Gov. Davis Signs Bill to Raise Fraud Fines

Corporations that hide damaging financial information from their shareholders could be fined up to $1 million, under legislation signed by California Gov. Gray Davis.

The governor signed the bill, and two others designed to strengthen corporate accountability, on Sunday. Davis said the bills would “increase trust in the financial markets by improving corporate accountability.”

Assemblyman Lou Correa (D-Anaheim) said his bill to increase penalties for securities fraud brings the state’s fines in line with federal laws. Correa’s bill also prohibits the destruction of documents during securities laws violations.

The bill requires publicly held companies to tell shareholders and regulators when corporate officers make false or misleading statements about their companies’ finances. Companies that hide damaging financial information could be fined up to $1 million.

The bill also bars company executives from retaliating against an employee who refused to participate in an illegal activity, and it doubles, from $5,000 to $10,000, the maximum potential fines for retaliating against whistle-blowers who disclose company crimes.