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The SOX Provision that Could Blindside Your Company

A little-known section criminalizes the anticipatory obstruction of justice.

By Ashley Post, Inside Counsel | Updated on September 10, 2012
hibernating bearThe 2001 collapse of the energy giant Enron Corp. and the subsequent downfall of its accounting firm, Arthur Andersen, sent shockwaves through corporate America. Not only did the infamous scandal involve the largest bankruptcy in history at the time, but it also centered on a massive audit failure and the destruction of documents in an attempt to cover up corporate transgressions.

As a response to Enron and other corporate and accounting scandals, Congress created the now well-known Sarbanes-Oxley Act (SOX), which seeks to prevent future similar egregious misconduct and increases the penalties against companies and auditors that try to defraud shareholders or federal investigators.

Although SOX became law a decade ago, corporate lawyers are becoming increasingly concerned with one of its particularly potent provisions, 18 USC Section 1519, which states that “whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States … or in relation to or contemplation of any such matter or case, shall be fined … imprisoned not more than 20 years, or both.”

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