal. Both of these terms are significant. Let’s start with “knowingly.” A person acts knowingly, the judge said, if he acts “consciously and with awareness and comprehension and not because of ignorance, mistake, misunderstanding or other similar reason.” In Stevens’ case, the government had to prove beyond a reasonable doubt that when Stevens filed his disclosure reports, he knew that they contained a false statement. While the jury presumably concluded that Stevens had such knowledge, the judge’s instructions suggest that Members who unknowingly make errors would not be guilty of Stevens’ crime. More to the point, the instructions mean that a Member should not be convicted for making a false statement out of mere “ignorance, mistake or misunderstanding.”

As for “willfully,” the judge said it means “voluntarily and intentionally, with knowledge that one’s conduct is unlawful, and with the specific intent to do something that the law forbids.” Again, the jury’s guilty verdict means that it presumably concluded that Stevens acted willfully. However, Members who make inadvertent errors without the specific intent to do something illegal would not meet this standard.

A second standard on which the judge instructed the jury appears to filter out financial disclosure report errors that are insignificant. That standard is materiality. The judge told the jury that the government had to prove that the false statements in Stevens’ reports were material to the Senate Ethics Committee. The judge said: “A fact is material if it has a natural tendency to influence, or was capable of influencing, the decision of the Senate Select Committee on Ethics in making a particular determination.”

The judge did not specify what determination Stevens’ false statement might have influenced. Nonetheless, from court filings, it appears the government’s position was that what made Stevens’ statements material was the likelihood that the Senate Ethics Committee would have conducted an investigation had it known the truth about the gifts that Stevens failed to disclose. This was because the value of the benefits that Stevens failed to disclose far exceeded the gift limits established by the Senate.

Again, the jury presumably concluded that Stevens’ false statements were material to the Senate Ethics Committee. Nonetheless, false statements that do not meet this standard should not be the basis for a criminal conviction. Thus, Members who make insignificant errors that do not have a natural tendency to influence and are not capable of influencing a decision of the Ethics Committee presumably could not be subject to criminal liability. None of this is to suggest that Members need not worry about inadvertent or insignificant errors on their reports. There are several reasons to guard against such errors. For one, even if such errors should not result in criminal liability, this is no guarantee that prosecutors would not investigate the errors. Government investigations in and of themselves are something to be avoided. Second, some errors that are not criminal might still violate Senate ethics rules and therefore could lead to investigations by the Ethics Committee, or even sanctions.

So, you may take heart that errors on Members’ reports rarely result in criminal liability. But, don’t let that be reason for your Senator to be any less diligent about the accuracy of his reports. The best way to avoid trouble is to have no errors at all.

C. Simon Davidson is a partner with the law firm McGuireWoods LLP. Click here to submit questions. Readers should not treat his column as legal advice. Questions do not create an attorney-client relationship.