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Third Circuit Distinguishes "Bad Acts" From "Crimes" In Reversing False Statements Conviction for Lack of Materiality

The concept of materiality is critical in criminal fraud and false statement cases, as well as civil fraud cases, because it is what distinguishes harmless misrepresentations from consequential ones.
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A misrepresentation is material only when it is capable of influencing the decision-maker, such that a lie even to an FBI Special Agent is generally not a crime unless it could be impactful. Lying to the FBI about where you spent your Thanksgiving is probably not material, but it would be material if you’re being investigated for a robbery that took place that day.

Courts and litigants have often struggled when applying this standard in close cases, in part because the standard raises a theoretical question: If the recipient of the false statement knew the truth, could that have influenced the recipient’s decision? The Third Circuit recently weighed in on this requirement in United States v. Johnson, 2021 WL 5492600, --- F.4th --- (3d Cir. Nov. 23, 2021), providing helpful guidance to courts and litigants alike. 

In Johnson, the defendant filed a fabricated praecipe in the federal docket in one of the civil sexual assault lawsuits against Bill Cosby, claiming he represented the plaintiff-victim and falsely indicating that the plaintiff had failed to pay taxes on a prior settlement. When the plaintiff’s attorney saw the filing, she inquired with the district court, and the district court struck the filing from the docket. A jury later found the defendant guilty of making false statements in a matter within the jurisdiction of the federal government, 18 U.S.C. § 1001, and aggravated identity theft in relation to the false statements, 18 U.S.C. § 1028A(a)(1) and (c)(4). The district court sentenced the defendant to 32 months’ imprisonment.

On appeal, the Third Circuit reversed the defendant’s convictions, finding that there was insufficient evidence that the false statement was material to a decision of the judge. The court explained that, to be material, a false statement must have "a natural tendency to influence, or be capable of influencing, the decision of the decision-making body to which it was addressed." While the false statement need not have been relied on by the recipient, or have actually influenced the recipient’s decision, the false statement must be capable of influencing a "reasonable decision-maker," the court added.

The court emphasized that, under this standard, "not every misrepresentation presented to a governmental decision-maker is inherently 'material,'" and information that is "relevant" can still be "immaterial," as materiality and relevance "are not synonymous." Materiality requires "probative weight" as to the decision to be made, and "the government cannot simply present evidence that a statement was false and the information generally within the purview of the governmental decision-maker to which it was addressed" in order to satisfy the requirement. Instead, the government must "adduc[e] testimony or other evidence explaining the purpose or use of the statement and some specific way or ways in which the statement might affect a particular decision of the decision-making body." 

The court reversed the convictions because there was insufficient evidence that the defendant’s fabricated filing was material to a decision by the judge. There was no evidence that the judge needed to rule on the authenticity of the fabricated document or needed to make a credibility determination about the plaintiff to which the fabricated filing could be relevant. The court also rejected the government’s argument that the fabricated filing was material merely because it caused the judge to act by striking the filing: "The Judge’s decision merely to delete a false filing is not the type of decision that, without more, itself gives rise to materiality, at least on the record here." 

In closing, the court acknowledged that the defendant’s conduct was "malicious," wasted public time and resources, disrupted the administration of justice, interfered with the orderly work of federal courts, and flouted the respect due to judges and attorneys sworn to uphold the law. But "for bad acts to constitute crimes, at the trial the Government must prove each element beyond a reasonable doubt," an "ancient guarantee that was not honored," the court observed.

Notably, the Third Circuit’s Johnson decision comes on the heels of its equally illuminating decision in United States v. Harra, 985 F.3d 196 (3d Cir. 2021), where the court held as a matter of first impression: "When a defendant is charged with false reporting based on an ambiguous reporting requirement … the Government must prove either that its interpretation of the reporting requirement is the only objectively reasonable interpretation or that the defendant’s statement was also false under the alternative, objectively reasonable interpretation." The court in Harra reversed false statements convictions because the government failed to meet this standard, where the SEC’s and Federal Reserve’s reporting requirements were ambiguous. 

Courts and litigants around the country will likely rely on the Third Circuit’s decisions in Johnson and Harra when applying the false statement statute’s falsity and materiality requirements—requirements that are often hotly contested at trial. These decisions could also be persuasive in other cases involving a materiality requirement, such as in federal mail and wire fraud cases or civil cases involving the False Claims Act or common law fraud claims. 

At bottom, entities and individuals in the Third Circuit and elsewhere should analyze early in an investigation or litigation whether an alleged misrepresentation is both false and material under prevailing case law, as arguments about the absence of those elements could be persuasive to prosecutors, the court, or the jury. 

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