    [Senate Hearing 107-948]
    [From the U.S. Government Publishing Office]

                   ACCOUNTING REFORM AND INVESTOR PROTECTION
                                   VOLUME IV

                                                            S. Hrg. 107-948

                             ACCOUNTING REFORM AND
                              INVESTOR PROTECTION

    =======================================================================

                                   DOCUMENTS

                                   before the

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED SEVENTH CONGRESS

                                 SECOND SESSION

                                   VOLUME IV

                                       ON

           THE LEGISLATIVE HISTORY OF THE SARBANES-OXLEY ACT OF 2002:
     ACCOUNTING REFORM AND INVESTOR PROTECTION ISSUES RAISED BY ENRON AND
                             OTHER PUBLIC COMPANIES

                                   ----------

               REPORTS, BILLS, AND THE SARBANES-OXLEY ACT OF 2002

                                   ----------

      APRIL 16, 22, 24, 25, MAY 6, JUNE 18, 26, JULY 15, 16, AND 25, 2002

                                   ----------

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

    87-708              U.S. GOVERNMENT PRINTING OFFICE
                                WASHINGTON : 2003
    ____________________________________________________________________________
    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpr.gov  Phone: toll free (866) 512-1800; (202) 512�091800
    Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      PAUL S. SARBANES, Maryland, Chairman
    CHRISTOPHER J. DODD, Connecticut     PHIL GRAMM, Texas
    TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
    JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
    CHARLES E. SCHUMER, New York         WAYNE ALLARD, Colorado
    EVAN BAYH, Indiana                   MICHAEL B. ENZI, Wyoming
    ZELL MILLER, Georgia                 CHUCK HAGEL, Nebraska
    THOMAS R. CARPER, Delaware           RICK SANTORUM, Pennsylvania
    DEBBIE STABENOW, Michigan            JIM BUNNING, Kentucky
    JON S. CORZINE, New Jersey           MIKE CRAPO, Idaho
    DANIEL K. AKAKA, Hawaii              JOHN ENSIGN, Nevada

               Steven B. Harris, Staff Director and Chief Counsel
                 Wayne A. Abernathy, Republican Staff Director
                      Martin J. Gruenberg, Senior Counsel
                           Dean V. Shahinian, Counsel
                       Stephen R. Kroll, Special Counsel
                           Lynsey Graham Rea, Counsel
                            Vincent Meehan, Counsel
                            Sarah A. Kline, Counsel
                      Judith Keenan, Senior Policy Advisor
        Alexander M. Sternhell, Staff Director, Securities Subcommittee
                    Linda L. Lord, Republican Chief Counsel
                  Stacie Thomas Morales, Republican Economist
                    Michelle R. Jackson, Republican Counsel
         Geoffrey P. Gray, Republican Senior Professional Staff Member
                      Mark F. Oesterle, Republican Counsel
                    Katherine McGuire, Republican Economist
             Michael D. Thompson, Republican Legislative Assistant
       Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
                           George E. Whittle, Editor
                    Irene Whiston Carroll, Assistant Editor
                       Frank E. Wright, Assistant Editor
                        Kevin D. High, Assistant Editor

                                      (ii)

                                C O N T E N T S

                                  ----------

                                    VOLUME I

                                  ----------

                           TUESDAY, FEBRUARY 12, 2002

                                                                       Page

    Opening statement of Chairman Sarbanes...........................     1

    Opening statements, comments, or prepared statements of:
        Senator Shelby...............................................     3
        Senator Miller...............................................     4
        Senator Enzi.................................................     4
        Senator Corzine..............................................     6
        Senator Hagel................................................     7
        Senator Stabenow.............................................     7
        Senator Bayh.................................................     8
        Senator Carper...............................................     8
        Senator Johnson..............................................     9
            Prepared statement.......................................    55
        Senator Schumer..............................................    10
        Senator Dodd.................................................    11
        Senator Akaka................................................    56

