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rhody
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#150
Dec5-11, 03:13 PM
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Quote Quote by mheslep;But before you throw people in jail, [I
exactly [/I] what law are you saying was broken? I bought some stock the other day. It went down.
Sixty Minutes had a segment on this featuring two whistleblowers, who reported that the way mortgages were being doctored, and reported were of dubious quality and a high percentage of their loans fell into this category, if I remember correctly this was somewhere above 50%. The problem was systemic and across the company's. The Sarbanes–Oxley Act of 2002 was supposed to address this.

In a nutshell, the CEO/CFO's of major financial institutions with over 500 million in assets were to sign a document at physcal year end that said all financial statements under their scrutiny were valid and accurate. If fraud could be proven, and they were tried and convicted they could be subject to:
(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 bySection 802(a) of the SOX a written statement by the chief executive officer and chief financial officer (or equivalent thereof) of the issuer.

(b) Content.— The statement required under subsection (a) shall certify that the periodic report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of [1] 1934 (15 U.S.C. 78m or 78o (d)) and that information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

(c) Criminal Penalties.— Whoever— (1) certifies any statement as set forth in subsections (a) and (b) of this section knowing that the periodic report accompanying the statement does not comport with all the requirements set forth in this section shall be fined not more than $1,000,000 or imprisoned not more than 10 years, or both; or

(2) willfully certifies any statement as set forth in subsections (a) and (b) of this section knowing that the periodic report accompanying the statement does not comport with all the requirements set forth in this section shall be fined not more than $5,000,000, or imprisoned not more than 20 years, or both.
You have to watch the Sixty Minutes program to get the full picture, but to date the Securities and Exchange Commission (SEC) the oversight branch and the US Justice Department, the judicial branch have not prosecuted or convicted any of the major banks involved in the Securities debacle, with exception of two people, one of which, Richard Scrushy is described below.

The laws are in place, and there appears to be substantial evidence to investigate, but as you can see from the fines and the periods for confinement have not been dealt to anyone accused and convicted of cooking the books at the expense of the shareholders. The financial penalty and incarceration time in proportion to the the amount of harm done to our economy and million's of people's lives seems out of whack to me.

One of the guy's who was prosecuted and convicted under Sarbanes–Oxley, Richard Marin Scrushy
recieved this penalty for his crimes. His criminal trial was in Montgomery, Alabama.
On June 28, 2007, Scrushy was sentenced to six years and ten months in a federal prison, ordered to pay $267,000 in restitution to United Way of Alabama, three years probation, and a fine of $150,000.[43] Scrushy is also expected to personally pay for his time in prison and perform 500 hours of community service
His civil trial was in Birmingham, Alabama.
Scrushy continued to assign blame to his subordinates and maintain that he did nothing wrong.[55] Closing arguments were heard in the trial on May 27, 2009.[56] On June 18, 2009, Judge Horn ordered Scrushy to pay $2.87 billion in damages.[57] Judge Horn stated, "Scrushy knew of and actively participated in the fraud" and referred to Scrushy as the "CEO of the fraud".[11] Scrushy is expected to appeal the judgment
After review of what Scrushy was ordered to serve and pay for his crimes (plea bargained down substantially from the maximum penalty) it hardly seems fair does it ? Do you think his punishments will deter others from continuing the practice of misreporting financial statements as a CFO ? Personally, I doubt it, the reward is too high and the risk and punishment too low. I might add as a final tribute the the Sixty Minute Investigators, they report that the Justice Department has for unknown reasons been unwilling to aggressively pursue other CEO's and CFO's of major US financial institutions.

Rhody...