(Sec. 3) Amends Federal bankruptcy law to make certain debts that arise under claims relating to the violation of Federal or State securities laws or common law fraud in connection with the purchase or sale of any security and that result from any Federal or State court order, settlement agreement, or administrative order or penalty non-dischargeable in bankruptcy.
(Sec. 4) Amends the Federal judicial code to authorize a private right of action that involves a securities fraud-related claim to be brought not later than the earlier of five years after the date of the alleged violation or two years after its discovery.
(Sec. 5) Directs the United States Sentencing Commission to review and amend the Federal sentencing guidelines to ensure that the offense levels, existing enhancements, and/or offense characteristics are sufficient to deter and punish violations involving: (1) obstruction of justice; (2) record destruction; (3) fraud when the number of victims adversely involved is significantly greater than 50 or when it endangers the solvency or financial security of a substantial number of victims; and (4) organizational criminal misconduct.
(Sec. 6) Prohibits any company with securities registered on a national security exchange (publicly traded company) from discharging or otherwise discriminating against an employee because of any lawful act by the employee to: (1) disclose information or otherwise assist in an investigation by Federal regulators, Congress, or supervisors of prohibited conduct; or (2) file or participate in a proceeding relating to fraud against shareholders. Allows an aggrieved employee to: (1) file a complaint with the Secretary of Labor; or (2) if the Secretary has not issued a final decision within 180 days and there is no showing that such delay is due to the bad faith of the claimant, to bring an action in the appropriate U.S. district court. Delineates remedies, including reinstatement, back pay, and compensatory damages, if the claimant prevails.
(Sec. 7) Provides that any person who defrauds shareholders of publicly traded companies shall be fined and/or imprisoned for up to ten years.
[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 2010 Introduced in Senate (IS)]
107th CONGRESS
2d Session
S. 2010
To provide for criminal prosecution of persons who alter or destroy
evidence in certain Federal investigations or defraud investors of
publicly traded securities, to disallow debts incurred in violation of
securities fraud laws from being discharged in bankruptcy, to protect
whistleblowers against retaliation by their employers, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 12, 2002
Mr. Leahy (for himself, Mr. Daschle, Mr. Durbin, and Mr. Harkin)
introduced the following bill; which was read twice and referred to the
Committee on the Judiciary
_______________________________________________________________________
A BILL
To provide for criminal prosecution of persons who alter or destroy
evidence in certain Federal investigations or defraud investors of
publicly traded securities, to disallow debts incurred in violation of
securities fraud laws from being discharged in bankruptcy, to protect
whistleblowers against retaliation by their employers, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Corporate and Criminal Fraud
Accountability Act of 2002''.
SEC. 2. CRIMINAL PENALTIES FOR ALTERING DOCUMENTS.
(a) In General.--Chapter 73 of title 18, United States Code, is
amended by adding at the end the following:
``Sec. 1519. Destruction, alteration, or falsification of records in
Federal investigations and bankruptcy
``Whoever knowingly alters, destroys, mutilates, conceals, covers
up, falsifies, or makes a false entry in any record, document, or
tangible object with the intent to impede, obstruct, or influence the
investigation or proper administration of any matter within the
jurisdiction of any department or agency of the United States or any
case filed under title 11, or in relation to or contemplation of any
such matter or case, shall be fined under this title, imprisoned not
more than 5 years, or both.
``Sec. 1520. Destruction of corporate audit records
``(a) Any accountant who conducts an audit of an issuer of
securities to which section 10A(a) of the Securities Exchange Act of
1934 (15 U.S.C. 78j-1(a)) applies, shall maintain all documents
(including electronic documents) sent, received, or created in
connection with any audit, review, or other engagement for such issuer
for a period of 5 years from the end of the fiscal period in which the
audit, review, or other engagement was concluded.
``(b) Whoever knowingly and willfully violates subsection (a) shall
be fined under this title, imprisoned not more than 5 years, or both.
``(c) Nothing in this section shall be deemed to diminish or
relieve any person of any other duty or obligation, imposed by Federal
or State law or regulation, to maintain, or refrain from destroying,
any document.''.
(b) Clerical Amendment.--The table of sections at the beginning of
chapter 73 of title 18, United States Code, is amended by adding at the
end the following new items:
``1519. Destruction, alteration, or falsification of records in Federal
investigations and bankruptcy.
``1520. Destruction of corporate audit records.''.
SEC. 3. ENHANCED ENFORCEMENT OF LAWS AFFECTING RACKETEER-INFLUENCED AND
CORRUPT ORGANIZATIONS.
Section 1964 of title 18, United States Code, is amended--
(1) in subsection (b), by inserting after ``The Attorney
General'' the following: ``, the Attorney General of any State,
or the Securities and Exchange Commission''; and
(2) in subsection (d), by inserting before the period the
following: ``or any State''.
