If You Want to Catch a Liar, Get It in Writing
Here’s a proposal to level the playing field between investigators and defendants. But Paul Manafort shouldn't get his hopes up.
A little-noted decision by the U.S. Supreme Court earlier this month shines a surprising and useful light on last week’s new indictment of former Donald Trump associate Paul Manafort by Special Counsel Robert Mueller. No, the court’s decision has nothing to do with obstruction of justice or money laundering. The case is actually about an obscure provision of federal bankruptcy law. But what the justices said can teach us a lot about the mess in which the president’s former campaign chairman finds himself.
The court case, Lamar, Archer & Cofrin LLP v. Appling, received almost no attention from the news media, perhaps because it was handed down on the same day as Masterpiece Cakeshop. The facts are pretty simple. Scott Appling, who had filed for Chapter 7 bankruptcy, faced a lawsuit from Lamar, Archer, a law firm that had provided him with legal services. Before declaring bankruptcy, Appling had fallen behind in paying the firm’s invoices but had promised to catch up when he received a pending tax refund.
When he got his refund (which was smaller than he had led Lamar, Archer to believe), Appling used the money for other expenses — and, meanwhile, told the firm that it hadn’t yet arrived. Finally the firm sued for its money. After Appling filed for bankruptcy, the firm proceeded against him under a provision of federal law that basically provides that one cannot discharge in bankruptcy a debt arising from fraud or false representation. 1 For example, if you lie to get a loan, then spend the money and declare bankruptcy, the lender can still go after you. It’s plain why this rule strengthens the credit markets.
The statute contains an exception, however, for “a statement respecting the debtor’s ... financial condition.” A statement of that kind will save a debt from discharge only if made in writing. According to a unanimous Supreme Court, that exception protects Appling from the law firm’s suit. His statements to Lamar, Archer that he would pay the invoice when he got his refund and, later, that the refund had not arrived qualified as statements about his financial condition. Therefore, Justice Sonia Sotomayor wrote for the court, they protected the law firm only if they were in writing. Because they were oral, the debt to the law firm was discharged.
The distinction isn’t trivial. In fact, we could usefully import it into aspects of criminal law. To see why, let’s bring in Manafort. If you take a look at the new indictment, you’ll see that he’s charged with money laundering, obstruction of justice and making false statements. Regular readers will know that I tend to wax apoplectic over the absurd asymmetry of our rules about lying in criminal investigations: As I’ve pointed out before, if I lie to law enforcement, it’s a crime, but if law enforcement lies to me, it’s just good police work. I have long been of the view that the asymmetry is oppressive and wrong. 2 I’m not interested in condoning the telling of intentional untruths; I’m quite interested in limiting the situations in which the government can punish you for it.
Critics, including some of my Yale colleagues, have responded that I give insufficient weight to the difficulty of proving complex crimes, and the need for a tool to pressure suspects into cooperating, in order to reach higher-ups. I tell them that if they think lying to investigators should be a crime, then lying by investigators should be a crime, too.
But there’s no need to join battle afresh, because the Lamar, Archer decision suggests a useful compromise. Perhaps it should be illegal, in the course of a criminal investigation, only to make false written statements to investigators. There’s a nice bright line, courtesy of the U.S. Bankruptcy Code: Lie to the authorities orally and you’re fine; do it in writing and they can throw the book at you.
This approach would have several advantages. For one thing, we’d avoid the spectacle of criminalizing the understandable human instinct to deny and evade. Prosecutors would no longer have an incentive to ask the same questions over and over in the hope of catching the exhausted suspect in a lie. And the fact that a witness would have to write out his story before his lies placed him in jeopardy would provide a sort of notice requirement: Now we’re going formal; now you’d better tell the story straight.
The rule in the bankruptcy code has long been read liberally. For example, in a case decided in 1997, a federal appellate court held that when an applicant for credit gave the lender false information orally, and the lender’s computer generated a filled-out form that the borrower never saw or signed, the applicant had not submitted a false written statement, and the debt was discharged.
I’d be similarly liberal in interpreting a writing requirement for false oral statements to law enforcement personnel. The fact that the person interviewing me is taking notes, for instance, would not mean that I’m submitting a written statement, so I would still be protected if I made a comment that turned out to be false.
Now, don’t worry. Even if you’re so deeply into the Resistance that you can’t evaluate a policy proposal unless you know how it’ll affect the Trumposphere, you can relax. Were the law as I suggest, Manafort wouldn’t get off — not if the allegations contained in the new indictment are true. Counts four and five charge Manafort with violating the Foreign Agents Registration Act and the False Statements Act by lying in written statements.
That’s as it should be. Sotomayor writes in Lamar, Archer that wise creditors can protect their interests by insisting “that the representations respecting the debtor’s financial condition on which they rely in extending money, property, services, or credit are made in writing.” It’s perfectly reasonable to require wise prosecutors to do the same.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
My criticism does not apply to statutes criminalizing lies under penalty of perjury, where the attendant formalities provide proper notice.
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Brooke Sample at firstname.lastname@example.org