H.R. 5118
Corporate Fraud Accountability Act of 2002

Summary

H.R. 5118 provides new measures for increasing the punishment of corporate wrongdoers. Specifically, the measure:

• increases the penalties for mail and wire fraud from five years to twenty years and creates a new "securities fraud" section that carries a maximum penalty of twenty-five years;
• strengthens laws that criminalize document shredding and other forms of obstruction of justice and provides a maximum penalty of twenty years for such violation;
• grants emergency authority to the U.S. Sentencing Commission to promulgate guidelines that reflect the serious nature of securities, pension, and accounting fraud;
• closes loopholes by which corporate officers can use bankruptcy laws to discharge liabilities based on securities fraud; requires top corporate executives to certify that the financial statements of the company fairly and accurately represent the financial condition of the company. Violating this section can subject corporate executives to fines of up to $5 million and twenty years in prison;
• provides additional tools to prosecutors to prosecute wrongdoing by corporate criminals who attempt and conspire to violate the law; increases the criminal penalties for those who file false statements with the Securities Exchange Commission to a maximum penalty of $5 million and twenty years in prison. If a corporation files a false statement then the fines increase up to a maximum of $25 million;
• freezes extraordinary payments to executives while the company is subject to an SEC investigation; and bans CEO’s and other officers who clearly abuse their power from serving in any corporate leadership provision.

Background

In the wake of recent scandals involving such companies as Enron, Worldcom, Global Crossing, Arthur Andersen, Tyco and a growing number of other companies, it is necessary to reform our laws in order restore the integrity of our markets and hold accountable those corporations and their executives who have defrauded investors and harmed the American economic system.