[Congressional Record Volume 148, Number 13 (Wednesday, February 13, 2002)]
[Senate]
[Pages S733-S745]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. SPECTER (for himself and Mr. Durbin):
  S. 1937. A bill to set forth certain requirements for trials and 
sentencing by military commissions, and for other purposes; to the 
Committee on Armed Services.
  Mr. SPECTER. Mr. President, I have sought recognition to introduce, 
on behalf of Senator Durbin and myself, legislation entitled the 
``Military Commission Procedures Act of 2002.''
  The President issued an order establishing generalized procedures for 
trying members of al-Qaida and the Taliban. It is my view and Senator 
Durbin's view that Congress ought to consider what are the appropriate 
procedures pursuant to our authority under the Constitution, article I, 
section 8, which gives to the Congress the responsibility and authority 
``To define and punish . . . Offenses against the Law of Nations.''
  We have already legislated in part, delegating to the President the 
authority to establish military tribunals ``by regulations which shall, 
so far as he considers practicable, apply the principles of law and the 
rules of evidence generally recognized in the trial of criminal cases 
in the United States district courts, but which may not be contrary to 
or inconsistent with this chapter.''
  The President promulgated his order without consultation with 
Congress. This legislation is a starting point for what we believe 
ought to be consideration by the Judiciary Committee.
  In the President's order, there was a provision that there could be 
no appeal from any order of the military tribunal. But that, on its 
face, was inconsistent with the Constitution, which preserves the right 
of habeas corpus unless there is rebellion or invasion, neither of 
which had occurred here.
  The President's order also allowed for conviction of a capital 
offense by a two-thirds vote, but that is inconsistent with the Uniform 
Code of Military Justice, and the law does not allow a regulation to be 
inconsistent with that law.
  So Senator Durbin and I have provided the modifications that two-
thirds is acceptable generally. But if the sentence carries 10 years or 
more, it requires a three-fourths vote. And for the death penalty, it 
would require a unanimous vote.
  This legislation further provides for right to counsel consistent 
with the Uniform Code of Military Justice, which would be either 
military counsel or could be private counsel. But that right is 
preserved.
  On one provision, we have provided that there would be no ``Miranda'' 
rights for suspects who are interrogated. I candidly concede that in 
abrogating ``Miranda'' rights, that will be a source of some 
contention, which can be the subject of hearings. But it is our view 
that we should not give al-Qaida or Taliban prisoners access to counsel 
before they are questioned, first, for the safety of the soldiers who 
are doing the questioning, and, second, because of the importance, 
potentially, that eliciting information would stop further terrorist 
attacks.
  Of course, we could provide no ``Miranda'' warnings in advance but 
not allow admissions to be used at trial, but it is our view, subject 
to hearings and further consideration, that ``Miranda'' rights ought 
not to be required.
  We have provided for an open trial unless there is classified 
information; and, if classified information is used, we have 
incorporated the provisions of the Anti-Terrorism Act of 1996--a 
compromise worked out by Senator Simon and myself on the floor--which 
provides for a summary to be given to the defendant and the commission, 
to be reviewed by the commission, to see if it is adequate to protect 
sources and methods of classified information and also adequate to 
inform the defendant of the evidence so that the defendant would have 
substantially the same ability to make his defense as he would if the 
classified information was disclosed.

[[Page S734]]

  We have not provided any restrictions on rules of evidence, since it 
is the custom of Congress not to do so. But we think this legislation 
is an important first step. We now know there is a large contingent of 
those captive in Guantanamo Bay.
  I believe the President made a sound decision in saying that al-Qaida 
members were not prisoners of war, not subject to the Geneva Convention 
because they are terrorists, murdering innocent civilians. The 
President did accord Taliban members the protections of the Geneva 
Convention.
  But these trials will soon start. It is very important that our 
country and our Government proceed with accepted norms for criminal 
trials. To have a death penalty imposed on a two-thirds vote, as is in 
the Presidential order, would not be consistent with our generalized 
standards. To provide for no appeal is not consistent with the 
constitutional provisions.
  The ACTING PRESIDENT pro tempore. The Senator's time has expired.
  Mr. SPECTER. I ask unanimous consent for 30 seconds to finish my 
sentence, Mr. President.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. SPECTER. We believe this is a starting point. We urge early 
hearings so we can establish the parameters, so when we deal with these 
treacherous terrorists, we will, in accordance with American standards, 
give them basic due process--no more, but basic due process.
  Mr. DURBIN. Mr. President, on November 13, 2001, President Bush 
issued a military order authorizing the use of military commissions to 
prosecute individuals who may be engaged in activities related to the 
subject of our campaign against terrorism.
  The initial public reaction to the White House action was one of 
surprise and skepticism: Surprise that the order was issued without any 
advance notice, and skepticism as to whether the decision is based on 
sound legal or policy grounds. Many commentators also raised legitimate 
concerns that the Administration's use of military tribunals could 
potentially undermine our long-held foreign policy of criticizing other 
nations' reliance on such tribunals.
  My reaction, which, I believe, was echoed by many of my colleagues in 
Congress, was one of disappointment, in addition to the surprise and 
skepticism. I was disappointed that Congress was excluded from 
deliberating a policy as important as this one before the White House 
announced the order.
  I have said repeatedly since September 11 that I fully support the 
President in his efforts to combat terrorism both here and abroad. In 
response to September 11, Congress worked hand in hand with the 
administration on a host of items in a truly cooperative and bipartisan 
manner, from the passage of a joint resolution authorizing the 
President to use all necessary force, to the passage of the sweeping 
anti-terrorism bill.
  Yet on the drafting of this military order, Congress was left 
completely in the dark. The Constitution provides executive powers to 
the President, not exclusive powers. Our Nation remains strong only if 
the co-equal branches of government work together.
  Any proceeding that takes place under President Bush's order will 
have to withstand the test of legal scrutiny for years to come. But 
more importantly, it will also have to pass the scrutiny of our 
citizens at home and of our friends and enemies abroad who are watching 
to see how the greatest democracy in history carries out justice.
  At the Judiciary Committee hearing held in early December, Senator 
Specter and I both questioned the administration's witness to ascertain 
the precise constitutional authority upon which the administration was 
relying in creating this tribunal. We did not receive a satisfactory 
answer.
  We also wanted to know the precise scope and reach of the order in 
terms of who will be brought before such a tribunal, what procedural 
and evidentiary standards are to be applied, and what due process 
safeguards, including appeals, will be in place. We did not receive 
many details here either.
  Instead, the administration asked us to wait for the regulations 
implementing the order that the Defense Department was preparing.
  It has been over 3 months since the President's order was issued, and 
we have not seen the Defense Department regulations. So I believe it is 
appropriate for Congress to act now to provide the constitutional 
authority and guidance on procedures before the first military 
commission is empaneled under the President's order.
  I am introducing the ``Military Commission Procedures Act of 2002'' 
with Senator Specter. I believe this bill will provide the executive 
branch with the legal authority to prosecute potential terrorists 
captured in the current military campaign abroad.
  Our bill is designed to ensure that military commissions are used in 
the most narrow and necessary circumstances while protecting the basic 
rights of defendants. The bill limits the jurisdiction of military 
commissions to try defendants only for violations of the law of war, 
and not any domestic laws.
  The defendants would be entitled to representation by counsel in the 
same manner as military service members under the Uniform Code of 
Military Justice. The prosecution would need to prove its case beyond a 
reasonable doubt, and the death penalty could not be imposed without a 
unanimous vote as to guilt and to the sentence.
  Furthermore, in order to keep the proceedings as open as possible, 
our bill provides for classified information procedures where the 
defendant would receive a summary of such evidence while the commission 
considers the actual evidence in camera and ex parte. The bill also 
authorizes convicted defendants to petition the U.S. Supreme Court for 
certiorari.
  In short, Senator Specter and I believe this bill includes the 
details that the President's military order of November 13 should have 
included. More importantly, the bill provides the full force of the 
congressional and constitutional support behind the President's 
continuing efforts to wage a war against terrorism.
  I urge my colleagues to join us in supporting this legislation.
                                 ______
                                 