                                   WITNESSES

    Arthur Levitt, Chairman, U.S. Securities and Exchange Commission,
      1993 to 2000...................................................    14
        Prepared statement...........................................    56
    Richard C. Breeden, Chairman, U.S. Securities and Exchange
      Commission, 1989 to 1993.......................................    16
        Prepared statement...........................................    58
        Response to written questions of Senator Hagel...............    94
    David S. Ruder, Chairman, U.S. Securities and Exchange
      Commission, 1987 to 1989.......................................    20
        Prepared statement...........................................    69
        Response to written questions of Senator Hagel...............    94
    Harold M. Williams, Chairman, U.S. Securities and Exchange
      Commission, 1977 to 1981.......................................    23
        Prepared statement...........................................    75
        Response to written questions of Senator Hagel...............    95
    Roderick M. Hills, Chairman, U.S. Securities and Exchange
      Commission, 1975 to 1977.......................................    26
        Prepared statement and exhibits..............................    78
        Response to written questions of Senator Hagel...............    95

                                  ----------

                          THURSDAY, FEBRUARY 14, 2002

    Opening statement of Chairman Sarbanes...........................    97

    Opening statements, comments, or prepared statements of:
        Senator Gramm................................................    98
            Prepared statement.......................................   141
        Senator Stabenow.............................................    99
            Prepared statement.......................................   141
        Senator Enzi.................................................    99
        Senator Bayh.................................................   100
        Senator Crapo................................................   101
        Senator Bunning..............................................   101
        Senator Shelby...............................................   113
        Senator Carper...............................................   113
        Senator Akaka................................................   114
            Prepared statement.......................................   142
        Senator Miller...............................................   128
        Senator Corzine..............................................   129
        Senator Johnson..............................................   142

                                   WITNESSES

    Paul A. Volcker, Chairman, International Accounting Standards
      Committee Foundation; Chairman, Arthur Andersen's Independent
      Oversight Board; Former Chairman, Federal Reserve System.......   102
        Prepared statement...........................................   143
    Sir David Tweedie, Chairman, International Accounting Standards
      Board; Former Chairman, United Kingdom's Accounting Standards
      Board..........................................................   107
        Prepared statement...........................................   147

                  Additional Material Supplied for the Record

    Letter from Paul A. Volcker, Chairman, International Accounting
      Standards Committee Foundation; Chairman, Arthur Andersen's
      Independent Oversight Board; Former Chairman, Federal Reserve
      System to Chairman Paul S. Sarbanes, dated May 17, 2002........   159
    Editorial from The Wall Street Journal by Paul A. Volcker,
      Chairman, International Accounting Standards Committee
      Foundation, dated February 19, 2002............................   164
    Memo from Sir David Tweedie, Chairman, International Accounting
      Standards Board; Former Chairman, United Kingdom's Accounting
      Standards Board on Funding of the UK Accounting Standards Board   166
    Article from Sir David Tweedie, Chairman, International
      Accounting Standards Board; Former Chairman, United Kingdom's
      Accounting Standards Board, dated January 2002.................   168

                                  ----------

                           TUESDAY, FEBRUARY 26, 2002

    Opening statement of Chairman Sarbanes...........................   181

    Opening statements, comments, or prepared statements of:
        Senator Gramm................................................   183
        Senator Miller...............................................   184
        Senator Enzi.................................................   184
        Senator Stabenow.............................................   186
        Senator Allard...............................................   187
            Prepared statement.......................................   234
        Senator Shelby...............................................   187
            Prepared statement.......................................   234
        Senator Corzine..............................................   188
            Prepared statement.......................................   234
        Senator Schumer..............................................   219

                                   WITNESSES

    Walter P. Schuetze, Chief Accountant, U.S. Securities and
      Exchange Commission, 1992 to 1995..............................   189
        Prepared statement...........................................   235
    Michael H. Sutton, Chief Accountant, U.S. Securities and Exchange
      Commission, 1995 to 1998.......................................   193
        Prepared statement...........................................   239
    Lynn E. Turner, Chief Accountant, U.S. Securities and Exchange
      Commission, 1998 to 2001.......................................   196
        Prepared statement...........................................   243
    Dennis R. Beresford, Former Chairman, Financial Accounting
      Standards Board, 1987 to 1997..................................   201
        Prepared statement...........................................   258
        Response to question raised by Senator Miller................   270

