[Congressional Record Volume 148, Number 6 (Monday, February 4, 2002)]
[Extensions of Remarks]
[Page E65]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            THE INDEPENDENT INVESTMENT ADVISORS ACT OF 2002

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                         HON. ALCEE L. HASTINGS

                               of florida

                    in the house of representatives

                        Monday, February 4, 2002

  Mr. HASTINGS of Florida. Mr. Speaker, I rise today to introduce the 
Independent Investment Advisors Act of 2002.
  The sudden and unexpected bankruptcy of the Enron Corporation has 
raised a multitude of questions and concerns regarding current auditor 
independence laws. Furthermore, it highlighted the obvious conflict of 
interest that arises when an auditor has a financial interest in the 
company he or she is auditing.
  In November, 2001, days before filing for Chapter 11, Enron disclosed 
to the public that it had overstated its profits by more than $580 
million since 1997. This means that for five years, the Enron 
Corporation lied to its investors and employees about its earnings. At 
the same time, the company's auditor, Arthur Andersen, entrusted with 
the responsibility of providing investors with an accurate and honest 
evaluation of Enron's financial situation, failed to expose Enron's 
ongoing lies. Though Congressional and judicial investigations may 
yield otherwise, it is, nonetheless, fair to assume that the millions 
of dollars Enron was paying Arthur Andersen undoubtedly played a role 
in the firm's decision not to expose Enron's ongoing lies. In 2000 
alone, Enron paid Arthur Andersen more than $55 million for its audit 
work and consulting fees.
  The most stirring fact surrounding the investigation of Arthur 
Andersen's failures with Enron is that concerns about auditor 
independence is nothing new. In a 1984 opinion, the U.S. Supreme Court 
stated, ``It is . . . not enough that financial statements be accurate; 
the public must also perceive them as being accurate. Public faith in 
the reliability of a corporation's financial statements depends upon 
the perception of the outside auditor as an independent professional.'' 
Former Chairman of the Securities and Exchange Commission (SEC), Arthur 
Levitt, echoed the need for auditor independence during a Senate 
hearing on January 24, 2002. He noted, ``Any reforms must recognize the 
importance of gatekeepers (auditors) in safeguarding the interests of 
investors and the fundamental need to preserve and enhance these 
gatekeepers' independence.''
  Using the model that Mr. Levitt proposed to a Congressional oversight 
committee in 2000, I come to the floor today to introduce the 
Independent Investment Advisors Act of 2002. My bill instructs the SEC 
to, within 60 days, revise current auditor independence laws to require 
that investment advisors (individuals or firms) provide full public 
disclosure of any financial ties to any company he, she, or it, is 
auditing. In addition, it also bans auditors from purchasing, selling, 
or engaging in any financial transactions with respect to the company 
being audited 30 days prior to and 30 days following the release of any 
financial statement regarding that company.
  Mr. Speaker, as the American public continues to deal with the 
economic affects of September 11 and the ongoing recession, it is 
essential that Congress do everything it can to restore the public's 
confidence in the ability of an auditor to provide an independent, 
accurate, and reliable evaluation of publicly owned enterprises. The 
Independent Investment Advisors Act of 2002 is a good start in 
accomplishing this difficult task, and I urge the House to pass it 
quickly.

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