      By Mr. REID (for himself, Mr. Bennett, Mr. Hatch, and Mr. 
        Ensign):
  S. 1939. A bill to establish the Great Basin National Heritage Area, 
Nevada and Utah; to the Committee on Energy and Natural Resources.
  Mr. REID. Mr. President, I rise today for myself, Senator Ensign, 
Senator Hatch, and Senator Bennett to introduce this bill, which will 
establish a National Heritage Area in eastern Nevada and western Utah.
  National Heritage Areas are regions in which residents, businesses, 
as well as local and tribal governments have joined together in 
partnership to conserve and celebrate cultural heritage and special 
landscapes. For Nevada, these include such nationally significant 
historic areas as the Pony Express and Overland Stage Route, Mormon and 
other pioneer settlements, historic mining camps and ghost towns, as 
well as Native American cultural resources such as the Fremont Culture 
archeological sites.
  The bill will also highlight some of Nevada's natural riches. The 
Great Basin contains great natural diversity, including forests of 
bristlecone pine, which are renowned for their ability to survive for 
thousands of years. The Great Basin National Heritage Area includes 
White Pine County and the Duckwater Reservation in Nevada and Millard 
County, UT. The Heritage Area will also ensure the preservation of key 
educational and inspirational opportunities in perpetuity without 
compromising traditional local control over--and use of--the landscape. 
Finally, the Great Basin National Heritage Area will provide a 
framework for celebrating Nevada's and Utah's rich historic, 
archeological, cultural, and natural resources for both visitors and 
residents.
  The bill will establish a board of directors to manage the area. 
Consisting of local officials from both counties and tribes, the board 
will have the authority to receive and spend federal funds and develop 
a management plan within five years of the bill's passage. The bill 
mandates the Secretary of the Interior to enter into a memorandum of 
understanding with the Board of Directors for the management of the 
resources of the heritage area. The bill also authorizes up to $10 
million to carry out the Act but limits Federal

[[Page S735]]

funding to no more than fifty percent of the project's costs. The bill 
allows the Secretary to provide assistance until September 20, 2020.
  This bill benefits not just Nevada and Utah, but citizens of all 
States. It highlights some areas of outstanding cultural and natural 
value and brings people together to celebrate values that they can be 
proud of.
                                 ______
                                 
      By Mr. LEVIN (for himself, Mr. McCain, Mr. Fitzgerald, Mr. 
        Durbin, and Mr. Dayton):
  S. 1940. A bill to amend the Internal Revenue Code of 1986 to provide 
that corporate tax benefits from stock option compensation expenses are 
allowed only to the extent such expenses are included in a 
corporation's financial statements; to the Committee on Finance.
  Mr. LEVIN. Mr. President, today I am pleased to introduce Ending the 
Double Standard for Stock Options Act along with my colleagues Senator 
McCain, Senator Fitzgerald and Senator Durbin.
  As another lesson learned from the Enron debacle, this bill addresses 
a costly and dangerous double standard that allows a company to take a 
tax deduction for stock option compensation as a business expense while 
not showing it as a business expense on its financial statement.
  Stock options were a driving force behind management decisions at 
Enron that focused on increasing Enron's stock price rather than the 
solid growth of the company.
  Stock options are opportunities given to certain employees, usually 
top executives, to purchase a company's stock at a set price for a 
specified period of time, such as 5 or 10 years. When the stock price 
increases, the potential profit to the executive rises, and the more 
stock options an executive has, the smaller the increase needed to 
realize significant gain.
  Stock options are a stealth form of compensation, because they do 
not, under current accounting rules, have to be shown as an expense on 
the corporate books. In fact they're the only form of compensation that 
doesn't have to be treated as an expense at any time. But, like other 
forms of compensation, option expenses are allowed as a tax deduction 
for a corporation. It doesn't make sense, but that's the way it is. And 
this long-standing mismatch between U.S. accounting and tax rules was 
exploited by Enron to the hilt. The result was both misleading 
financial statements and an incentive to push accounting rules to the 
limit in order to artificially raise stock prices so as to make the 
stock options more valuable.
  A New York Times article from last October 21, reports that, ``Since 
1993, studies from Wall Street to Washington have shown that pushing 
[stock option] expenses off the income statement has inflated corporate 
earnings and misled investors about profits, particularly at technology 
concerns. Options are also a titanic but stealthy transfer of wealth 
from shareholders to corporate management.''
  Let's look at how it worked at Enron. We've all heard about the many 
ways that Enron inflated its earnings and hid its debts by keeping 
various partnerships off the company books. Well, Enron did the same 
thing with stock options.
  For five years, from 1996 until the year 2000, Enron told its 
shareholders that it was rolling in revenues. One analysis by Citizens 
for Tax Justice, using Enron's public filings, reports that Enron 
claimed a total 5-year income of $1.8 billion. This figure apparently 
included, however, a number of accounting gimmicks, one of which was 
Enron's decision to relegate all stock option compensation it had 
provided to a footnote and to exclude such compensation from its total 
expenses, even though, according to the same study, the stock option 
pay over five years had reached almost $600 million. That $600 million, 
by the way, represented one-third of all the income reported by Enron 
over a 5-year period.
  Yet all $600 million was, legally, kept off-the-books, away from 
Enron's bottom line. That's because existing U.S. accounting rules 
allow U.S. companies to omit employee stock option compensation as a 
charge to earnings on their financial statements. That is a unique 
rule. Stock option compensation is the only kind of employee 
compensation that a U.S. company never has to record on its financial 
statements at any time as an expense. That means Enron could give its 
executives, directors and other employees $600 million in stock options 
and never show one penny of that pay on its books. It could dole out 
stock options like candy and never reduce by one penny its alleged 
income of $1.8 billion.

