[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5118 Referred in Senate (RFS)]

  2d Session
                                H. R. 5118


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 17, 2002

                                Received

                             July 19, 2002

       Read twice and referred to the Committee on the Judiciary

_______________________________________________________________________

                                 AN ACT


 
     To provide for enhanced penalties for accounting and auditing 
  improprieties at publicly traded companies, 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 Fraud Accountability Act 
of 2002''.

SEC. 2. HIGHER MAXIMUM PENALTIES FOR MAIL AND WIRE FRAUD.

    (a) Mail Fraud.--Section 1341 of title 18, United 5 States Code, is 
amended by striking ``five'' and inserting ``20''.
    (b) Wire Fraud.--Section 1343 of title 18, United States Code, is 
amended by striking ``five'' and inserting ``20''.
    (c) Securities Fraud.--Chapter 63 of title 18, United States Code, 
is amended by adding at the end the following:
``Sec. 1348. Securities fraud
    ``Whoever knowingly executes 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 25 years, 
or both.''.
    (d) 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:

``1348. Securities fraud.''.

SEC. 3. TAMPERING WITH A RECORD OR OTHERWISE IMPEDING AN OFFICIAL 
              PROCEEDING.

    Section 1512 of title 18, United States Code, is amended--
            (1) by redesignating subsections (c) through (i) as 
        subsections (d) through (j), respectively; and
            (2) by inserting after subsection (b) the following new 
        subsection:
    ``(c) Whoever corruptly--
            ``(1) alters, destroys, mutilates, or conceals a record, 
        document, or other object, or attempts to do so, with the 
        intent to impair the object's integrity or availability for use 
        in an official proceeding; or
            ``(2) otherwise obstructs, influences, or impedes any 
        official proceeding, or attempts to do so,
shall be fined under this title or imprisoned not more than 20 years, 
or both.''.

SEC. 4. AMENDMENT TO THE FEDERAL SENTENCING GUIDELINES.

    (a) Request for Immediate Consideration by The United States 
Sentencing Commission.--Pursuant to its authority under section 994(p) 
of title 28, United States Code, and in accordance with this section, 
the United States Sentencing Commission is requested to--
            (1) promptly review the sentencing guidelines applicable to 
        securities and accounting fraud and related offenses;
            (2) expeditiously consider the promulgation of new 
        sentencing guidelines or amendments to existing sentencing 
        guidelines to provide an enhancement for officers or directors 
        of publicly traded corporations who commit fraud and related 
        offenses; and
            (3) submit to Congress an explanation of actions taken by 
        the Sentencing Commission pursuant to paragraph (2) and any 
        additional policy recommendations the Sentencing Commission may 
        have for combating offenses described in paragraph (1).
    (b) Considerations in Review.--In carrying out this section, the 
Sentencing Commission is requested to--
            (1) ensure that the sentencing guidelines and policy 
        statements reflect the serious nature of securities, pension, 
        and accounting fraud and the need for aggressive and 
        appropriate law enforcement action to prevent such offenses;
            (2) assure reasonable consistency with other relevant 
        directives and with other guidelines;
            (3) account for any aggravating of mitigating circumstances 
        that might justify exceptions, including circumstances for 
        which the sentencing guidelines currently provide sentencing 
        enhancements;
            (4) ensure that 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;
            (5) ensure that 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;
            (6) make any necessary conforming changes to the sentencing 
        guidelines; and
            (7) assure that the guidelines adequately meet the purposes 
        of sentencing as set forth in section 3553 (a)(2) of title 18, 
        United States Code.
    (c) Emergency Authority and Deadline For Commission Action.--The 
United States Sentencing Commission is requested to promulgate the 
guidelines or amendments provided for under this sections as soon as 
practicable, and in any event not later than the 120 days after the 
date of enactment of this Act, in accordance with the procedures sent 
forth in section 21(a) of the Sentencing Reform Act of 1987, as though 
the authority under that Act had not expired.

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) is a claim for--
                            ``(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), any of the State securities laws, or 
                        any regulation or order 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. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

    (a) In General.--Chapter 63 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1349. Failure of corporate officers to certify financial reports
    ``(a) Certification of Periodic Financial Reports.--Each periodic 
report containing financial statements filed by an issuer with the 
Securities Exchange Commission pursuant to section 13(a) or 15(d) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) shall 
be accompanied by a written statement by the chairman of the board, 
chief executive officer, and chief financial officer (or equivalent 
thereof) of the issuer.
    ``(b) Content.--The statement required under subsection (a) shall 
certify that those financial statements fairly and accurately 
represent, in all material respects, the operations and financial 
condition of the issuer.
    ``(c) Criminal Penalties.--Whoever--
            ``(1) knowingly violates this section shall be fined not 
        more than $1,000,000, or imprisoned not more than 10 years, or 
        both; or
            ``(2) willfully violates this section shall be fined not 
        more than $5,000,000, or imprisoned not more than 20 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:

``1349. Failure of corporate officers to certify financial reports.''.

SEC. 7. ATTEMPTS AND CONSPIRACIES TO COMMIT CRIMINAL OFFENSES.

    (a) In General.--Chapter 1 of title 18, United States Code, is 
amended by inserting before section 2 the following:
``Sec. 1. Attempt and conspiracy
    ``Any person who attempts or conspires to commit any offense 
against the United States shall be subject to the same penalties as 
those prescribed for the offense, the commission of which was the 
object of the attempt or conspiracy.
    (b) Clerical Amendment.--The table of sections at the beginning of 
title 18, United States Code, is amended so that the item relating to 
section 1 reads as follows:

``1. Attempt and conspiracy.''.

