NY prosecutor Vance wants tougher fraud punishment

NEW YORK (Reuters) - A leading New York prosecutor wants to toughen a broad 1920s state law used to investigate and prosecute securities fraud on Wall Street by imposing stricter prison sentences.

Manhattan District Attorney Cyrus Vance told a lawyers' group on Tuesday that he intends to ask the state legislature this year to change the law known as the Martin Act to allow for minimum prison terms in white-collar crime cases regardless of the loss amount.

"The Martin Act has never been more relevant," Vance said in prepared remarks to the New York City Bar Association. "In recent years, our entire nation has become painfully aware of the devastating toll on our economy that results when widespread mistrust infects financial markets."

The 1921 act gained a resurgence in prominence as a law enforcement and regulatory tool since the 1990s under successive New York Attorneys General, the state's top prosecutor, including Eliot Spitzer and Andrew Cuomo. But its use has also been described by critics as over-reaching.

Vance suggested that when it comes to punishments for white-collar crime, the statute is outdated.

Under the Act, the highest level crime, which at its simplest involves intentional false statements resulting in a loss of more than $250, carries no minimum term of imprisonment regardless of whether the loss amount is hundreds of dollars or hundreds of millions of dollars.

Under Vance's proposal, a small-time broker who defrauds his customer of $2,000 would be subject to a maximum of 1-1/3 years to 4 years imprisonment; a sophisticated manipulator or perpetrator of a large-scale accounting fraud would be subject to a mandatory minimum prison term of 1 year to 3 years. They could face a maximum prison term of 8-1/3 years to 25 years.

"This year I will be calling on the legislature to reform the Martin Act, to make it even more powerful in the battle against fraud, by conforming the penalties for different loss amounts to those in the current Grand Larceny statutes and by increasing the statute of limitation," Vance said.

Vance won the November 2009 election to succeed Robert Morgenthau, who had served in the post since 1975.

Vance also said his office expected to bring more cases in partnership with the U.S. Securities and Exchange Commission, the Commodities Futures Trading Commission, the Financial Industry Regulatory Authority, the Federal Reserve Bank of New York and the Depository Trust & Clearing Corporation.

(Reporting by Grant McCool; Editing by Gary Hill)