                  Additional Material Supplied for the Record

    Article by Walter P. Schuetze in Abacus, a Journal of Accounting,
      Finance, and Business Studies, ``What Are Assets and
      Liabilities?'' dated February 2001.............................   271
    Article by Walter P. Schuetze, 2001 RJ Chambers Research Lecture,
      dated November 27, 2001........................................   288
    Letter from Walter P. Schuetze to Senator Charles E. Schumer,
      dated March 25, 2002...........................................   296
    Letter with attachments from Lynn E. Turner, Director, College of
      Business, Colorado State University, dated March 1, 2002.......   302

                                  ----------

                          WEDNESDAY, FEBRUARY 27, 2002

    Opening statement of Chairman Sarbanes...........................   341

    Opening statements, comments, or prepared statements of:
        Senator Gramm................................................   342
        Senator Miller...............................................   343
        Senator Corzine..............................................   362

                                   WITNESSES

    John H. Biggs, Chairman, President, and CEO, Teachers Insurance
      and Annuity Association-College Retirement Equities Fund (TIAA-
      CREF)..........................................................   343
        Prepared statement...........................................   373
    Ira M. Millstein, Co-Chairman of the Blue Ribbon Committee on
      Improving the Effectiveness of Corporate Audit Committees;
      Senior Partner, Weil, Gotshal & Manges, LLP....................   350
        Prepared statement...........................................   378

                  Additional Material Supplied for the Record

    Miscellaneous exhibits submitted by Ira M. Millstein, Co-Chairman
      of the Blue Ribbon Committee on Improving the Effectiveness of
      Corporate Audit Committees; Senior Partner, Weil, Gotshal &
      Manges, LLP....................................................   388

                                  ----------

                                   VOLUME II

                                  ----------

                             TUESDAY, MARCH 5, 2002

    Opening statement of Chairman Sarbanes...........................   505

    Opening statements, comments, or prepared statements of:
        Senator Bunning..............................................   506
        Senator Dodd.................................................   507
        Senator Miller...............................................   507
        Senator Crapo................................................   508
        Senator Corzine..............................................   508
            Prepared statement.......................................   550
        Senator Stabenow.............................................   515
            Prepared statement.......................................   550
        Senator Bennett..............................................   515

                                   WITNESSES

    David M. Walker, Comptroller General of the United States, U.S.
      General Accounting Office; accompanied by: Thomas McCool,
      Managing Director, Financial Markets and Community Investment;
      and Robert Gramling, Former Director, Corporate Financial
      Audits.........................................................   508
        Prepared statement...........................................   551
    Robert R. Glauber, Chairman and Chief Executive Officer, National
      Association of Securities Dealers, Inc.........................   527
        Prepared statement...........................................   569
    Joel Seligman, Dean and Ethan A.H. Shepley University Professor,
      Washington University School of Law in St. Louis; Public
      Member, American Institute of Certified Public Accountants
      Professional Ethics Executive Committee........................   530
        Prepared statement...........................................   573
    John C. Coffee, Jr., Adolf A. Berle Professor of Law, Columbia
      University School of Law.......................................   534
        Prepared statement...........................................   582

                  Additional Material Supplied for the Record

    GAO Report, SEC Operations, Increased Workload Creates
      Challenges, dated March 2002...................................   594
    GAO Report, Highlights of GAO's Corporate Governance,
      Transparency and Accountability Forum, dated March 2002........   638
    Business Week article submitted by Senator Paul S. Sarbanes,
      dated March 11, 2002...........................................   653
    The Wall Street Journal article submitted by Senator Robert F.
      Bennett, dated February 25, 2002...............................   654
    Letter from GAO Comptroller General of the United States David M.
      Walker to Senator Paul S. Sarbanes, dated May 3, 2002..........   657
    Letter from John C. Coffee, Jr., Bevis Longstreth, and Joel
      Seligman to Senator Paul S. Sarbanes, dated July 1, 2002.......   670
    Letter from SEC Chairman Harvey L. Pitt to Senator Phil Gramm,
      dated July 3, 2002.............................................   674
    Letter from SEC Attorney General Eliot Spitzer to Senator Paul
      Sarbanes, dated June 5, 2002...................................   676

