The Senate approved on Monday the most sweeping changes in corporate accountability since the Depression, creating stiff penalties and jail terms for company fraud and tightening oversight of the accounting industry.
>Tis about time!!<
The vote was 97-0 for the bipartisan bill, lifted by a rising tide of unease over a string of corporate accounting scandals that have shattered Americans' confidence in business and the markets and threatened the fragile economic recovery.
"It is high time we call corporate executives on the carpet and hold them responsible," Sen. Max Cleland, D-Ga., declared on the Senate floor before the vote.
Sen. Charles Grassley, R-Iowa, denounced "the crooks running these corporations."
As the Senate neared passage of the legislation after nearly a week of debate and votes on amendments, President Bush told business leaders, "We intend to hold people accountable."
"We can't pass a law that says, 'You will be honest,'" the president said in a speech at the University of Alabama at Birmingham. "We can pass laws that say, 'If you're not honest we'll get you.'"
Bush urged Congress to get him a bill to sign before adjourning for its summer recess. Congressional leaders indicated they would try to do that.
In a show of bipartisanship, a spokesman for House Speaker Dennis Hastert, R-Ill., said lawmakers would try to begin Tuesday resolving differences between the bill in the Democratic-controlled Senate and a version passed in April by the GOP-led House. The House measure is widely considered weaker, because it lacks penalties for corporate fraud and does not go as far toward reining in accountants.
"That's something that we're going to try to aim for," said the Hastert spokesman, John Feehery.
Senate Majority Leader Tom Daschle, D-S.D., went further, asking Republican leader Sen. Trent Lott, R-Miss., to join him in a request to Hastert for the House to vote on the newly passed Senate measure.
In rare shows of unanimity, senators voted last week to add a series of new penalties, including 10-year prison terms for securities fraud. Chief executive officers and chief financial officers who certified false company financial reports would be slapped with prison terms of five to 10 years and fines of $500,000 to $1 million.
In his Birmingham address, Bush coupled an upbeat assessment of the economy with a warning to corporate leaders to "behave responsibly," an attempt to restore investor confidence in the wake of a wave of business scandals.
Despite the attempt, the markets dropped even further after his remarks. The Dow Jones industrials were down about 400 points in early-afternoon trading but rallied late in the session to close down 45 points.
Bush has been dogged in recent weeks by a decade-old insider-trading investigation by the Securities and Exchange Commission into his $848,000 sale of stock in his former oil company, Harken Energy Corp., where he was a director.
Additionally, Vice President Dick Cheney's former company, Halliburton Co., is being investigated by the SEC for its accounting practices while Cheney was its chief executive.
The Senate bill would ban personal loans from companies to their top officials and directors, and would require company insiders to notify the SEC more promptly when they buy or sell company stock.
The measure creates a new private-sector oversight board for the accounting industry with disciplinary powers, to replace the current system in which the industry polices itself. The board would be overseen by the SEC, which also would appoint members in consultation with the Treasury Department and the Federal Reserve Board.
The legislation restricts a wide range of consulting and other nonauditing services that accounting firms would be allowed to provide to their audit clients, including bookkeeping, financial systems design and personnel and legal services. The move has been fiercely opposed by the accounting industry, a major contributor to lawmakers' campaign funds.
Investor confidence has been shaken since a series of corporate accounting scandals, beginning with the collapse of Enron Corp. Its longtime auditor, Arthur Andersen LLP, recently was convicted of obstructing justice by shredding Enron audit documents. WorldCom Inc., Xerox Corp. and Global Crossing Ltd. also are under investigation.
Senators continued to sound a populist note Monday in the floor debate. Sen. Byron Dorgan, D-N.D., ticked off names of former chairman Kenneth Lay and other top Enron executives who cashed in millions of dollars of company stock last year before it plunged.
In contrast, Dorgan said, "The folks at the bottom lost their shirts." Employees later lost jobs and retirement savings in accounts heavy with Enron stock.
The White House has defended Bush's low-interest loans of $180,000 from Harken, a type of transaction that Bush now wants to ban as part of the crackdown on corporate wrongdoing.
Bush and the Republicans have been on the defensive as Democrats have made corporate accountability a political issue in this congressional election year. Presidential spokesman Ari Fleischer portrayed the questions the White House has been facing over its handling of corporate scandals as politicking by Democrats.
"The closer it gets to the election, it's going to be expected that some people are going to engage in statements that are political in nature," Fleischer said Monday.
Meanwhile, Bush's SEC chairman, Harvey Pitt, remained under fire because of his past work representing the accounting industry and big corporations before the agency. Several members of Congress, including Republican Sen. John McCain of Arizona, have urged his resignation.
Fleischer shrugged off calls for Pitt to step down, saying "the president stands by his team. |