  The result was that Enron was able to provide extravagant 
compensation, without ever having to account for that extravagance on 
its bottom line where stockholders and the public might take notice.
  But Enron's misleading financial statements are not the end of the 
story. The backside of the story is that, at the same time Enron was 
touting its skyrocketing revenues and providing extravagant pay to 
insiders, it was apparently telling Uncle Sam that its expenses 
exceeded its income and its tax liability was little or nothing. The 
study by Citizens for Tax Justice, after reviewing Enron's public 
filings, has calculated that, despite claiming a 5-year revenue total 
of $1.8 billion, Enron apparently failed to pay any U.S. tax in 4 out 
of the last 5 years. How did a company with $1.8 billion in revenue 
apparently pay so little in taxes? The same study calculated that with 
a 35 percent corporate tax rate, Enron should have paid about $625 
million over five years. But, apparently, according to the study, the 
principal way Enron avoided paying these taxes was by claiming that its 
income had been wiped out by nearly $600 million in stock option 
expenses, the same $600 million that Enron chose not to put on its 
financial statements as an expense. While these numbers are based on 
public filings and not based on a review of the actual tax returns, the 
significance of Enron's actions is the same, avoiding tax liability 
through the use of stock options.
  As I noted earlier, Enron was not acting illegally here, nor were its 
actions unique. It took advantage of the tax provisions which we hope 
to change in our bill which allow a company to claim a stock option 
expense on its tax return even if the company never lists that expense 
on the company books. These tax provisions incomprehensibly and 
indefensibly allow companies to tell Uncle Sam one thing and their 
stockholders something else.
  And to add insult to injury, last year the IRS issued Revenue Ruling 
2001-1 which determined that companies whose tax liability was erased 
through stock option expenses are not subject to the corporate 
Alternative Minimum Tax. That revenue ruling means that our most 
successful publicly traded companies, if they dole out enough stock 
options to insiders, can arrange their affairs to escape paying any 
taxes. That absurd result leaves the average taxpayer feeling like a 
chump for paying his fair share when a company like Enron can use its 
success in the stock market to apparently end up tax free.
  Now you may have noticed that, in discussing Enron's tax returns, I 
have been using the words ``appears to'' and ``apparently.'' That is 
because, despite a pending request from Senators Baucus and Grassley of 
the Senate Finance Committee, Enron has yet to release its tax returns 
to either Congress or the public.
  The lack of direct access to Enron's tax returns requires Congress 
and the public to have to continue making educated guesses about 
Enron's tax conduct, without having the actual facts. It is much too 
late and much too serious for Enron to be asking everyone to play this 
guessing game. Enron is in bankruptcy; it has brought economic loss to 
individuals and financial institutions across this country; its 
management claims to have done nothing wrong, and the company professes 
to be cooperating with investigators.
  Enron should immediately release to the public the last five years of 
its tax returns. Then we'll know with certainty if Enron paid no taxes 
in 4 out of the last 5 years and why. Then we'll know with certainty if 
Enron eliminated its taxes primarily through stock option deductions, 
or whether it used other tax provisions to avoid payment of tax such as 
diverting income through offshore tax havens. The public and the 
Congress have a right to know what really happened at Enron.

  It is also important to realize that most companies treat stock 
options

[[Page S736]]

the same way Enron did. A recent USA Today article reports that out of 
the S&P 500 companies, only Boeing and Winn-Dixie currently record 
stock option expenses on both their financial statements and tax 
returns. The other 498 companies apparently do not. The article says 
that had stock option expense been recognized on their earnings 
statements, the S&P 500's revenues would have fallen by 9 percent, 
another measure of how much off-the-books stock option pay is out 
there.
  Even more troubling, and something that needs more investigation and 
attention is the claim in the article that ``half a dozen academic 
studies have concluded that companies time the release of good or bad 
news near the date that executives are issued their options, 
orchestrating a potential windfall.'' In other words, some believe that 
executives are timing the release of company information around the 
dates they are to receive their stock options, thereby artificially 
inflating the value of their options.
  The future promises more of the same. A February 3rd New York Times 
article entitled, ``Even Last Year, Option Spigot Was Wide Open,'' 
reports that companies are providing more stock options than ever to 
their executives, even in the face of poor company performance and 
diluted stockholder earnings. ``It's a great time to give options,'' 
one expert is quoted as saying. ``They're cheap because they involve no 
change to earnings, and that's important at a time when profits are 
down.''
  Ten years ago, some of us tried to end corporate stock option abuses 
by urging the Board that issues generally accepted accounting 
principles, the Financial Accounting Standards Board or FASB, to 
require stock option expenses to be shown on company books. We were not 
successful. Corporate America fought back tooth and nail. Intense 
pressure was brought to bear on FASB. Arthur Levitt told the 
Governmental Affairs Committee last month that he spent 50 percent of 
his first four months at the SEC talking to corporate executives who 
wanted to keep their stock option pay off the books. On one day during 
the height of the campaign, 100 CEOs flew into Washington to lobby 
Members of Congress on this issue. In 1994, in the midst of this 
intense lobbying, the Senate voted 88-9 to recommend against putting 
stock option pay on the books.
  Arthur Levitt testified before our committee that one of his greatest 
regrets from his days at the SEC was that he didn't work harder to get 
stock options treated as an expense on a company's financial statement. 
Several accounting firms, including Andersen and Deloitte, now support 
expensing options. They are joined by more than 80 percent of U.S. 
financial analysts, as reported in a September 2001 survey conducted by 
the leading financial research organization, the Association for 
Investment Management and Research.
  In addition, the newly re-constituted International Accounting 
Standards Board in London, the international equivalent of our FASB, 
has announced that one of its first projects will be to propose 
international standards requiring stock options to be expensed on 
company books. But in a repeat of what happened here in the United 
States, corporate lobbyists are already organizing to oppose this 
project. An Enron document uncovered by my Subcommittee casts light on 
how this battle may be fought.
  The document is an email dated February 23, 2001, from David Duncan, 
the lead auditor of Enron at Andersen, to several Andersen colleagues, 
describing Enron's reaction to a request that it consider donating 
funds to the new International Accounting Standards Board.

       Today [Enron Chief Accountant] Rick Causey called to say 
     that Paul Volker had called Ken Lay (Enron Chairman) and 
     asked Enron to make a 5 year, 100k per year commitment to 
     fund the Trust Fund of 'the FASB's International equivalent' 
     . . . . While I believe Rick is inclined to do this given 
     Enron's desire to increase their exposure and influence in 
     rulemaking broadly, he is interested in knowing whether these 
     type of commitments will add any formal or informal access to 
     this process (i.e., would these type commitments present 
     opportunities to meet with the Trustees of these groups or 
     other benefits). I think any information along this front or 
     further information on the current strategic importance of 
     supporting these groups for the good of consistent rulemaking 
     would help Enron with its decision to be supportive.

  First, let me be clear that I'm not suggesting in any way that Paul 
Volker's request of Enron for a contribution to FASB's international 
equivalent was in any way improper. It wasn't. That is exactly how 
these accounting standards boards get funded. And the response by Enron 
is not really suprising, it's something we've all known but we've never 
had written confirmation of it. Contributions to the accounting 
standards boards affect the boards' independence, and that's bad news 
for reliable accounting.
  No one was mincing any words here. Enron wanted to know whether its 
money would buy access and influence at the new accounting standards 
board, and its auditor didn't bat an eye at this inquiry but asked his 
colleagues for ``any information along this front.''
  The bill we are introducing today does not require that stock options 
be charged to earnings. That is a decision for the accounting standards 
boards to make. And many of us in Congress will be working on 
legislation to make the accounting standards board more independent and 
less vulnerable to pressures from its contributors. The legislation we 
are offering today would simply state, in essence, that companies can 
take a tax deduction or tax credit for stock option expenses only to 
the extent that the company actually recognizes the same stock option 
expenses in the company books.
  The bill does not get into the accounting side of the issue. It does 
not, for example, tell companies that they have to expense stock 
options. It does not tell them when to take a stock option expense or 
how to book that expense. It focuses solely on the income tax deduction 
and states, in essence, that any tax deduction must mirror the company 
books. If a company declares a stock option expense on its books, then 
the company can deduct the expense on its tax return. If there is no 
stock option expense on the company books, there can be no expense on 
the company tax return.
  That's tax honesty. That will end the stock option double standard.
  The stock option double standard has been a long festering problem in 
corporate America. It has been one of the driving engines of stretching 
accounting rules to increase the value of a company's stock. Enron has 
put a face on this faceless problem and shown the cost of off-the-books 
stock option pay. Like other accounting gimmicks, off-the-books stock 
option pay coupled with a large tax deduction doesn't pass the smell 
test, because we all know that ``off-the-books'' means stealth 
compensation that is harder to track and easier for insiders to abuse. 
Add to the stealth factor and the insider abuse factor, a government 
policy of giving large corporate tax deductions which can completely 
eliminate a company's tax liability, and you've set the stage for just 
the type of stock option results we saw at Enron.
  It is time to end the stock option double standard, and I urge all of 
my colleagues to support enactment of this legislation this year.
  I ask unanimous consent to print in the Record, a bill summary, a 
section-by-section analysis, and the following materials: ``Less than 
Zero Enron's Corporate Income Tax Payments, 1996-2000'' (Citizens for 
Tax Justice, January 17, 2002); Duncan email (2/23/01); ``Enron's fall 
fuels push for stock option law'' (USA Today, 2/8/02); ``Even Last 
Year, Option Spigot Was Wide Open'' (New York Times, 2/3/02); ``Stock 
Option Madness'' (Washington Post, 1/30/02); ``Enron's Way: Pay 
Packages Foster Spin, Not Results'' (New York Times, 1/27/02); and 
stock option survey results by Association for Investment Management 
Research, as posted on the AIMR website on 2/8/02.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             [From Citizens for Tax Justice, Jan. 17, 2002]