SEC. 4. DEBTS NONDISCHARGEABLE IF INCURRED IN VIOLATION OF SECURITIES
FRAUD LAWS.
Section 523(a) of title 11, United States Code, is amended--
(1) in paragraph (17), by striking ``or'' after the
semicolon;
(2) in paragraph (18), by striking the period at the end
and inserting ``; or''; and
(3) by adding at the end, the following:
``(19) that--
``(A) arises under a claim relating to--
``(i) the violation of any of the Federal
securities laws (as that term is defined in
section 3(a)(47) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)(47)), any State
securities laws, or any regulations or orders
issued under such Federal or State securities
laws; or
``(ii) common law fraud, deceit, or
manipulation in connection with the purchase or
sale of any security; and
``(B) results, in relation to any claim described
in subparagraph (A), from--
``(i) any judgment, order, consent order,
or decree entered in any Federal or State
judicial or administrative proceeding;
``(ii) any settlement agreement entered
into by the debtor; or
``(iii) any court or administrative order
for any damages, fine, penalty, citation,
restitutionary payment, disgorgement payment,
attorney fee, cost, or other payment owed by
the debtor.''.
SEC. 5. STATUTE OF LIMITATIONS FOR SECURITIES FRAUD.
(a) In General.--Section 1658 of title 28, United States Code, is
amended--
(1) by inserting ``(a)'' before ``Except''; and
(2) by adding at the end the following:
``(b) Notwithstanding subsection (a), a private right of action
that involves a claim of fraud, deceit, manipulation, or deliberate or
reckless disregard of a regulatory requirement concerning the
securities laws, as defined in section 3(a)(47) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), may be brought not later
than the earlier of--
``(1) 5 years after the date on which the alleged violation
occurred; or
``(2) 3 years after the date on which the alleged violation
was discovered.''.
(b) Effective Date.--The limitations period provided by section
1658(b) of title 28, United States Code, as added by this section,
shall apply to all proceedings addressed by this section that are
commenced on or after the date of enactment of this Act.
SEC. 6. REVIEW OF FEDERAL SENTENCING GUIDELINES FOR OBSTRUCTION OF
JUSTICE AND EXTENSIVE CRIMINAL FRAUD.
Pursuant to section 994 of title 28, United States Code, and in
accordance with this section, the United States Sentencing Commission
shall review and amend, as appropriate, the Federal Sentencing
Guidelines and related policy statements to ensure that--
(1) the guideline offense levels and enhancements for an
obstruction of justice offense are adequate in cases where
documents or other physical evidence are actually destroyed or
fabricated;
(2) the guideline offense levels and enhancements for
violations of section 1519 or 1520 of title 18, United States
Code, as added by this Act, are sufficient to deter and punish
that activity;
(3) the guideline offense levels and enhancements under
United States Sentencing Guideline 2B1.1 (as in effect on the
date of enactment of this Act) are sufficient for a fraud
offense when the number of victims adversely involved is
significantly greater than 50; and
(4) a specific offense characteristic enhancing sentencing
is provided under United States Sentencing Guideline 2B1.1 (as
in effect on the date of enactment of this Act) for a fraud
offense that endangers the solvency or financial security of 1
or more victims.
SEC. 7. PROTECTION FOR EMPLOYEES OF PUBLICLY TRADED COMPANIES WHO
PROVIDE EVIDENCE OF FRAUD.
(a) In General.--Chapter 73 of title 18, United States Code, is
amended by inserting after section 1514 the following:
``Sec. 1514A. Civil action to protect against retaliation in fraud
cases
``(a) Whistleblower Protection for Employees of Publicly Traded
Companies.--No company with securities registered under section 6 of
the Securities Act of 1933 (15 U.S.C. 77f) or section 12 or 15(d) of
the Securities Exchange Act of 1934 (15 U.S.C. 78l, 78o(d)), or any
officer, employee, contractor, subcontractor, or agent of such company,
may discharge, demote, suspend, threaten, harass, or in any other
manner discriminate against an employee in the terms and conditions of
employment because of any lawful act done by the employee--
``(1) to provide information, cause information to be
provided, or otherwise assist in an investigation regarding any
conduct which the employee reasonably believes constitutes a
violation of section 1341, 1343, 1344, or 1348, any rule or
regulation of the Securities and Exchange Commission, or any
provision of Federal law relating to fraud against
shareholders, when the information or assistance is provided to
or the investigation is conducted by--
``(A) a Federal regulatory or law enforcement
agency;
``(B) any Member of Congress or any committee of
Congress; or
``(C) a person with supervisory authority over the
employee (or such other person working for the employer
who has the authority to investigate, discover, or
terminate misconduct); or
``(2) to file, cause to be filed, testify, participate in,
or otherwise assist in a proceeding filed or about to be filed
(with any knowledge of the employer) relating to an alleged
violation of section 1341, 1343, 1344, or 1348, any rule or
regulation of the Securities and Exchange Commission, or any
provision of Federal law relating to fraud against
shareholders.
