as. You said...." LIAR. Kerry has nothing to do with #1 top Bushie Enron."....
Kerry's Enron Connection
January 24, 2004
joehilldispatch.org
Jonathan Cohn writing in the New Republic takes a look at a serious gap in John Kerry's record of fighting moneyed special interests:
Back in 1995, [Kerry] backed a controversial measure that severely limited the ability of investors to sue companies engaged in fraudulent accounting practices--a legal change widely believed to have contributed to the accounting scandals of the last few years. The law, which consumer groups opposed vociferously precisely because they feared it would lead to white-collar crime, was part of Newt Gingrich's Contract With America. Yet Kerry voted for it anyway, not once but twice--the second time overriding a veto by President Clinton.
The law in question is the Private Securities Litigation Reform Act of 1995. At the time it came up for debate, the bill's supporters said it would curb frivolous lawsuits against companies whose stock prices had fallen but who had engaged in no wrongdoing. According to company executives, these "strike suits" had cost them millions in litigation expenses while making it impossible to communicate freely with potential investors (because they feared every statement might be used against them later in court).
But the question in 1995 was no so much whether to reform securities litigation as how, and critics complained loudly that this proposed law went too far. Particularly worrisome was a proposal requiring plaintiffs to show firm proof of wrongdoing before a case could go forward. (The old law had a much lower threshold for evidence, on the theory that it was frequently impossible to get hard evidence without going through the pre-trial discovery process.) The U.S. Public Interest Group argued that the measure amounted to a "license to lie for white-collar crooks"--a sentiment Clinton would later echo in his veto message. The measure, he said, would "close the courthouse doors" to investors who'd lost money thanks to unscrupulous companies and their accountants.
During the initial debate over the bill on the Senate floor, Kerry, a member of the committee with jurisdiction over banking, acknowledged the legislation's shortcomings. "My preference also would have been to include stronger investor recovery provisions," he said, noting that he had supported failed Democratic amendments that would have softened the bill's impact. But unlike 26 of his Democratic colleagues and a handful of Republicans (Arlen Specter and John McCain among them) for whom such problems were cause enough to oppose the bill, Kerry embraced it anyway. "On balance," he said, "this legislation should lead to the creation of a more favorable climate for investors and businesses." After Clinton vetoed the bill, Kerry voted to override the president--a motion that passed the Senate by one vote. It was the first time a Clinton veto failed, leaving the White House to say merely that Clinton "hopes that the unintended consequences of the legislation actually do not occur."
As we all now know, the consequences did occur. The Enron case is just the most famous example of a company cooking its books while accountants looked the other way, costing investors hundreds of millions of dollars (not to mention throwing thousands of employees out of work). And while it would be grossly unfair to blame it all on the Securities Reform Litigation Act, many experts think the law played a critical role in the scandals--partly by insulating auditors and other would-be watchdogs from the threat of lawsuits. It "substantially reduced the liability of accountants and other corporate gatekeepers," says Columbia University law professor John Coffee, an expert on securities regulation who advised the Clinton White House on this issue in 1995. "It's reasonable to infer that ... [to] the extent that auditors no longer felt the pressure of litigation, it became easier to acquiesce at the margins to a fraud that they might not otherwise allow to happen."
James Cox, a securities expert at Duke Law School, is even more blunt when asked whether the 1995 law contributed to the Enron scandals: "You betcha," he says. And while the enormous publicity surrounding cases like Enron and WorldCom mean the guilty parties in those cases may eventually have to compensate investors, Cox wonders what will happen to less-publicized cases that don't generate congressional hearings or investigations by the Securities and Exchange Commission. "There's a wider number of fraudulent-reporting violations than the government has the personnel to prosecute, so we rely on private litigation to pick up the slack," says Cox. Indeed, according to a study he just published, government can pursue just 20 percent of the cases worth investigating. |