    Less Than Zero: Enron's Corporate Income Tax Payments, 1996-2000

       A January 17, analysis of Enron's financial documents by 
     Citizens for Tax Justice finds that Enron paid no corporate 
     income taxes in four of the last five years--although the 
     company was profitable in each of those years.
       Over the five-year period from 1996 to 2000, Enron received 
     a net tax rebate of $381 million. This includes a $278 
     million tax rebate in 2000 alone.
       Over the same period, the company's profit before federal 
     income taxes totaled $1.785 billion. In none of these years 
     was the company's profit less than $87 million.

[[Page S737]]



                      LESS THAN ZERO: CORPORATE INCOME TAX PAYMENTS BY ENRON, 1996 TO 2000
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                2000     1999    1998    1997     1996    96-00
----------------------------------------------------------------------------------------------------------------
U.S. profits before federal income taxes....................     $618     $351    $189     $87     $540   $1.785
Tax at 35% corporate rate would be..........................      216      123      66      30      189      625
Less tax benefits from stock options........................     -390     -134     -43     -12      -19     -597
Less tax savings from other loopholes, etc..................     -104      -94     -36      -1     -173     -409
                                                             ---------------------------------------------------
Federal income taxes paid (+) or rebated(-).................     -278     -105     -13      17       -3     -381
----------------------------------------------------------------------------------------------------------------

       At the 35 percent tax rate, Enron's tax on profits in the 
     past five years would have been $625 million, but the company 
     was able to use tax benefits from stock options and other 
     loopholes to reduce its five-year tax total to substantially 
     less than zero.
       Among the loopholes used to reduce the company's tax 
     liability was the creation of more than 800 subsidiaries in 
     ``tax havens'' such as the Cayman Islands.
                                  ____


 Summary of Levin-McCain-Fitzgerald-Durbin Ending the Double Standard 
                for Stock Options Act, February 13, 2002

       The Enron fiasco has brought to light a long-festering 
     problem in how some U.S. corporations use stock options to 
     avoid paying U.S. taxes while overstating earnings. According 
     to one recent analysis reported in the New York Times, Enron 
     apparently failed to pay any U.S. tax in four out of last 
     five years, despite skyrocketing revenues and an alleged 
     five-year pre-tax income from 1996 to 2000, of $1.8 billion. 
     To sidestep paying about $625 million in taxes on its $1.8 
     billion in income, Enron apparently claimed stock option tax 
     deductions totaling almost $600 million. At the same time, 
     Enron never reported this $600 million as an expense on its 
     financial statements--an expense which, had it been reported, 
     would have reduced Enron's income by one-third.
       Enron was able to employ this stock option double standard, 
     because of accounting rules that allow stock option 
     compensation to be kept off a company's books. Right now, 
     many U.S. companies routinely give their executives large 
     numbers of stock options as part of their compensation. When 
     an executive exercises those options, the company can claim a 
     corresponding compensation expense on its tax return, while 
     at the same time employ accounting rules to omit reporting 
     any expense at all on its books. The company can tell Uncle 
     Sam one thing and its shareholders the opposite. That's just 
     what Enron did--it lowered its tax bill by claiming stock 
     option expenses on its tax returns, while overstating its 
     earnings by leaving stock option expenses off its financial 
     statements.
       The stock option loophole Enron used makes no sense, but 
     when the Financial Accounting Standards Board--the board that 
     issues accounting standards--tried to change the rules ten 
     years ago, corporations and audit firms fought the Board 
     tooth and nail. They demanded that companies be allowed to 
     continue to keep stock option compensation off the books. In 
     the end, the best the Board could get was a footnote noting 
     the earning charge that should be taken on a company's books. 
     But that stock option footnote--like so many Enron 
     footnotes--doesn't tell the true financial story of a 
     company.
       It's time to end the stock option double standard. The 
     Levin-McCain-Fitzgerald-Durbin bill would not legislate 
     accounting standards for stock options or directly require 
     companies to expense stock option pay, but it would require 
     companies to treat stock options on their tax returns the 
     exact same way they treat them on their financial statements. 
     In other words, a company's stock option tax deduction would 
     have to mirror the stock option expense shown on the 
     company's books. If there is no stock option expense on the 
     company books, there can be no expense on the company tax 
     return. If a company declares a stock option expense on its 
     books, then the company can deduct exactly the same amount in 
     the same year on its tax return. The bill would require 
     companies to tell Uncle Sam and their stockholders the same 
     thing--whether employee stock options are an expense and, if 
     so, how much of an expense against company earnings. Enron 
     has already shown how much damage, if not corrected, that the 
     existing stock option double standard can inflict on company 
     bookkeeping, investor confidence, and tax fairness.
       The bill cosponsors are Senators Levin, McCain, Fizgerald 
     and Durbin, and the bill is expected to be referred to the 
     Senate Committee on Finance.

  Section-by-Section Analysis of Ending the Double Standard for Stock 
                              Options Act

       Section 1. Short Title. The short title of the bill is 
     ``Ending the Double Standard for Stock Options Act.''
       Section 2. Stock Option Deductions and Tax Credits. This 
     section of the bill would amend two Internal Revenue Code 
     sections to address stock options compensation. The first tax 
     code section, 26 U.S.C. 83(h), addresses employer deductions 
     for employee wages paid for by a stock option transfer. The 
     second tax code section, 26 U.S.C. 41(b)(2)(D), addresses 
     employer tax credits for research expenses, including 
     employee wages.
       Subsection (a) of this section of the bill would add a new 
     paragraph (2) to the end of 26 U.S.C. 83(h) that would 
     restrict the compensation deduction that a company could 
     claim for the exercise of a stock option by limiting the 
     stock option deduction to the amount that the company has 
     claimed as an expense on its financial statement. This 
     section would also make it clear that the deduction may not 
     be taken prior to the year in which the employee declares the 
     stock option income. In addition, a new subparagraph (2)(B) 
     would require the Treasury Secretary to promulgate rules to 
     apply the new restriction to cases where a parent corporation 
     might issue stock options to the employees of a subsidiary 
     corporation or vice versa.
       Subsection (b) of this section of the bill would add a new 
     clause (iv) to the end of 26 U.S.C. 41(b)(2)(D). This new 
     clause would restrict the research tax credit that a company 
     could claim for employee wages paid for by the transfer of 
     property in connection with a stock option by saying that the 
     amount of the credit shall not exceed the amount of the 
     corresponding stock option deduction allowed under 26 U.S.C. 
     83(h).
       The purpose of both new statutory provisions is to ensure 
     that any stock option deduction or credit claimed on a 
     taxpayer's return will mirror, and not exceed, the 
     corresponding stock option expense shown on the taxpayer's 
     financial statement. If no stock option expense is shown on 
     the taxpayer's financial records, there can be no expense 
     taken as a deduction or credit on the taxpayer's return. If a 
     taxpayer declares a stock option expense on its financial 
     statement, then the taxpayer is permitted to claim a 
     corresponding deduction or credit on its return in the same 
     taxable year for exactly the same amount of expense.
       Subsection (c) of the bill provides that the amendments 
     made by the Act apply only to wages and property transferred 
     on or after the date of enactment of the Act.
                                  ____

