Obstruction of Justice and Martha Stewart Revisited

Obstruction of justice recently reappeared in the headlines and generated confusion as to whether an underlying crime is required before charging an individual with obstruction of justice.  This recent confusion probably came as a great surprise to lifestyle and media mogul Martha Stewart who in 2004 was convicted of obstruction of justice after a five week jury trial.  Ms. Stewart served a sentence of five months in prison, five months of home confinement, two year’s probation, and paid a substantial monetary fine even though she was not charged with any underlying crime at the time of her trial.

First, it’s important for us to understand what obstruction of justice is.  Obstruction of justice covers a wide range of conduct, but the most common instances involve interfering with evidence or witnesses in a criminal case.  Penalties for obstruction of justice can include a significant fine, a prison sentence for up to five years, or both.  Obstruction of justice is defined in Title 18 of the U.S. Code which criminalizes conduct that corruptly obstructs, influences, or impedes any official proceeding or investigation. 

Obstruction of justice occurs when someone intentionally interferes with or obstructs prosecutors or other government officials.  Proving an obstruction of justice charge typically requires three elements: obstructive conduct, corrupt intent, and a sufficient connection to a pending or contemplated proceeding.  There is no mention of any requirement of an underlying crime. 

Martha Stewart sold over $200,000 of stock in a biotechnology company the day before a public announcement that the Food and Drug Administration had rejected its application for approval of a cancer drug.  Ms. Stewart and her stockbroker claimed they had a prior agreement to sell the stock when its price fell below $60 per share, but the government contended that was merely a cover story. Prosecutors claimed Ms. Stewart’s broker knew that the company’s CEO and his daughter were selling their own holdings and immediately told Ms. Stewart to sell, which she did. 

During the news conference announcing the charges against Ms. Stewart, the United States Attorney for the Southern District of New York stated – “This criminal case is about lying, lying to the FBI, lying to the SEC, lying to investors.  Martha Stewart is being prosecuted not for who she is, but because of what she did.”  At the time of Ms. Stewart’s indictment, the U.S. Attorney explained that he used his prosecutorial discretion in deciding not to bring insider trading charges against Ms. Stewart or her broker.  The most serious remaining charges against Ms. Stewart for securities fraud were dismissed by the court because “the evidence and inferences the government present[ed] [we]re simply too weak to support a finding beyond a reasonable doubt of criminal intent.”

The fact that Ms. Stewart could appropriately be prosecuted and convicted for obstruction of justice without a charge of any underlying offense was widely discussed at the time of her trial.  In Ms. Stewart’s case, interfering with the investigation was the crime, regardless of whether she was ever found guilty or even charged with committing the crimes that were the focus of the criminal investigation, in Ms. Stewart’s case -- insider trading and securities fraud. 

While the Martha Stewart case is perhaps the most high profile instance of prosecuting a case for obstruction without an underlying crime, it is far from the only example.  Courts ranging from Utah, to Michigan, to Florida have held that defendants can form the corrupt intent required for obstruction of justice, without committing an underlying crime, if they seek to protect their own reputations or shield family and friends from criminal liability.  While most lawyers would agree it is more difficult to prove obstruction of justice without an indictable underlying crime, it’s not impossible, and Ms. Stewart’s case serves as a reminder of this fact.