                                  ----------

                            WEDNESDAY, MARCH 6, 2002

    Opening statement of Chairman Sarbanes...........................   679

    Statement of Senator Gramm.......................................   680

                                   WITNESSES

    Shaun F. O'Malley, Chairman, 2000 Public Oversight Board Panel on
      Audit Effectiveness (O'Malley Commission); Former Chairman,
      Price Waterhouse; Past President, Financial Accounting
      Foundation.....................................................   681
        Prepared statement...........................................   716
    Lee J. Seidler, Deputy Chairman of the 1978 AICPA Commission on
      Auditors' Responsibilities; Managing Director Emeritus, Bear
      Stearns........................................................   685
        Prepared statement...........................................   725
    Arthur R. Wyatt, CPA, Former Chairman, American Institute of
      Certified Public Accountants' Accounting Standards Executive
      Committee; Former Chairman, International Accounting Standards
      Committee; Former Partner, Arthur Andersen & Co.; Professor of
      Accountancy Emeritus, University of Illinois...................   689
        Prepared statement...........................................   739
    Abraham J. Briloff, Emanuel Saxe Distinguished Professor
      Emeritus, Bernard M. Baruch College, CUNY......................   692
        Prepared statement...........................................   745
    Bevis Longstreth, Member of the O'Malley Commission; Former
      Commissioner of the Securities & Exchange Commission, 1981-
      1984; Retired Partner, Debevoise & Plimpton....................   696
        Prepared statement...........................................   793

                  Additional Material Supplied for the Record

    Letter from Chairman Paul S. Sarbanes to President George W.
      Bush, dated March 6, 2002......................................   802
    Letter from the National Association of State Boards of
      Accountancy to Chairman Paul S. Sarbanes and Members of the
      Banking Committee, dated March 22, 2002........................   804

                                  ----------

                            THURSDAY, MARCH 14, 2002

    Opening statement of Chairman Sarbanes...........................   809

    Opening statements, comments, or prepared statements of:
        Senator Bunning..............................................   811
        Senator Gramm................................................   811
        Senator Corzine..............................................   813
        Senator Enzi.................................................   813
        Senator Dodd.................................................   815
        Senator Bayh.................................................   816
        Senator Stabenow.............................................   817
            Prepared statement.......................................   860
        Senator Miller...............................................   817
        Senator Carper...............................................   842

                                   WITNESSES

    James G. Castellano, CPA, Chairman, Board of Directors, American
      Institute of Certified Public Accountants (AICPA); Managing
      Partner, Rubin, Brown, Gornstein & Company, LLP................   818
        Prepared statement...........................................   860
        Response to written question of Senator Miller...............   888
    James E. Copeland, Jr., CPA, Chief Executive Officer, Deloitte &
      Touche, LLP....................................................   820
        Prepared statement...........................................   862
    William E. Balhoff, CPA, CFE, Chairman, Executive Committee,
      AICPA Public Company Practice Section; Senior Audit Director,
      Postlethwaite & Netterville, A.P.A.C...........................   823
        Prepared statement...........................................   865
    Olivia F. Kirtley, CPA, Former Chairman, Board of Directors,
      AICPA (1998-1999); Retired Vice President and CFO, Vermont
      American Corporation...........................................   825
        Prepared statement...........................................   866
    James S. Gerson, CPA, Chairman, Auditing Standards Board, AICPA;
      Partner, PricewaterhouseCoopers, LLP...........................   827
        Prepared statement...........................................   868
    Robert E. Litan, Vice President and Director, Economic Studies
      Program, The Brookings Institution.............................   848
        Prepared statement...........................................   870
        Response to written question of:
            Senator Gramm............................................   889
            Senator Miller...........................................   890
    Peter J. Wallison, Resident Fellow and Co-Director, Project on
      Financial Market Deregulation, American Enterprise Institute...   853
        Prepared statement...........................................   879