     To: Steve M. Samek@ANDERSEN WO; Lawrence A. Reiger@ANDERSEN 
         WO; Gregory J. Jonas@ANDERSEN WO; Jeannot 
         Blanchet@ANDERSEN WO
     CC: Michael L. Bennett@ANDERSEN WO; D. Stephen Goddard 
         Jr.@ANDERSEN WO
     Date: 02/23/2001 09:56 AM
     From: David B. Duncan
     Subject: Enron Funding of FASB Trust
     Attachments:
       I recently asked Enron to consider funding the FASB Trust 
     pursuant to a Steve Samek request.
       Today, Rick Causey called to say that Paul Volker had 
     called Ken Lay (Enron Chairman) and asked Enron to make a 5 
     year, 100k per year commitment to fund the Trust Fund of 
     ``the FASB's International equivalent'' (best Rick could 
     remember). Lay is asking Causey if this is something that 
     they should do.
       While I believe Rick is inclined to do this given Enron's 
     desire to increase their exposure and influence in rulemaking 
     broadly, he is interested in knowing whether these type of 
     commitments will add any formal or informal access to this 
     process (i.e., would these type commitments present 
     opportunities to meet with the Trustees of these groups or 
     other benefits). I think any information along this front or 
     further information on the current strategic importance of 
     supporting these groups for the good of consistent rulemaking 
     would help Enron with its decision to be supportive.
       Could any of you guys help me out with more information or 
     point me to someone who could? Thanks.
                                  ____


                     [From USA Today, Feb. 8, 2002]

              Enron's Fall Fuels Push for Stock Option Law

                      (Matt Krantz and Del Jones)

       The Enron implosion has breathed life into legislation that 
     business leaders thought they had killed in the mid-1990s.
       In a highly controversial move, at least three senators 
     want to end the legal tax deductions companies take for stock 
     options they issue to executives and workers unless they 
     subtract the same expense from their earnings.
       As it is, almost every company takes a tax deduction for 
     options, but ignores them when it comes to reporting their 
     profits. Among the S&P 500, only Boeing and Winn-Dixie follow 
     the advice of the Financial Accounting Standards Board in 
     recording the cost of options on both ledgers, says David 
     Zion, analyst with Bear Stearns. The rest are like Enron, 
     which took a $625 million tax deduction for options from 1996 
     to 2000, yet legally included the $625 million on its 
     earnings.
       If stock options were treated as an expense, the earnings 
     reported by firms in the S&P 500 would have been 9% lower in 
     2000, Zion says. Technology companies, more likely to use 
     options for rank-and-file compensation, would be harder hit. 
     Fourteen companies, including Yahoo and Citrix Systems, would 
     have posted losses in 2000, rather than gains. Microsoft and 
     Cisco take large tax deductions for options.
       Options are contracts that allow the purchase of stock, 
     usually within five years, at today's price. If the stock 
     rises, the stock can be bought at a discount.
       Conventional wisdom has long held that options align the 
     goals of executives and workers with those of the 
     shareholders. Enron has given pause to that thinking because 
     its executives artificially boosted the stock price at the 
     risk of shareholders.
       Outright frauds is rare, but at least a half-dozen academic 
     studies have concluded that

[[Page S738]]

     companies time the release of good or bad news near the date 
     that executives are issued their options, orchestrating a 
     potential windfall.
       Sens. Carl Levin, D-Mich., John McCain, R-Ariz., and Peter 
     Fitzgerald, R-Ill., are dusting off the tax-deduction 
     proposal that was defeated by a vote of 88-9 in 1994. At the 
     time, Home Depot founder and CEO Bernard Marcus said he had 
     ``never been more strongly opposed to anything.''
       Citigroup CEO Sanford Weill was quick out of the chute 
     Thursday, warning on CNBC's Squawk Box not to get into an 
     Enron frenzy and hurry through bad legislation.
       But Matt Ward, CEO of WestWard Pay Strategies, an options 
     consulting firm in San Francisco, says he fears the 
     legislation stands a better chance of passing this time 
     because of what he calls the ``Enron thieves'' and because 
     technology companies have been weakened by the economy and 
     don't have the resources or energy to influence Washington.
       Ward says a law change would result only in rank-and-file 
     employees losing their stock options. CEOs would continue to 
     get theirs, he says.
       ``Noises are coming from Washington because some oil 
     company guys have been greedy,'' Ward says.
       David Yermack, associate professor of finance at New York 
     University's Stern School of Business, says he doubts if 
     stock options could have pushed Enron executives into hiding 
     millions of dollars of losses in off-book partnerships. That 
     said, there is no reason options should not count against 
     earnings jut as cash compensation does.
       ``If Enron has made them reconsider this horrible position, 
     there is silver lining to this debacle,'' Yermack says.
       More than 80% of financial analysts and portfolio managers 
     agree with Yermack, according to a survey by the Association 
     for Investment Management and Research.
       ``I'm dissatisfied with using fuzzy numbers in doing 
     accounting,'' says Dick Wagner, president of the Strategic 
     Compensation Research Associates.
                                  ____


                [From the New York Times, Feb. 3, 2002]

              Even Last Year, Option Spigot Was Wide Open

                          (By Stephanie Strom)

