InsideCounsel Looks to Manatt Partner on Sarbanes-Oxley Act Provision
"A SOX Provision That Could Blindside Your Company"
September 1, 2012— InsideCounsel looked to Manatt's Julian, Kenneth B., a partner in the firm's Litigation Division, for insight into the precautions in-house counsel should take with regard to 18 U.S.C Section 1519 of the Sarbanes-Oxley Act, which was created nearly a decade ago to prevent corporate and accounting scandals and to increase the penalties against the companies and auditors that try to defraud shareholders or federal investigators.
InsideCounsel reports that corporate lawyers are becoming increasingly concerned with a provision that criminalizes anticipatory obstruction of justice. Section 1519 states that "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 of proper administration of any matter within the jurisdiction of any department or agency of the United States . . . or in relation to or contemplation of any such matters or case, shall be fined . . . imprisoned not more than 20 years, or both."
Julian told the publication that companies should limit document deletion. "What corporate officers and in-house counsel are doing potentially could be the innocent destruction of a document, but some federal agency later could contend that they recklessly destroyed these documents because they knew the company could be the subject of an investigation," he said. "All of a sudden, you have this huge sweep of potentially innocent conduct crossing the line into a felony violation."