                                  ----------

                            TUESDAY, MARCH 19, 2002

    Opening statement of Chairman Sarbanes...........................   893

    Opening statements, comments, or prepared statements of:
        Senator Gramm................................................   894
            Prepared statement.......................................   939
        Senator Corzine..............................................   894
        Senator Dodd.................................................   917
        Senator Carper...............................................   936
        Senator Akaka................................................   939

                                   WITNESSES

    Charles A. Bowsher, Chairman, Public Oversight Board; Former
      Comptroller General of the United States; accompanied by: Alan
      B. Levenson, Counsel to the Public Oversight Board.............   895
        Prepared statement...........................................   939
    Aulana L. Peters, Member, Public Oversight Board; Former
      Commissioner, U.S. Securities and Exchange Commission; Retired
      Partner, Gibson, Dunn & Crutcher...............................   902
        Prepared statement...........................................   963
    John C. Whitehead, Former Co-Chairman, Goldman Sachs & Co.;
      Former Deputy Secretary of State...............................   918
        Prepared statement...........................................   965
    L. William Seidman, Former Chairman, Federal Deposit Insurance
      Corporation; Former Chairman, Resolution Trust Corporation.....   921
        Prepared statement...........................................   967
    Michael Mayo, Managing Director, Prudential Securities, Inc......   925
        Prepared statement...........................................   969

                  Additional Material Supplied for the Record

    The Road to Reform, a White Paper from the Public Oversight
      Board, dated March 19, 2002....................................   973
    Letter from Harvey L. Pitt, Chairman, U.S. Securities and
      Exchange Commission to Charles A. Bowsher, Chairman, Public
      Oversight Board, dated January 22, 2002........................   994
    Fortune news article, The Price of Being Right, dated February 5,
      2001...........................................................   996

                                  ----------

                           WEDNESDAY, MARCH 20, 2002

    Opening statement of Chairman Sarbanes...........................  1003

    Opening statements, comments, or prepared statements of:
        Senator Akaka................................................  1004

                                   WITNESSES

    Senator Howard M. Metzenbaum (Ret.), Chairman, Consumer
      Federation of America..........................................  1004
        Prepared statement...........................................  1032
    Sarah Teslik, Executive Director, Council of Institutional
      Investors......................................................  1009
        Prepared statement...........................................  1040
        Response to written questions of Senator Akaka...............  1056
    Thomas A. Bowman, CFA, President and Chief Executive Officer,
      Association for Investment Management and Research.............  1012
        Prepared statement...........................................  1043
    Damon A. Silvers, Associate General Counsel, American Federation
      of Labor and Congress of Industrial Organizations..............  1016
        Prepared statement...........................................  1053

                                  ----------

                            THURSDAY, MARCH 21, 2002

    Opening statement of Chairman Sarbanes...........................  1059

    Opening statements, comments, or prepared statements of:
        Senator Dodd.................................................  1060
        Senator Bunning..............................................  1060
        Senator Corzine..............................................  1061
        Senator Enzi.................................................  1062
        Senator Gramm................................................  1064
        Senator Bennett..............................................  1084
        Senator Schumer..............................................  1087
        Senator Carper...............................................  1089
        Senator Johnson..............................................  1102

                                    WITNESS

    Harvey L. Pitt, Chairman, U.S. Securities and Exchange Commission  1065
        Prepared statement...........................................  1103

                  Additional Material Supplied for the Record

    The Washington Post article, submitted by Harvey L. Pitt,
      Chairman, U.S. Securities and Exchange Commission, dated
      November 15, 2000..............................................  1167
    Letter from Stephen M. Cutler, Director, Division of Enforcement,
      U.S. Securities and Exchange Commission, to Chairman Paul S.
      Sarbanes and Congressman Michael G. Oxley, dated July 23, 2002.  1168

                                  ----------

                                   VOLUME III

                                  ----------

                              MONDAY, JULY 8, 2002

    Senate Floor Debate in Regard to the Accounting Reform and
      Investor Protection Act of 2002 taken from the Congressional
      Record.........................................................  1171

