Securities Fraud and Sentencing Guidelines After Sarbanes-Oxley

In the legislative process that led to the adoption of Sarbanes-Oxley (SOX), legislators from both sides of the aisle vied with each other to establish their credentials for being tough on white-collar crime. The maximum penalties for mail fraud and wire fraud were increased from 5 to 20 years. Pub. L. No. 107-204 ' 903. The maximum penalty for willful violations of any provision of the Exchange Act or rule or regulation adopted thereunder the violation of which is unlawful was increased from 10 to 20 years. Pub. L. No. 107-204 ' 903. If this were not enough, a new crime relating to securities fraud in connection with the securities of public companies with a maximum penalty of 25 years was created. Pub. L. No. 107-204 ' 807 This does not exhaust the list, but should be sufficient to suggest that there are more than enough post-SOX criminal laws covering financial fraud to deter rational corporate officers and others to refrain from participating in financial crimes. The maximum statutory sentence, however, is less significant than other sentencing guideline factors in determining the range of sentence (minimum to maximum) within which the sentencing judge must impose a sentence. Defendant X, as we describe in greater detail below, an officer of a public company convicted of a willful violation of Rule 10b-5 resulting in a loss to more than 250 investors of $7-$20 million and a first time offender, under the Guidelines' Sentencing Table (below) has an offense level of 37 and faces a minimum term of 210 months (17.5 years) and a maximum sentence of 262 months (21 years and 10 months). Critical to determining the sentencing range is the Sentencing Table and what goes into it. See United States Sentencing Commission, Guidelines Manual (Nov. 2003) (available at http://www.ussc.gov/2003guid/2003guid.pdf), The Sentencing Table is as in effect as of Nov. 1, 2003 and incorporates amendments resulting from the provisions of the Sarbanes-Oxley Act discussed below.