SEC. 8. INCREASED CRIMINAL PENALTIES UNDER SECURITIES EXCHANGE ACT OF 
              1934.

    Section 32(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78ff(a)) is amended--
            (1) by striking ``$1,000,000, or imprisoned not more than 
        10 years'' and inserting ``$5,000,000, or imprisoned not more 
        than 20 years''; and
            (2) by striking ``$2,500,000'' and inserting 
        ``$25,000,000''.

SEC. 9. TEMPORARY FREEZE AUTHORITY FOR THE SECURITIES AND EXCHANGE 
              COMMISSION.

    (a) In General.--Section 21C(c) of the Securities Exchange Act of 
1934 (15 U.S.C. 78u-3(c)) is amended by adding at the end the 
following:
            ``(3) Temporary freeze.--
                    ``(A) In general.--
                            ``(i) Issuance of temporary order.--
                        Whenever, during the course of a lawful 
                        investigation involving possible violations of 
                        the Federal securities laws by an issuer of 
                        publicly traded securities or any of its 
                        directors, officers, partners, controling 
                        persons, agents, or employees, it shall appear 
                        to the Commission that it is likely that the 
                        issuer will make extraordinary payments 
                        (whether compensation of otherwise) to any of 
                        the foregoing persons, the Commission may 
                        petition a Federal district court for a 
                        temporary order requiring the issuer to escrow, 
                        subject to court supervision, those payments in 
                        an interest-bearing account for 45 days.
                            ``(ii) Standard.--A temporary order shall 
                        be entered under clause (i), only after notice 
                        and opportunity for a hearing, unless the court 
                        determines that notice and hearing prior to 
                        entry of the order would be impracticable or 
                        contrary to the public interest.
                            ``(iii) Effective period.--A temporary 
                        order issued under clause (i) shall--
                                    ``(I) become effective immediately;
                                    ``(II) be served upon the parties 
                                subject to it; and
                                    ``(III) unless set aside, limited 
                                or suspended by a court of competent 
                                jurisdiction, shall remain effective 
                                and enforceable for 45 days.
                            ``(iv) Extensions authorized.--The 
                        effective period of an order under this 
                        subparagraph may be extended by the court upon 
                        good cause shown for not longer than 45 
                        additional days, provided that the combined 
                        period of the order shall not exceed 90 days.
                    ``(B) Process on Determination of violations.--
                            ``(i) Violations charged.--If the issuer or 
                        other person described in subparagraph (A) is 
                        charged with any violation of the Federal 
                        securities laws before the expiration of the 
                        effective period of a temporary order under 
                        subparagraph (A) (including any applicable 
                        extension period), the order shall remain in 
                        effect, subject to court approval, until the 
                        conclusion of any legal proceedings related 
                        thereto, and the affected issuer or other 
                        person, shall have the right to petition the 
                        court for review of the order.
                            ``(ii) Violations not charged.--If the 
                        issuer or other person described in 
                        subparagraph (A) is not charged with any 
                        violation of the Federal securities laws before 
                        the expiration of the effective period of a 
                        temporary order under subparagraph (A) 
                        (including any applicable extension period), 
                        the escrow shall terminate at the expiration of 
                        the 45-day effective period (or the expiration 
                        of any extension period, as applicable), and 
                        the disputed payments (with accrued interest) 
                        shall be returned to the issuer or other 
                        affected person.''.
    (b) Technical Amendment.--Section 21C(c)(2) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) is amended by striking 
``This'' and inserting ``paragraph (1)''.

SEC. 10. AUTHORITY OF THE COMMISSION TO PROHIBIT PERSONS FROM SERVING 
              AS OFFICERS OR DIRECTORS.

    (a) Securities Exchange Act of 1934.--Section 21C of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u-3) is amended by adding at the end 
the following:
    ``(f) Authority of the Commission to Prohibit Persons From Serving 
as Officers or Directors.--In any cease-and-desist proceeding under 
subsection (a), the Commission may issue an order to prohibit, 
conditionally or unconditionally, and permanently or for such period of 
time as it shall determine, any person who has violated section 10(b) 
or the rules or regulations thereunder, from acting as an officer or 
director of any issuer that has a class of securities registered 
pursuant to section, or that is required to file reports pursuant to 
section (d), if the conduct of that person demonstrates unfitness to 
serve as an officer or director of any such issuer.''.
    (b) Securities Act of 1933.--Section 8A of the Securities Act of 
1933 (15 U.S.C. 77h-1) is amended by adding at the end of the 
following:
    ``(f) Authority of the Commission to Prohibit Persons From Serving 
as Officers or Directors.--In any cease-and-desist proceeding under 
subsection (a), the Commission may issue an order to prohibit, 
conditionally or unconditionally, and permanently or for such period of 
time as it shall determine, any person who has violated section 
17(a)(1) or the rules or regulations thereunder, from acting as an 
officer or director of any issuer that has a class of securities 
registered pursuant to section of the Securities Exchange Act of 1934, 
or that is required to file reports pursuant to section 15(d) of that 
Act, if the conduct of that person demonstrates unfitness to serve as 
an officer or director of any such issuer.''.

SEC. 11. RETALIATION AGAINST INFORMANT.

    (a) In General.--Section 1513 of title 18, United States Code, is 
amended by adding at the end the following:
    ``(e) Whoever knowingly, with the intent to retaliate, takes any 
action harmful to any person, including interference with the lawful 
employment or livelihood of any person, for providing to a law 
enforcement officer any truthful information relating to the commission 
or possible commission of any Federal offense, shall be fined under 
this title or imprisoned not more than 10 years, or both.''.

            Passed the House of Representatives July 16, 2002.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.