                                  ----------

                             TUESDAY, JULY 9, 2002

    Senate Floor Debate in Regard to the Accounting Reform and
      Investor Protection Act of 2002 taken from the Congressional
      Record.........................................................  1225
    Continuation of the Senate Floor Debate in Regard to the
      Accounting Reform and Investor Protection Act of 2002 taken
      from the Congressional Record..................................  1247

                                  ----------

                            WEDNESDAY, JULY 10, 2002

    Senate Floor Debate in Regard to the Accounting Reform and
      Investor Protection Act of 2002 taken from the Congressional
      Record.........................................................  1261

                                  ----------

                             THURDAY, JULY 11, 2002

    Senate Floor Debate in Regard to the Accounting Reform and
      Investor Protection Act of 2002 taken from the Congressional
      Record.........................................................  1355
    Continuation of the Senate Floor Debate in Regard to the
      Accounting Reform and Investor Protection Act of 2002 taken
      from the Congressional Record..................................  1387

                                  ----------

                             FRIDAY, JULY 12, 2002

    Senate Floor Debate in Regard to the Accounting Reform and
      Investor Protection Act of 2002 taken from the Congressional
      Record.........................................................  1423
    Continuation of the Senate Floor Debate in Regard to the
      Accounting Reform and Investor Protection Act of 2002 taken
      from the Congressional Record..................................  1429

                                  ----------

                             MONDAY, JULY 15, 2002

    Senate Floor Debate in Regard to the Accounting Reform and
      Investor Protection Act of 2002 taken from the Congressional
      Record.........................................................  1463

                                  ----------

                            THURSDAY, JULY 25, 2002

    Senate Floor Debate in Regard to the Sarbanes-Oxley Act of 2002
      Conference Report taken from the Congressional Record..........  1613
                                  ----------

                                   VOLUME IV

                                  ----------
    Transcript of President Bush's remarks at the Signing Ceremony
      for the Sarbanes-Oxley Act of 2002 on July 30, 2002............  1653
    The Sarbanes-Oxley Act of 2002, Public Law 107-204 signed by
      President Bush on July 30, 2002. Text is identical to
      Conference Report on H.R. 3763 passed by the House of
      Representatives on July 25, 2002, by a vote of 423 Yeas to 3
      Nays and by the Senate by a vote of 99 Yeas to 0 Nays..........  1657

    H.R. 5118, Corporate Fraud Accountability Act of 2002, passed by
      the House of Representatives on July 16, 2002, by a vote of 391
      Yeas to 28 Nays................................................  1723

    S. 2673, Public Company Accounting Reform and Investor Protection
      Act of 2002, passed by the Senate on July 15, 2002, by a vote
      of 97 Yeas to 0 Nays. For procedural purposes, the bill is
      renamed H.R. 3763..............................................  1737

    Senate Committee on Banking, Housing, and Urban Affairs report on
      S. 2673, Public Company Accounting Reform and Investor
      Protection Act of 2002, filed by Chairman Sarbanes on June 26,
      2002...........................................................  1879

    S. 2673, Public Company Accounting Reform and Investor Protection
      Act of 2002, passed by the Senate Committee on Banking,
      Housing, and Urban Affairs on June 18, 2002, by a vote of 17
      Yeas to 4 Nays.................................................  1953

    Senate Committee on the Judiciary Report on S. 2010, Corporate
      and Criminal Fraud Accountability Act of 2002, filed by
      Chairman Leahy on May 6, 2002..................................  2071

    S. 2010, Corporate and Criminal Fraud Accountability Act of 2002,
      passed by the Senate Judiciary Committee on April 25, 2002, by
      a vote of 19 Yeas to 0 Nays....................................  2109

    H.R. 3763, Corporate and Auditing Accountability, Responsibility,
      and Transparency Act of 2002, passed by the House of
      Representatives on April 24, 2002, by a vote of 334 Yeas to 90
      Nays...........................................................  2135

    House Committee on Financial Services Report on H.R. 3763,
      Corporate and Auditing Accountability, Responsibility, and
      Transparency Act of 2002, dated April 22, 2002.................  2193

    H.R. 3763, Corporate and Auditing Accountability, Responsibility,
      and Transparency Act of 2002, passed by the House Committee on
      Financial Services on April 16, 2002, by a vote of 49 Yeas to
      12 Nays........................................................  2257
               REMARKS BY THE PRESIDENT AT SIGNING OF H.R. 3763,

                         THE SARBANES-OXLEY ACT OF 2002

                                        The White House
                                 Office of the Press Secretary,
                                                         July 30, 2002.

