Preserving the Paper (and Electronic) Trail: Records and Information Management Professionals Will Be Key Players in Devising Systems to Meet the Law's Retention Requirements. (Capital Edge: Legislative & Regulatory Update)

By Leahy, Patrick J. | Information Management, January-February 2003 | Go to article overview

Preserving the Paper (and Electronic) Trail: Records and Information Management Professionals Will Be Key Players in Devising Systems to Meet the Law's Retention Requirements. (Capital Edge: Legislative & Regulatory Update)


Leahy, Patrick J., Information Management


When Congress passed the Sarbanes-Oxley Act of 2002, it adopted a comprehensive approach to corporate reform. Sen. Paul Sarbanes (D-Maryland) authored provisions creating a new regulatory regime aimed at stopping fraud from occurring in the first place. I and other members of the Judiciary Committee added measures to restore accountability for those who break the rules. By enacting a law that contained not only new regulatory tools, but also tough punishment for wrongdoers, the U.S. Congress sent a clear message to corporate executives like those at Enron--"Don't do it."

In addition to creating a new federal crime of securities fraud and raising the penalties for existing fraud crimes, the enforcement scheme crafted in the Senate Judiciary Committee included new criminal provisions aimed at preserving evidence of fraud. The importance of these provisions is simple. As a former prosecutor, I know that no matter how egregious the crime, you can't prove a case without the evidence.

Unfortunately, the Arthur Andersen case demonstrated that corporations are well aware of this simple lesson. The most striking aspect of Andersen's Enron document shredding binge was that it was not the work of one or two rogue employees. The company itself was convicted. In fact, the Arthur Andersen document destruction policy was devised after another embarrassing case for the express purpose of hiding damaging documents from regulators and victims. Something is wrong with our corporate culture when the lesson learned from a previous case of corporate misconduct is not to change business practices but to destroy the evidence better next time.

The evidence tampering provisions of the Sarbanes-Oxley Act were aimed at changing that culture. Prosecutors and regulators need documents to assess corporate conduct. Retention of records also fosters a corporate culture that rewards honest conduct and deters fraud. Working with my colleagues on the Judiciary Committee, we crafted two new criminal provisions in Sarbanes-Oxley designed to preserve the integrity of key corporate records.

The act creates one new felony for destroying, altering, or falsifying a record with the intent to obstruct an investigation, which is found in Section 1519, Title 18 of the U.S. Code. The new crime closes loopholes in existing law, including provisions that make it a crime to persuade another person to shred a document but not to do it oneself. It also abolishes the requirement of a close link between the shredding and a pending court matter or official investigation. By contrast, the new crime covers record destruction or fabrication intended to obstruct informal as well as formal federal probes. It applies not just once the investigation starts, but also to obstructive conduct "in contemplation" of a matter. When a person tampers with evidence with the intent to obstruct justice, such technical distinctions should not be controlling.

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Preserving the Paper (and Electronic) Trail: Records and Information Management Professionals Will Be Key Players in Devising Systems to Meet the Law's Retention Requirements. (Capital Edge: Legislative & Regulatory Update)
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