Hastert OKs Corporate Fraud Measures
By MARCY GORDON 07/12/2002 03:18:46 EST
WASHINGTON (AP) - The leader of the GOP-controlled House has expressed approval of measures adopted by the Democratic-led Senate to create stiff penalties for corporate fraud.
With a series of corporate accounting scandals dragging down the stock market and putting President Bush and the Republicans on the defensive, senators on Thursday weighed strengthening the powers of federal securities regulators to go after executives who violate the law.
House Speaker Dennis Hastert, R-Ill., told reporters Thursday the House was "looking at what the Senate does" with the legislation. "I think they have acted responsibly so far. We'll have to see what the rest of the amendments are on their bill."
Sen. John McCain, R-Ariz., implored his colleagues to adopt his proposal requiring companies to count executives' stock options as an expense against earnings. Otherwise, investors will continue to get misleading information on companies' financial performance, McCain said on the Senate floor.
The debate over stock options has taken on new urgency since the collapse of Enron Corp. in December and the subsequent string of accounting scandals at big corporations. Executives at Enron and other big companies reaped millions of dollars in profits by cashing in their options before the companies' share prices plunged. On the other hand, many ordinary Enron employees who had heavily invested in company stock lost their retirement savings.
Stock options have been "terribly abused by the same people" that a unified Senate targeted in adopting new criminal penalties on Wednesday, McCain said.
Prospects for adoption of his plan - a change urged by Federal Reserve Chairman Alan Greenspan but opposed by the business community - appeared weak. McCain accused Senate colleagues, including some fellow Republicans, of bowing to lobbyists for high-tech companies and using delaying tactics to block a vote on his proposal.
The new criminal sanctions, including 10-year prison terms for securities fraud, were added to an accounting oversight bill inching toward passage amid a crisis of investor confidence. They include, and go beyond, proposals Bush made in a speech Tuesday on corporate responsibility.
Bush has given only qualified support to the bipartisan bill, which would create an independent private body with authority to discipline auditors and establish auditing and ethics rules. A new corporate fraud task force that the president announced Tuesday will hold its first meeting Friday.
An accounting oversight bill passed by the House in April is considered weaker than the Senate version by consumer groups and some Democrats and does not contain the new penalties against corporate fraud and executives who deceive investors. After the Senate passes its bill, it will have to be reconciled with the House version by a committee of lawmakers from both chambers.
Hastert acknowledged that the Senate measure goes further than the House package, but added, "I support it so far. ... We certainly know more now than we did in April when we passed that bill."
But Rep. Michael Oxley, R-Ohio, chief architect of the House bill, suggested a "cooling off period" until the fall before drafting a final compromise.
Oxley, chairman of the House Financial Services Committee, derided the Senate's labors as a "feeding frenzy ... get an amendment out and send out your press release."
"It's not bad to have a cooling off period in August," he said, adding that legislating in haste can produce detrimental results.
The Senate, meanwhile, debated a proposal by Sen. Carl Levin, D-Mich., to strengthen the enforcement powers of the Securities and Exchange Commission, which is investigating dozens of major corporations.
The SEC would get the authority, for example, to impose civil fines on company officials, directors, auditors and lawyers, and ban officials and directors from all publicly traded companies - without having to go to court. Existing fines would be increased.
"We have some ruthless people out there that have lined their own pockets," Levin said.
In another move aimed at preventing future corporate disasters, the Senate Finance Committee approved a bill Thursday to tighten protections on employee 401(k) plans.
The bill, sponsored by committee Chairman Max Baucus, D-Mont., would let workers sell company stock that employers provide as matching contributions after three years. It also would require companies to provide 30 days' notice to employees before they are locked out of their accounts for administrative changes.
The measure competes with a more stringent one by Sen. Edward M. Kennedy, D-Mass., that has already passed the Health, Education, Labor and Pensions Committee. |
