Steve Poss, a Partner and Co- Chair of the Corporate Governance and Securities Litigation Group at Goodwin Procter LLP, led the conference session on Securities Litigation Exposure. Mr. Poss started the session by explaining that we are in the midst of an extraordinary period of change in the enforcement environment facing public companies and their officers and directors. He cited the Sarbanes-Oxley Act, the many new and proposed SEC regulations implementing it, along with the new proposed listing requirements by the NYSE and NASDAQ, and a more aggressive enforcement environment at the SEC, at the Department of Justice, and among state prosecutors.
Mr. Poss then asked the question "Do you really need to change?" in your daily business lives in order to deal with this new environment. He reviewed for the group his "Top Ten List" of "Dangerous Comforting Myths" that some business people believe in as a way of avoiding the structural and behavioral changes needed to reduce liability risks in this new environment. The myths included: "Only the crooks need to worry about getting sued;""The regulators will understand that we are very busy people;" and "Don't worry, the government will be reasonable." Mr. Poss explained that whistling in the dark will not help and that the reality is that we all need to pay close attention to the enhanced risks of securities litigation exposure and take prudent actions to minimize those risks.
Some Criminal Penalty Provisions of Sarbanes-Oxley
Mr. Poss then reviewed some of the provisions of the Sarbanes- Oxley statute containing criminal penalty provisions. Section 801 provides criminal penalties of up to 20 years imprisonment for altering or destroying documents with the intent to impede, obstruct or influence a federal investigation and 10 years imprisonment for failing to retain audit records as required by law.
Section 906 of Sarbanes-Oxley contains criminal penalties for false certifications by the CEO or CFO. The statute provides for penalties of up to 20 years for willful violations and up to 10 years imprisonment for violations where the executive knowingly signed a false certification. Mr. Poss told the audience that this section of the Sarbanes-Oxley statute "should really be renumbered Section 007" because "it gives the SEC and the Department of Justice a license to kill."