        The President. Thank you very much. Welcome to the White
    House, and welcome to this historic occasion.
        During the past year the American economy has faced several
    sudden challenges, and proven its great resiliency. Terrorists
    attacked the center and symbol of our prosperity. A recession
    cost many American workers their jobs. And now corporate
    corruption has struck at investor confidence, offending the
    conscience of our Nation. Yet, in the aftermath of September
    11, we refuse to allow fear to undermine our economy. And we
    will not allow fraud to undermine it either.
        With well-timed tax cuts we fought our way out of recession
    and back to economic growth. And now with a tough new law we
    will act against those who have shaken confidence in our
    markets, using the full authority of Government to expose
    corruption, punish wrongdoers, and defend the rights and
    interests of American
    workers and investors.
        My Administration pressed for greater corporate integrity.
    A united Congress has written it into law. And today I sign the
    most far-reaching reforms of American business practices since
    the time of Franklin Delano Roosevelt. This new law sends very
    clear messages that all concerned must heed. This law says to
    every dishonest corporate leader: you will be exposed and
    punished; the era of low standards and false profits is over;
    no boardroom in America is above or beyond the law.
        This law says to honest corporate leaders: your integrity
    will be recognized and rewarded, because the shadow of
    suspicion will be lifted from good companies that respect the
    rules.
        This law says to corporate accountants: the high standards
    of your profession will be enforced without exception; the
    auditors will be audited; the accountants will be held to
    account.
        This law says to shareholders that the financial
    information you receive from a company will be true and
    reliable, for those who deliberately sign their names to
    deception will be punished.
        This law says to workers: we will not tolerate reckless
    practices that artificially drive up stock prices and
    eventually destroy the companies, and the pensions, and your
    jobs.
        And this law says to every American: there will not be a
    different ethical standard for corporate America than the
    standard that applies to everyone else. The honesty you expect
    in your small
    businesses, or in your workplaces, in your community or in your
    home, will be expected and enforced in every corporate suite in
    this country.
        I commend the Congress for passing a strong set of reforms.
    I particularly thank Senator Paul Sarbanes and Congressman Mike
    Oxley. Both are very thoughtful, and were persistent voices for
    reform. They are true advocates of corporate integrity. I
    appreciate their working together to send a signal to the rest
    of the country that it is possible in Washington, DC, to set
    aside partisan differences and to do what is right for the
    American people. I also
    appreciate the bipartisan leadership in the Congress, and I
    particularly thank Senator Daschle and Senator Lott who are
    with us here today.
        I want to thank members of my Cabinet who worked on this
    bill: Secretary of Treasury O'Neill and Attorney General
    Ashcroft,
    Secretary Evans, Secretary Chao. I appreciate the FBI (Federal
    Bureau of Investigations) Director being here, along with the
    Chairman of Securities and Exchange Commission, Harvey Pitt. I
    appreciate the Corporate Fraud Task Force members who are here.
    I want to assure the American people, they are just getting
    started.
        America's system of free enterprise, with all its risk and
    all its rewards is a strength of our country, and a model for
    the world. Yet free markets are not a jungle in which only the
    unscrupulous survive, or a financial free-for-all guided only
    by greed. The fundamentals of a free market--buying and
    selling, saving and investing--require clear rules and
    confidence in basic fairness.
        The only risks, the only fair risks are based on honest
    information. Tricking an investor into taking a risk is theft
    by another name. Corporate executives must set an ethical tone
    for their companies. They must understand the skepticism
    Americans feel and take action to set clear standards of right
    and wrong. Those who break the rules tarnish a great economic
    system that provides
    opportunity for all.
        Their actions hurt workers who committed their lives to
    building the company that hired them. Their actions hurt
    investors and
    retirees who placed their faith in the promise of growth and
    integrity. For the sake of our free economy, those who break
    the law--break the rules of fairness, those who are dishonest,
