Putting Terrorists out of Business: Using Sarbanes-Oxley to Prosecute Terror Financiers

March 31, 2010

Adam R. Pearlman

Assume a charity solicited contributions from donors willing to support a religious or social cause overseas in 2000 and 2001, and that charity’s administrators funnel a portion of those funds to a State Department-designated foreign terrorist organization (FTO). Fearing government investigations of their activities after the attacks of September 11, 2001 and the passage of the Patriot Act, the charity’s in-house counsel repeatedly encourages staff to “comply with” the charity’s established document retention policy with respect to the distribution of donations, which effectively is a euphemism for ordering employees to destroy whatever records that could point to the group’s activities that could be construed as material support of terrorism. According to the Supreme Court’s decision in Arthur Andersen LLP v. United States, under then-existing laws, the hypothetical charity, its officers, and counsel might not have been guilty of obstructing justice because it is not “necessarily corrupt for an attorney to persuade a client with intent to cause that client to withhold documents from the Government,” and because that persuasion to destroy documents may not have occurred with a particular government proceeding in mind...

Putting Terrorists out of Business: Using Sarbanes-Oxley to Prosecute Terror Financiers