On July 30, 2002, President Bush signed the historic Sarbanes-Oxley Act of 2002 which increased penitentiary time for wire fraud and mail fraud to 20 years per count and created a new securities fraud offense which provides for 25 years in prison per count. In addition, the Act creates serious criminal penalties for CEOs who sign financial information deemed to be untrue or that omits information considered to be material.
Under the Act, any restatement of financial information which results from material noncompliance with the reporting requirements of the securities law results in the forfeiture by the CEO and CFO to the company of "any bonus or other incentive-based or equity-based compensation" or "any profits realized from the sale of securities" for a 12-month period. Although the Act specifically provides authority to the audit committee to employ independent counsel and advisers for the committee, there are no comparable provisions for the CEO and CFO who have the personal risks imposed on them as a result of the new requirement that they sign the financials.
These actions are historic and as former S.E.C. Chairman Pitt stated are "unprecedented." Given the clear financial and criminal liability imposed on CEOs, CFOs and others by these recent developments, independent and thorough representation on their behalf is absolutely essential to ensure that they are not placed in serious potential personal jeopardy for criminal charges.
SUMMARY OF ACT'S CRIMINAL PROVISIONS
|
STATUTE |
NAME |
OLD |
NEW |
NOTES |
|
15 USC §78ff(a) |
Securities & Exchange Act of 1934 |
10 years & $1,000,000 |
20 years & $5,000,000 |
See new Securities Fraud statute below. |
|
18 USC §1341 |
Mail Fraud |
5 years |
20 years |
Commonly used by prosecutors. |
|
18 USC §1343 |
Wire Fraud |
5 years |
20 years |
Commonly used by prosecutors. |
|
18 USC §1348 |
Securities Fraud |
NEW |
25 years |
Covers all companies regulated by SEC. |
|
18 USC §1349 |
Attempt & Conspiracy |
NEW |
See Notes |
Punishment same as object offense. |
|
18 USC §1350 |
Failure of CEO to Certify Financial Reports |
NEW |
10 years & $1,000,000 |
Punishment if "willful" is 20 years & $5,000,000. |
|
18 USC §1512 |
Destruction of records for use in official proceeding |
NEW |
20 years |
Also includes cover up, concealment and falsification. |
|
18 USC §1513 |
Retaliation Against Informants |
NEW |
10 years |
Covers "any action harmful to any person, including interference with the lawful employment or livelihood of any person." |
|
18 USC §1519 |
Destruction of Records |
NEW |
20 years |
Also includes cover up, concealment and falsification. |
|
18 USC §1520 |
Destruction of Corporate Audit Papers |
NEW |
10 years |
Must be kept for 5 years. |
|
29 USC §1131 |
ERISA violations |
1 year & $100,000 |
10 years & $500,000 |
Retirement plan violations. |
Law Offices of Dan C. Guthrie, Jr.
2525 Mckinnon, Suite 425 Dallas, TX 75201
Phone: 214.953.1000 E-mail Fax: 214.953.0200
Dan C. Guthrie handles white collar criminal defense matters for clients throughout Texas, including the cities of Dallas, Houston, Austin, San Antonio, Lubbock, Amarillo, and the Nation: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