``(b) Election of Action.--
``(1) In general.--A person who alleges discharge or other
discrimination by any person in violation of subsection (a) may
seek relief under subsection (c), by--
``(A) filing a complaint with the Secretary of
Labor; or
``(B) bringing an action at law or equity in the
appropriate district court of the United States.
``(2) Procedure.--
``(A) In general.--An action under paragraph (1)(A)
shall be governed under the rules and procedures set
forth in section 42121(b) of title 49, United States
Code.
``(B) Exception.--Notification made under section
42121(b)(1) of title 49, United States Code, shall be
made to the person named in the complaint and to the
employer.
``(C) Burdens of proof.--An action brought under
paragraph (1)(B) shall be governed by the legal burdens
of proof set forth in section 42121(b) of title 49,
United States Code.
``(D) Statute of limitations.--An action under
paragraph (1) shall be commenced not later than 180
days after the date on which the violation occurs.
``(c) Remedies.--
``(1) In general.--An employee prevailing in any action
under subsection (b)(1) (A) or (B) shall be entitled to all
relief necessary to make the employee whole.
``(2) Compensatory damages.--Relief for any action under
paragraph (1) shall include--
``(A) reinstatement with the same seniority status
that the employee would have had, but for the
discrimination;
``(B) 2 times the amount of back pay, with
interest; and
``(C) compensation for any special damages
sustained as a result of the discrimination, including
litigation costs, expert witness fees, and reasonable
attorney fees.
``(3) Punitive damages.--
``(A) In general.--In a case in which the finder of
fact determines that the protected conduct of the
employee under subsection (a) involved a substantial
risk to the health, safety, or welfare of shareholders
of the employer or the public, the finder of fact may
award punitive damages to the employee.
``(B) Factors.--In determining the amount, if any,
to be awarded under this paragraph, the finder of fact
shall take into account--
``(i) the significance of the information
or assistance provided by the employee under
subsection (a) and the role of the employee in
advancing any investigation, proceeding,
congressional inquiry or action, or internal
remedial process, or in protecting the health,
safety, or welfare of shareholders of the
employer or of the public;
``(ii) the nature and extent of both the
actual and potential discrimination to which
the employee was subjected as a result of the
protected conduct of the employee under
subsection (a); and
``(iii) the nature and extent of the risk
to the health, safety, or welfare of
shareholders or the public under subparagraph
(A).
``(d) Rights Retained by Employee.--
``(1) Other remedies unaffected.--Nothing in this section
shall be deemed to diminish the rights, privilege, or remedies
of any employee under any Federal or State law, or under any
collective bargaining agreement.
``(2) Voluntary adjudication.--No employee may be compelled
to adjudicate his or her rights under this section pursuant to
an arbitration agreement.''.
(b) Clerical Amendment.--The table of sections at the beginning of
chapter 73 of title 18, United States Code, is amended by inserting
after the item relating to section 1514 the following new item:
``1514A. Civil action to protect against retaliation in fraud cases.''.
SEC. 8. CRIMINAL PENALTIES FOR DEFRAUDING SHAREHOLDERS OF PUBLICLY
TRADED COMPANIES.
(a) In General.--Chapter 63 of title 18, United States Code, is
amended by adding at the end the following:
``Sec. 1348. Securities fraud
``Whoever knowingly executes, or attempts to execute, a scheme or
artifice--
``(1) to defraud any person in connection with any security
registered under section 12 or 15(d) of the Securities Exchange
Act of 1934 (15 U.S.C. 78l, 78o(d)) or section 6 of the
Securities Act of 1933 (15 U.S.C. 77f); or
``(2) to obtain, by means of false or fraudulent pretenses,
representations, or promises, any money or property in
connection with the purchase or sale of any security registered
under section 12 or 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78l, 78o(d)) or section 6 of the Securities Act
of 1933 (15 U.S.C. 77f),
shall be fined under this title, or imprisoned not more than 10 years,
or both.''.
(b) Clerical Amendment.--The table of sections at the beginning of
chapter 63 of title 18, United States Code, is amended by adding at the
end the following new item:
``1348. Securities fraud.''.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S1785-1788)
Read twice and referred to the Committee on the Judiciary. (text of measure as introduced: CR S1789-1790)
Committee on the Judiciary. Ordered to be reported with an amendment in the nature of a substitute favorably.
Committee on the Judiciary. Reported by Senator Leahy with an amendment in the nature of a substitute. With written report No. 107-146. Additional views filed.
Committee on the Judiciary. Reported by Senator Leahy with an amendment in the nature of a substitute. With written report No. 107-146. Additional views filed.
Placed on Senate Legislative Calendar under General Orders. Calendar No. 366.
Sponsor introductory remarks on measure. (CR S5252-5254)
Committee on the Judiciary Subcommittee on Crime and Drugs. Hearings held.
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