[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4098 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 4098

  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 HOUSE OF REPRESENTATIVES

                             April 9, 2002

  Mr. Conyers (for himself, Mr. Frank, Mr. Berman, Ms. Jackson-Lee of 
 Texas, Ms. Waters, Mr. Gephardt, Mr. LaFalce, Mr. Engel, Mr. Dingell, 
 Mr. Jackson of Illinois, Mrs. Christensen, Mr. Davis of Illinois, Mr. 
 Cummings, Mr. Sanders, Ms. Solis, Mrs. Clayton, Ms. Brown of Florida, 
 Mr. Lynch, Mr. Hoeffel, Mr. Gutierrez, and Ms. Schakowsky) introduced 
    the following bill; which was 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. 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.''.

SEC. 4. 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. 5. 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. 6. INCREASED PROTECTION OF EMPLOYEES WAGES UNDER CHAPTER 11 
              PROCEEDINGS.

    Section 507(a) of title 11, United States Code, is amended--
            (1) in paragraph (3) by striking ``90'' and inserting 
        ``180'', and
            (2) in paragraphs (3) and (4) by striking ``$4,000'' each 
        place it appears and inserting ``$10,000''.

SEC. 7. 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. 8. 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. 9. ESTABLISHMENT OF A RETIREMENT SECURITY FRAUD BUREAU.

    (a) In General.--Part II of title 28, United States Code, is 
amended by adding at the end the following:

            ``CHAPTER 40A--RETIREMENT SECURITY FRAUD BUREAU

``Sec. 600. Retirement Security Fraud Bureau
    ``(a) In General.--The Attorney General shall establish a 
Retirement Security Fraud Bureau which shall be a bureau in the 
Department of Justice.
    ``(b) Director.--
            ``(1) Appointment.--The head of the Retirement Security 
        Fraud Bureau shall be the Director who shall be appointed by 
        the Attorney General.
            ``(2) Duties and powers.--The duties and powers of the 
        Director are as follows:
                    ``(A) Advise and make recommendations on matters 
                relating to pension and securities fraud, in general, 
                to the Assistant Attorney General of the Criminal 
                Division.
                    ``(B) Maintain a government-wide data access 
                service, with access, in accordance with applicable 
                legal requirements, to the following:
                            ``(i) Information collected by the 
                        Department of Justice, the Department of the 
                        Treasury, and the Securities Exchange 
                        Commission on pension and securities fraud 
                        matters.
                            ``(ii) Other privately and publicly 
                        available information on pension and securities 
                        fraud-related activities.
                    ``(C) Analyze and disseminate the available data in 
                accordance with applicable legal requirements, 
                policies, and guidelines established by the Attorney 
                General to--
                            ``(i) identify possible criminal activity 
                        to appropriate Federal, State, local, and 
                        foreign law enforcement agencies;
                            ``(ii) support ongoing criminal pension and 
                        securities fraud investigations;
                            ``(iii) determine emerging trends and 
                        methods in pension and securities fraud 
                        matters; and
                            ``(iv) support government initiatives 
                        against pension and securities fraud-related 
                        activities.
                    ``(D) Furnish research, analytical, and 
                informational services to financial institutions, to 
                appropriate Federal regulatory agencies with regard to 
                financial institutions, and to appropriate Federal, 
                State, local, and foreign law enforcement authorities, 
                in accordance with policies and guidelines established 
                by the Department of Justice, in the interest of 
                detection, prevention, and prosecution of pension and 
                securities fraud-related crimes.
                    ``(E) Establish and maintain a special unit 
                dedicated to assisting Federal, State, local, and 
                foreign law enforcement and regulatory authorities in 
                combating pension and securities fraud.
                    ``(F) Such other duties and powers as the Attorney 
                General may delegate or prescribe.
    ``(c) Authorization of Appropriations.--There are authorized to be 
appropriated for the Retirement Security Fraud Bureau such sums as may 
be necessary for fiscal years 2003, 2004, 2005, and 2006.''.
    (b) Clerical Amendment.--The table of chapters at the beginning of 
part II of title 28, United States Code, is amended by adding at the 
end the following new item:

``40A. Retirement Security Fraud Bureau.....................     600''.
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