Context Matters: Emails In White-Collar Prosecutions

Electronic mail, or "email," has been a regular means of communication in the business world since the mid-1990s. The growth of electronic communication has in turn affected white-collar criminal investigations and prosecutions. What used to be a casual conversation or obscure memorandum— evidence of which was subject to the vagaries of memory and document searches—is now frequently available in an email. As a result, prosecutors and defense lawyers spend tremendous amounts of time and money sorting and reviewing electronic communications (and other electronic documents), arguably at the expense of finding and developing "old-fashioned" testimonial evidence.

The availability of electronic communications has affected the conduct of civil and criminal enforcement agencies in various ways. In its most stark form, a single email (or small number of emails) has been disclosed by prosecutors to put a company or individual on the defensive even before charges are filed. More generally, during an investigation, offhand remarks in emails, often quickly dashed off without much thought, can take on undue importance when they are viewed, often mistakenly, to represent considered judgments and thoughtful opinions.

Electronic communications have likewise become important in criminal trials. The government has begun to rely on emails to prove a defendant's actions and, most importantly, his or her mental state, with the argument that a statement in an email is the best evidence of a defendant's contemporaneous state of mind. Defense lawyers typically make several arguments to refute that claim: for example, that the statements or emails in question are being taken out of context and mean something different from what the government alleges, or that the individual had limited information or was mistaken at the time of the email, and similar explanations. Quite often, such emails are ambiguous and of limited or no value in judging an individual's actual knowledge and intent. Nonetheless, investigations regularly give rise to emails that give the government powerful evidence and are difficult for the defense to explain.

In this article, we explore how the government has fared in several cases in which the government's case rested in important respects on emails. Judges have expressed reservations about reliably inferring a defendant's state of mind from one or a limited set of emails without adequate testimony or other documents to place the critical communications in context. Juries too may be showing some resistance to placing too much reliance on emails, perhaps because jurors themselves understand their own email habits, as suggested by an acquittal in a high-profile case in the Eastern District of New York.

The Bear Stearns Prosecution

In 2008, the government charged two former Bear Stearns hedge fund managers with fraud on the theory that in 2007 they made positive statements about mortgagebacked securities which they did not really believe—as shown by emails on personal email accounts which expressed concerns about how these securities would perform. The case drew considerable attention because it was one of the first prosecutions growing out of the global financial crisis. After a month-long trial and two days of deliberation, the jury returned verdicts of not guilty.

The prosecution sought to convince the jury that the defendants were knowingly making false statements about their portfolios largely on the basis of documentary evidence, mostly of emails. Other evidence of guilt was limited. As one commentator noted, "a case built on provocative email excerpts, bereft of context, can teeter when witnesses appear...