       Surprise, surprise. Early reports suggest that top 
     executives across America got a bigger dollop of stock 
     options last year as part of their pay.
       As corporate earnings and cash flow have ebbed and stock 
     prices have fallen, boards have been doling out options as a 
     cheap, balance-sheet-friendly way of compensating mangers. 
     The annual proxy season, when companies reveal compensation, 
     is just starting. If the disclosures show the trend toward 
     larger option grants holding after a year that most companies 
     would lie to forget, it would seem to make a mockery of the 
     concept of pay for performance. That was the reason options 
     grew so popular in the first place. Yet while some companies 
     are trying to make options better reflect their fortunes, 
     most other simply contend that options are primarily a 
     motivational tool and have never been a reward for 
     performance.
       With stock prices stalled, options may not seem attractive 
     now. But executives who receive them can usually count on 
     rich rewards eventually, even if a company does only 
     marginally better. The increase in options, however imposes 
     additional costs on shareholders; the more options granted, 
     the lower the return for investors, since their holdings are, 
     one way or the other, diluted.
       But the options keep coming. Chief executives who received 
     more of them last year, even as their companies suffered, 
     include Daniel A. Carp of Eastman Kodak, John T. Chambers of 
     Cisco Systems, Scott G. McNealy of Sun Microsystems and 
     Harvey R. Blau of Aeroflex
       And Henry B. Schacht, returning to the helm of troubled 
     Lucent, received annual options grants almost five times the 
     size of those his predecessor received--and more than 17 
     times the size of the last grant he received the year he 
     retired. ``Fiscal 2001 was rather challenging for Lucent, so 
     the grants were made to ensure Henry had management stability 
     through the turnaround,'' said Mary Lou Ambrus, a Lucent 
     spokeswoman, in explanation.
       Changes are, many chief executives received bigger options 
     awards, as proxy statements, filed each March and April by 
     most companies, are expected to show, experts say. Some were 
     no doubt issued to make up for previous grants that had been 
     rendered worthless by tumbling stock prices.
       At the same time, the market's recovery has revived hopes 
     that old option grants will not be worthless. ``Options 
     typically run for 10 years, and already many of the ones 
     issued in the last year are back in the money,'' said John N. 
     Lauer, chief executive of Oglebay Norton, a shipping company. 
     ``If the economy recovers, those issued in previous years 
     will also regain value.''
       Mr. Lauer has gained notoriety in corporate circles for his 
     insistence on being paid entirely in options priced well 
     above Oglebay's stock price. Though Oglebay's performance 
     has improved somewhat, options he received five years ago 
     are still worth nothing.
       ``In a social setting where I'm in a room with other 
     C.E.O.'s, someone will teasingly suggest that they pass the 
     hat for me because I'm not making any money,'' he said. ``I 
     think they figure I'm loony or something.''
       Mr. Lauer is not the only executive to have high 
     performance goals, but it is safe to say that most executives 
     keep drawing large salaries, plus more and more options. 
     According to a survey done in the third quarter of last year 
     by Pearl Meyer & Partners, a human resources consulting firm 
     in New York, the number of options granted by 50 major 
     companies that will report their 2001 compensation this 
     spring was up an average of 12 percent from 2000.
       Consultants expect that trend to continue as companies 
     report 2001 compensation practices this spring. ``It's a 
     great time to give options,'' said Pearl Meyer, president of 
     the firm. ``They're cheap because they involve no charge to 
     earnings, and that's important at a time when profits are 
     down and boards are trying to make up for the fact that 
     salaries and bonuses are both down.''
       But Ms. Meyer and many others in the field--as well as, 
     they say, the members of corporate compensation committees--
     are not happy to see the increase in options grants. Their 
     expressions of concern are striking because of compensation 
     consultants have been among the biggest champions of the use 
     of options as performance incentives.
       The consultants are worried, in part, about the option 
     ``overhang''--options outstanding, plus those shares that 
     investors have authorized but that have yet to be granted. 
     More fundamentally, they suggest that the links between a 
     manager's pay and a company's performance--as measured by, 
     say, profitability, market-share growth and smart acquisition 
     strageties--have become more tenuous.
       Ms. Meyer suggests that the at-risk components of executive 
     pay be viewed as the legs of a stool; the legs reflecting 
     stock performance has grown longer and longer, while those 
     reflecting business and financial performance have become 
     shorter.
       ``We have overdosed on options and the stock market,'' she 
     said. ``We're dependent on the stock market for executive 
     compensation, pension payments, directors' compensation, 
     401(k) plans--our whole economy, practically, is dependent on 
     the market's performance.''
       That reliance has produced an overhang that dangles like a 
     sword of Damocles over investors. Eventually, their stakes 
     will be diluted--either when companies issue vast quantities 
     of new shares to make good on options grants, or when they 
     undertake share-repurchase programs that eat up cash they 
     might use for operations.
       According to a study by Watson Wyatt Worldwide, a human 
     resource consulting company, the average options overhang of 
     the companies in the Standard & Poor's 500-stock index was 
     14.6 percent of outstanding shares in 2000, up from 13 
     percent a year earlier.
       This spring's numbers will probably show another rise. The 
     overhang ``is definitely going to be up'' by a percentage 
     point or more in 2001, said Ira T. Kay, a consultant at 
     Watson Wyatt Worldwide, ``because people aren't exercising 
     their options the way they were when the stock market was 
     booming.''
       Mr. Kay predicted that the slowdown in the exercising of 
     options would work to curb the issuing of new ones this year 
     and next, although he anticipates a slow increase over the 
     long term. ``I've been in meetings of five boards that were 
     very reluctant to go to shareholders to ask for more shares 
     to underwrite options grants,'' he said, ``They don't 
     think they can justify it.''
       Companies are losing out on another salutary benefit of 
     options compensation as well--their ability to reduce 
     corporate taxes. Employers get a deduction when employees 
     exercise options, but as Mr. Kay and other compensation 
     consultants note, these days few are cashing them in.
       Oddly, shareholder advocates and institutional investors, 
     who stand to lose the most from an option glut, seem sanguine 
     thus far. Some note that while option awards have increased, 
     the value of the awards has collapsed. Pearl Meyer's research 
     shows that the value of option grants fell 7 percent in the 
     first eight months of 2001 after rising steadily for several 
     years.
       Some shareholder advocates say that will also help curb 
     future grants, as long as stocks are sluggish.
       ``We've had a 20 percent drop in the Standard & Poor's 
     index,'' said Patrick S. McGurn, of Institutional Shareholder 
     Services, a consulting business in Rockville, MD. ``And the 
     standard valuation method for options would tell that you'd 
     have to double or triple grants just to get to the level 
     where you were the previous year. Most boards are going to 
     balk at those numbers, particularly when corporate 
     performance has been so poor.''
       But that may be wishful thinking. Last year, Eastman Kodak 
     took $659 million in restructing charges that, combined with 
     falling sales and market share, pushed its earning down 95 
     percent. In November it awarded its chief executive, Mr. 
     Carp, options for 250,000 shares at an exercise price of 
     $29.31, Kodak's stock price at the time. All Mr. Carp must do 
     to gain is keep Kodak's stock level.
       That grant came on top of the 100,000 options he received 
     in January 2001 at a strike price of $40.97. So Mr. Carp 
     received three and a half times as many options in 2001 as he 
     did in 2000--at markedly lower strike prices. Sandra R. Feil, 
     director for worldwide total compensation at Kodak, said Mr. 
     Carp received two awards last year because the company had 
     changed the time of its grants, to November from January.
       As for the increase, Ms. Feil said Kodak had worked with 
     Frederic W. Cook & Company, a compensation consultant, which

[[Page S739]]

