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How Far Will Sarbox Stretch?

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Since it's Friday, we decided to dispense with the usual "Sarbox should stay vs. Sarbox should go" discussion in favor of an update on a story we first highlighted back in March.

 

Connecticut attorney Philip Russell was charged with violating Sarbanes-Oxley because he destroyed a then-client's computer as contraband after discovering it contained child pornography. In an effort to have the charges dismissed, he argued that Sarbanes-Oxley does not apply to such contraband, and in the alternative, that he did not intend to thwart the investigation because he wasn't aware of it, nor did he anticipate that it would occur.

 

According to Greenwich Time, the prosecutor in the case is pointing to statements from Sen. Patrick Leahy (D-Vt.) to support the proposition that Sarbox was intended to "cover a wide range of evidence." That an oil tanker engineer was once convicted under Sarbox for "illegally dumping waste into the ocean and keeping false logs about [it]" also demostrates the law's broad reach, the government argues.

 

Opinions differ as to how the court will ultimately rule on the issue -- even among attorneys quoted in the story.

 

Based on what we've read -- which is, admittedly, very little -- the stretch required for Sarbox to fit these facts is too extreme. The corporate fraud that Sarbox was enacted to combat usually shows up in falsified -- or missing -- financial records, or in altered or deleted e-mails or other communications. Even in the oil tanker case, we would guess the clincher was the fact that the logs regarding the waste were falsified, not that the waste itself was dumped.

 

Even so, the decision isn't ours to make. It will be interesting to see what the court does.

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