Liars unmasked

A Legal View: Advances in IT are making the False Statements Act even more effective

Securities and Exchange Commission Order No. 4-460

The federal False Statements Act has been law in this country for nearly 100 years. During that time, dozens of companies and individuals have been prosecuted for lying to government officials. However, those numbers are nothing compared to the explosion in prosecutions we're seeing now.

Federal law enforcement agencies are using computers and advanced data mining techniques to find and prosecute people who lie to government officials. Moreover, federal prosecutors are finding the law to be a handy tool for pursuing people in a variety of situations in which violations of other, more specific laws may be more difficult to prove.

The False Statements Act applies to every matter within the jurisdiction of every executive, legislative and judicial agency of the U.S. government. Under the act, it is a crime for any person:

* To knowingly and willfully falsify, conceal or cover up by any trick, scheme or device any material fact.

* To make any materially false, fictitious, or fraudulent statement or representation.

* To make or use any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry.

Punishment for a violation may include fines and imprisonment for up to five years.

In one recent example, the Justice Department used the act to arrest airport security guards who had used false Social Security cards when applying for employment. The case began with an Immigration and Naturalization Service review of computer records for more than 11,000 individuals at a single location, leading to the identification of about 200 suspects. Of these, 33 people working in the most sensitive areas of the airport were selected for indictment.

In the same way, the Securities and Exchange Commission (SEC) is using its extensive computer database of corporate financial information and sophisticated analytical systems to identify companies that may have filed materially false or misleading financial statements.

The government may choose to prosecute the companies, the individuals responsible or both. In fact, the SEC recently took steps that would make such prosecutions of company chief executive officers and chief financial officers easier by requiring them to personally certify in writing, under oath and for publication, that their most recent reports filed with the SEC are both accurate and complete.

The False Statements Act does not require a statement to be sworn, or signed under oath, to support a prosecution. But, as a practical matter, it is much easier for a prosecutor to persuade a jury to convict the accused when the allegedly false statement was made under oath.

The False Statements Act has always been a favorite tool of many federal prosecutors. Advances in information technology are making its use even more effective. As a consequence, prosecutions under the act can be expected to soar.

Peckinpaugh is corporate counsel for DynCorp in Reston, Va. This column represents his personal views.

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