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Lawmakers Approve Tougher Criminal Penalties for Corporate Fraud - 2002-07-10

The U.S. Senate responding to recent corporate scandals has approved by a 97 to zero vote tougher criminal penalties for defrauding shareholders and shredding documents.

The measure, an amendment to an accounting oversight bill being debated by the Senate, calls for 10-year prison terms for securities fraud.

The measure makes clear that shredding documents to obstruct an investigation is illegal, whether or not the records are under subpoena. It also grants federal protection to company employees who report fraud.

The vote comes in the wake of a series of revelations of accounting mistakes at such firms as WorldCom Incorporated and the now bankrupt Enron Corporation. Millions of investors lost their retirement savings.

Senator Paul Wellstone, a Democrat from Minnesota, said, "We need this legislation because the American investing public has lost its confidence in this corporate system."

Later Wednesday, the Senate approved an amendment calling for fines and prison time for corporate executives found to have 'recklessly and knowingly' filed false information with the Securities and Exchange Commission.

The overall bill which could be approved by the Democrat-led Senate as early as this week is stronger than a version passed by the Republican-led House last April.

President Bush who outlined his own proposals to crackdown on corporate fraud in a speech Tuesday has expressed support for the House bill. But the White House has signaled the President would be prepared to sign legislation that emerges after the House and Senate bills are reconciled.