    however wealthy or successful they may be, must pay a price.
        Today, we are taking practical steps to encourage honest
    enterprise in our Nation. Under this law, CEO's and chief
    financial officers must personally vouch for the truth and
    fairness of their
    companies' disclosures. Those financial disclosures will be
    broader and better for the sake of shareholders and investors.
        Corporate officials will play by the same rules as their
    employees. In the periods when workers are prevented from
    buying and selling stock in their pensions or 401(k)'s,
    corporate officials will also be barred from any buying or
    selling.
        Corporate misdeeds will be found and will be punished. This
    law authorizes new funding for investigators and technology at
    the Securities and Exchange Commission (SEC) to uncover
    wrongdoing. The SEC will now have the administrative authority
    to bar dishonest directors and officers from ever again serving
    in positions of corporate responsibility. The penalties for
    obstructing justice and shredding documents are greatly
    increased. Corporate crime will no longer pay. CEO's who profit
    by betraying the public trust will be forced to return those
    gains to investors. And the maximum prison term for common
    types of fraud has quadrupled from 5 to 20 years.
        For the first time, the accounting profession will be
    regulated by an independent board. This board will set clear
    standards to uphold the integrity of public audits, and have
    the authority to investigate abuses and discipline offenders.
    And auditing firms will no longer be permitted to provide
    consulting services that create conflicts of interest.
        This law gives my Administration new tools for enforcement.
    We will use them to the fullest. We will continue to
    investigate, arrest, and prosecute corporate officials who
    break the law. The Corporate Fraud Task Force I established is
    now hard at work, overseeing investigations of alleged fraud
    and insider trading. More than 200 Federal prosecutors are at
    work detecting and punishing corporate crimes. Every corporate
    official who has chosen to commit a crime can expect to face
    the consequences. No more easy money for corporate criminals,
    just hard time.
        As the work of enforcement proceeds, I hope Congress will
    join me in other important efforts to protect the savings and
    investments of Americans preparing for retirement. We have seen
    how workers can lose a lifetime of savings overnight, locked
    into pension plans without adequate choices and information.
        Workers should be able to sell company stock and diversify
    into other investments after 3 years in their own company's
    plan. They should receive updates on their retirement accounts,
    not once a year, but every 3 months. They should have access to
    sound investment advice. I have proposed pension protection
    reforms; the House has passed them. I hope the Senate takes
    them up soon.
        We must also work together to promote more growth in the
    economy and jobs for the American people. The fundamentals of
    our economy are sound. After all, sales of automobiles and new
    houses are on the rise. New unemployment claims have been
    falling since April. Inflation is low, productivity is
    increasing, and growth continues. Those are signs of strength
    in our economy, and with the right policies we can build on it.
        We must continue to work to control Federal spending, and
    make the tax cuts permanent, so Americans can save and plan for
    their own future. We must tear down trade barriers, so people
    everywhere can buy American. We must make terrorism insurance
    available to spur more construction.
        And on energy, we must encourage conservation through new
    technology and produce more energy at home, to give our economy
    safe and steady sources of power, and make our country less
    reliant upon foreign sources of power.
        The attacks against our economy in the last year have
    caused deep hardship, and highlighted the economy's fundamental
    strength. The American economy is more diverse and more
    innovative than ever before. And its greatest strength, the
    people who make it work, are better trained and more productive
    and more highly skilled than ever before.
        Whenever we face challenges, from the fear that threatened
    our economy after September 11 to the fraud that threatens
    investor confidence today, we have tackled them head on. The
    American economy depends on fairness and honesty. The vast
    majority of businesses uphold those values. With this law, we
    have new tools to enforce those values, and we will use those
    tools aggressively to defend our free enterprise system against
    corruption and crime.
        It is now my honor to sign the Sarbanes-Oxley Act of 2002.
        [Applause.]
        [The bill is signed.]