     found that Mr. Carp was in the lowest 25 percent of 
     executives receiving options. ``What we've done,'' she said, 
     ``is taken a step, and even a conservative step at that, in 
     getting him out of the lowest quartile.''
       But what about Kodak's dismal performance last year? ``We 
     look at stock options as a long-term incentive that's 
     forward-looking,'' Ms. Feil said. ``We don't look at them as 
     a reward for past performance.
       To understand just how easy it is to get richer and richer 
     on options, consider the case of Lawrence J. Ellison, 
     chairman, chief executive and co-founder of the Oracle 
     Compensation, the software maker. In January, with Oracle's 
     stock trading just above $30, near its yearly high of $34, 
     Ellison exercised option grants for about 23 million shares 
     at an average price of 23 cents, for a paper profit of more 
     than $700 million.
       It was the biggest options bonanza on record--and Mr. 
     Ellison holds options to buy an additional 47.9 million 
     shares. ``He could end up taking $3 billion out of the 
     company,'' said Judith Fischer, managing director of 
     Executive Compensation Advisory Services, a consulting firm.
       Investors are often forgiving of founders like Mr. Ellison, 
     many of whom staked personal assets and invested buckets of 
     sweat equity to get companies off the ground. His paper 
     profit has shrunk to $378 million as Oracle's stock has 
     sagged.
       But investors were still piqued by Mr. Ellison's timing. He 
     exercised his options a month before Oracle issued an 
     earnings warning. The options expired on Aug. 1; he was under 
     no pressure to sell them in January.
       To protect shareholders from dilutions from options, Oracle 
     routinely buys shares in the market. Other big corporate 
     users of options, like Microsoft and Dell Computer, do, too, 
     contending that it not only protects shareholders, but offers 
     them tax advantages.
       But repurchase programs can also have a huge impact on a 
     company's cash flow. Oracle started the fiscal year that 
     began June 1, 2000, with $7.4 billion in cash, then spent 
     $4.3 billion to repurchase shares largely for use in its 
     options program.
       At the end of the fiscal year, the company's overhang stood 
     at 28 percent of total outstanding shares. Microsoft has a 
     similarly large overhang, but it also has more cash.
       For years, shareholders have pushed companies to make chief 
     executives earn their keep, and they initially applauded the 
     use of options to accomplish that goal. But companies found 
     ways to make sure the options were worth something regardless 
     of performance, by repricing worthless options or replacing 
     them with fistfulls of new ones.
       The outcry over those practices, however, may be pushing 
     some companies to make changes.
       In the spring of 1999, the Longview Collective Investment 
     Fund, which manages some A.F.L.-C.I.O. pension money, 
     submitted a shareholder proposal to the Chubb Corporation, 
     the insurer, asking it to grant options that would more 
     closely align compensation with performance.
       The proposal was defeated. But when Beth W. Young, an 
     independent consultant who advises the A.F.L.-C.I.O. and 
     other pension fund managers, called Chubb the next spring to 
     resubmit the proposal, she was told that Chubb had already 
     incorporated into its incentive plan options that could be 
     exercised only if the stock price rose significantly.
       Roughly half the options handed out to Chubb's senior 
     management in 2000 and 2001 have an exercise price 25 percent 
     higher than the stock price on the day they wre granted. But 
     only 2 percent to 4 percent of large companies use such 
     ``premium priced'' options, consultants say.
       ``The executives who were granted these options will, at 
     least in theory, have a much stronger incentive to take steps 
     to increase the stock price,'' said Donald B. Lawson, the 
     Chubb senior vice president who manages compensation and 
     benefits.
       Chubb also uses ``performance shares,'' which can typically 
     be redeemed only after three years and only if the company 
     clears specific hurdles. In 2000, for example, the 
     performance shares it handed out in 1998 were worthless 
     because the company did not hit those targets.
       For Dean R. O'Hare, Chubb's chief executive, that meant his 
     total compensation fell by $448,508 from the previous year. 
     he did get more options, but those largely replaced 
     restricted shares--those that cannot be sold right away--
     after the company decided not to use them to reward 
     executives, Mr. Lawson said.
       Performance shares held by C. Michael Armstrong, the chief 
     executive of AT&T, have proved to be worthless for three 
     years as the company has fallen short of the board's goals 
     for increases in total return to shareholders.
       An options award for 419,200 shares granted to Mr. 
     Armstrong at the end of 2000 was also tied to better 
     performance. The options can be exercised only if AT&T 
     produces a $145 billion pretax gain for shareholders in the 
     year that started March 31. On the other hand, another twist 
     on options accelerates the vesting period if a company's 
     shares reach a certain target. In 2000, the Williams 
     Companies granted options with the condition that if, on 
     certain days, the stock traded at 1.4 times the price at the 
     beginning of the year, the options could be exercised 
     immediately rather than over three years.
       Other companies are working to get more plain-vanilla 
     stock, not options, into executives' hands--stock they must 
     buy. When Beazer Homes USA, a home builder, went public in 
     1994, it adopted a management stock purchase program to 
     increase managers' stakes. At the beginning of each year, 
     some 80 executives can choose to give up a percentage of 
     their bonuses to buy stock at a 20 percent discount on the 
     year-end closing price. The stock cannot be sold for three 
     years.
       Executives now own roughly 8 percent of the company, said 
     David S. Weiss, Beazer's chief financial officer. ``We think 
     it's a good idea to have them put real money at risk, as 
     opposed to just receiving a reward,'' he said. ``Options feel 
     like a gift from the company that the market, through its 
     whims, will reward or not. Shares reflect the company's 
     performance, whether good or bad.''
       Mr. Kay, at Watson Wyatt, said such pure stock subsidies 
     were gaining popularity. More companies, he said, plan to use 
     contingent options like those at Chubb and AT&T, which try to 
     reflect financial and business performance.
       Investors expect the BellSouth Corporation and the Eaton 
     Corporation, for example, to disclose such adjustments in 
     their new proxy statements. A spokesman for Eaton said he was 
     unaware of such a move, and a spokesman for BellSouth 
     declined to comment until the proxy is released in March.
       But other boards are already finding ways to limit the 
     risks that performance shares, premium-priced options, 
     performance-accelerated options and other performance-linked 
     tools pose.
       Until last April, Archie W. Dunham, chief executive of 
     Conoco, had options giving him the right to buy 700,000 
     shares. But he could exercise them only if Conoco's shares 
     traded about $35 on each of the five days before Aug. 17 of 
     this year.
       Before Conoco bought Gulf Canada Resources in July, 
     however, its board granted a two-year extension to Mr. Dunham 
     and at least six other executives holding those options. 
     ``The board thought the climate was right this year for some 
     kind of an acquisition but that it could have an adverse 
     effect on the stock price,'' John McLemore, a Conoco 
     spokesman, said. ``They thought it wouldn't be really fair 
     for those people who held these options to be punished for 
     something that might make it harder for them to meet the 
     conditions.''
       That means the board rewarded Mr. Dunham and his colleagues 
     for an acquisition that it knew was likely to hurt Conoco's 
     shares, at least temporarily--a courtesy not extended to 
     shareholders.
                                  ____


               [From the Washington Post, Jan. 30, 2002]

                          Stock Option Madness

                        (By Robert J. Samuelson)

       As the Enron scandal broadens, we may miss the forest for 
     the trees. The multiplying investigations have created a 
     massive whodunit. Who destroyed documents? Who misled 
     investors? Who twisted or broke accounting rules? The answers 
     may explain what happened at Enron but necessarily why. We 
     need to search for deeper causes, beginning with stock 
     options. Here's a good idea gone bad--stock options foster a 
     corrosive climate that tempts many executives, and not just 
     those at Enron, to play fast and loose when reporting 
     profits.
       As everyone knows, stock options exploded in the lasted 
     1980s and the 1990s. The theory was simple. If you made top 
     executives and managers into owners, they would act in 
     shareholders' interests. Executives' pay packages became 
     increasingly skewed toward options. In 2000, the typical 
     chief executive officer of one of the country's 350 major 
     companies earned about $5.2 million, with almost half of that 
     reflecting stock options, according to William M. Mercer 
     Inc., a consulting firm. About half of those companies also 
     had stock-option programs for at least half their employees. 
     Up to a point, the theory worked. Twenty years ago, America's 
     corporate managers were widely criticized. Japanese and 
     German companies seemed on a roll. By contrast, their 
     American rivals seemed stodgy, complacent and bureaucratic. 
     Stock options, were one tool in a managerial upheaval that 
     refocused attention away from corporate empire-building and 
     toward improved profitability and efficiency.
       All this contributed to the 1990s' economic revival. By 
     holding down costs, companies restrained inflation. By 
     aggressively promoting new products and technologies, 
     companies boosted production and employment. But slowly, 
     stock options became corrupted by carelessness, overuse and 
     greed. As more executives developed big personal stakes in 
     options, the task of keeping the stock price rising became 
     separate from improving the business and its profitability. 
     This is what seems to have happened at Enron.
       The company adored stock options. About 60 percent of 
     employees received an annual award of options, equal to 5 
     percent of their base salary. Executives and top managers got 
     more. At year-end 2000, all Enron managers and workers had 
     options, that could be exercised for nearly 47 million 
     shares. Under a typical plan, a recipient gets an options to 
     buy a given number of shares at the market price on the day 
     the option is issued. This is called ``the strike price.'' 
     But the option usually cannot be exercised for a few years. 
     If the stock's price rises in that time, the option can yield 
     a tidy profit. The lucky recipient buys at the strike price 
     and sells at the market price. On the 47 million Enron 
     options, the average ``strike price was about

[[Page S740]]

