Congressional Investigator Calls for Beefed-Up SEC
Mar 5 2002 2:12PM
WASHINGTON (Reuters) - America's corporate police force needs more cops and more money to prevent future company collapses like Enron Corp.'s, the chief of Congress' investigative unit told lawmakers on Tuesday.
David Walker, head of Congress' General Accounting Office, said the Securities and Exchange Commission is "increasingly strained" in fulfilling its regulatory mission.
"There is a growing mismatch between the SEC's responsibilities and its resources," Walker told lawmakers.
Not only the SEC, but also the laws it enforces governing companies, accountants and banks, need change, said Walker, himself an accountant now going toe-to-toe with Vice President Dick Cheney over access to records of his energy task force.
"As the largest corporation failure in U.S. history, Enron ... provides a loud alarm that the current system may be broken and in need of an overhaul," he said.
Low pay compared to other federal law enforcement agencies, coupled with high employee turnover and an ever-expanding amount of work combine to slow and hamper the SEC, he said.
In 2001, the SEC reviewed only about 16 percent of the annual corporate filings it received, or about half of its annual goal of 30 to 35 percent, he said.
Until Enron collapsed last fall in a cloud of debt downgrades, lawsuits, layoffs, and a plunging stock price, the SEC had not examined the company's 10K annual filing since 1997, said Joel Seligman, dean of the Washington University School of Law in St. Louis, also a witness.
The GAO's Walker released a report on the SEC's resources at a hearing held by the Senate Banking Committee on Tuesday into Enron, the former energy trading giant.
The 40-page GAO report was requested by committee Chairman Sen. Paul Sarbanes, of Maryland, as well as Connecticut's Chris Dodd and New Jersey's Jon Corzine. All are Democrats.
Houston-based Enron filed the largest-ever U.S. bankruptcy on Dec. 2 after imploding. Thousands of jobs and billions of dollars in equity were destroyed.
An in-depth internal inquiry ordered by Enron's board alleged that senior Enron managers used a web of off-the-books partnerships to manipulate financial results and fool investors while enriching themselves by tens of millions of dollars.
Ten congressional committees, including Senate Banking, are investigating the matter, as is the SEC and Justice Department.
With fallout from Enron shaking investor confidence in U.S. capital markets, chronic questions about the adequacy of SEC funding, staff, and mission have grown more acute.
SEC Chairman Harvey Pitt warned Sarbanes in a letter last month that staff morale could be crushed and a "massive exodus of our best and brightest" could follow if SEC employees did not get pay raises soon.
Despite widespread concern on Wall Street about more financial scandals, the Bush administration's recent budget proposal failed to cough up the money needed to fund a long-awaited "pay parity" program at the SEC in the proposed federal budget for fiscal 2003.
The commission polices thousands of publicly traded U.S. companies, securities markets, investment banks, and many other financial institutions.
Pay parity costing less than $100 million out of a total federal budget of $2.1 trillion would put SEC employees' salaries on a par with those of other federal financial regulatory workers.
President Bush proposed spending $467 million to fund the SEC in fiscal 2003, a 6.6-percent increase from the $438 million in the current fiscal year.
House Republicans this week unveiled legislation proposing a fiscal 2003 SEC budget of as much as $700 million to greatly expand its investigation and enforcement capacity. House Democrats propose jacking up the SEC budget to $876 million. |