     $30 and at the end of 2000, the market price was $83. The 
     potential profit was nearly $2.5 billion.
       Given the huge reward, it would have been astonishing if 
     Enron's managers had not become obsessed with the company's 
     stock price and--to the extent possible--tried to influence 
     it. And while Enron's stock soared, why would anyone complain 
     about accounting shenanigans? Whatever the resulting abuses, 
     the pressures are not unique to Enron. It takes a naive view 
     of human nature to think that many executives won't strive to 
     maximize their personal wealth.
       This is an invitation to abuse. To influence stock prices, 
     executives can issue optimistic profit projections. They can 
     delay some spending, such as research and development (this 
     temporarily helps profits). They can engage in stock buybacks 
     (these raise per-share earnings, because fewer shares are 
     outstanding). And, of course, they can exploit accounting 
     rules. Even temporary blips in stock prices can create 
     opportunities to unload profitable options.
       The point is that the growth of stock options has created 
     huge conflicts of interest that executives will be hard-
     pressed to avoid. Indeed, many executives will coax as many 
     options as possible from their compensation committees, 
     typically composed of ``outside'' directors. But because 
     `'directors are [manipulated] by management, sympathetic to 
     them, or simply ineffectual,'' the amounts may well be 
     excessive, argue Harvard law professors Lucian Arye Bebchuk 
     and Jesse Fried and attorney David Walker in a recent study.
       Stock options are not evil, but unless we curb the present 
     madness, we are courting continual trouble. Here are three 
     ways to check the overuse of options:
       (1) Change the accounting--count options as a cost. 
     Amazingly, when companies issue stock options, they do not 
     have to make a deduction to profits. This encourages 
     companies to create new options. By one common accounting 
     technique, Enron's options would have required deductions of 
     almost $2.4 billion from 1998 through 2000. That would have 
     virtually eliminated the company's profits.
       (2) Index stock options to the market. If a company's 
     shares rise in tandem with the overall stock market, the 
     gains don't reflect any management contribution--and yet, 
     most options still increase in value. Executives get a 
     windfall. Options should reward only for gains above the 
     market.
       (3) Don't reprice options if the stock falls. Some 
     corporate boards of directors issue new options at lower 
     prices if the company's stock falls. What's the point? 
     Options are supposed to prod executives to improve the 
     company's profits and stock price. Why protect them if they 
     fail?
       Within limits, stock options represent a useful reward for 
     management. But we lost those limits, and options became a 
     kind of free money sprinkled about by uncritical corporate 
     directors. The unintended result was a morally lax, get-rich-
     quick mentality. Unless companies restore limits--prodded, if 
     need be, by new government regulations--one large lesson of 
     the Enron scandal will have been lost.
                                  ____


                [From the New York Times, Jan. 27, 2002]

   Economic View; Enron's Way: Pay Packages Foster Spin, Not Results

                          (By David Leonhardt)

       As the stock plummeted, investors and employees alike were 
     left with big losses. But one group of shareholders came out 
     ahead--management. Many board members and top executives 
     managed to sell millions of dollars of shares before the big 
     fall and still have something to show for the stock's once-
     lofty price.
       This is the story of Enron, of course, but it hardly ends 
     there. Over the last two years, as the stock market has 
     fallen about 30 percent from its peak, the description fits 
     dozens of other companies as well. For example, Roger G. 
     Ackerman, the former chairman of Corning, sold $14 million of 
     the company's stock last year, mostly when it was trading at 
     about $57 a share, or seven times its current price. Donald 
     R. Scifres, the co-chairman of JDS Uniphase, made $23 million 
     selling company shares last year; the stock has lost nearly 
     90 percent of its value since January 2001. David R. Alvarez 
     sold $14 million worth of stock in Providian Financial, where 
     he is vice chairman, last year before the company 
     acknowledged that its balance sheet wasn't quite what it was 
     cracked up to be. The stock, which traded at $60 a share last 
     summer, now trades at around $4.
       Some of the biggest paydays have come at obscure companies 
     that were once market darlings, John J. Moores, better known 
     as the owner of the San Diego Padres baseball team, made $101 
     million last year selling shares of Peregrine Systems, on 
     whose board he serves, before its shares fell by more than 
     two-thirds. Richard Aube, a director at Capstone Turbine, 
     made $51 million selling its stock last year, according to 
     Thomson Financial. If you bought when we sold at around $30 a 
     share, your investment would be showing an 80 percent loss 
     now.
       The contrast is obviously cringe-inducing. But it is more 
     than that. Even when executives simply fail to live up to 
     their own predictions--rather than break the law, as some 
     people suspect that Enron managers did--the big insider 
     paydays offer a good lesson in how economic incentives are 
     askew in corporate America.
       Corporate spin aside, executives do not always prosper most 
     by making their companies great. They can often profit more 
     from creating unrealistic expectations than from delivering 
     consistently impressive results.
       Consider two companies. One has a stock price that has 
     appreciated slowly, starting at $20 five years ago and 
     gaining $2 a year, to $30 today. The second company's stock 
     also started at $20 five years ago, then zoomed to $100 after 
     a few years but has since fallen back to $20.
       By any reasonable measure, the leaders of the first company 
     have done a better job. Their share price has grown 50 
     percent, and they have avoided making gradiose predictions 
     that cause Wall Street analysts to set silly targets. The 
     second company has a stock that has underperformed a 
     savings account over the long run, and scores of workers 
     and investors have been burned by false hopes.
       Yet if the top executives of both companies had received 
     similar amounts of stock and both sold their shares on a 
     regular schedule, the executives of the second company would 
     actually be ahead. They would have made so much money selling 
     the stock when it was trading near $100 that they would be 
     multimillionaires despite the humbling decline.
       This is the Enron model of pay for performance, and it has 
     become common. Executives receive enormous grants of stock or 
     options, saying they are simply aligning their own interests 
     with those of their shareholders. But the packages are so 
     generous that even a temporary rise in the share price, 
     accompanied by the sale of a portion of an executive's stock, 
     can leave him set for life. The appeal of overly aggressive 
     accounting methods and manipulated earnings becomes obvious.
       ``You're providing C.E.O.'s with a perverse incentive,'' 
     said Nell Minow, the editor of the Corporate Library, a 
     research firm in Washington. ``You're rewarding them for a 
     goal that is not in the interest of long-term shareholders.''
       The executives who have made millions of dollars selling 
     once-expensive shares say they have done nothing wrong. They 
     simply followed a regular, legal schedule of selling stock, 
     they say, and would be far richer if the stock price had not 
     dropped.
       All of that is usually true. But it is also true that when 
     an economic system richly rewards certain behavior, no one 
     should be surprised when that behavior becomes the norm. If 
     you want to change it, you have to change the incentives. The 
     Enron mess has the potential to focus people's attention on 
     the complicated task of doing precisely that.
                                  ____


                  [From AIMR Exchange, Jan.-Feb. 2002]

Employee Stock Options Should Be Expensed on Income Statements, Survey 
                                 Shows

       In September 2001, AIMR surveyed more than 18,000 members 
     to gauge their responses to a proposed agenda topic of the 
     International Accounting Standards Board (IASB) that could 
     require companies to report the fair value of stock options 
     granted--including those to employees--as an expense on the 
     income statement, reducing earnings. Although share-based 
     payments to employees and others are increasing worldwide, 
     few countries currently have national standards on the topic.
       Do you consider share-based (or stock option) plans to be 
     compensation to the parties receiving the benefits of these 
     plans?
       Answer. Yes, 88%; no, 6%; it depends, 6%.
       Do firms you evaluate and monitor have shared-based (or 
     stock option) plans that grant shares of the firm's stock?
       Answer. Yes, 85%; no, 6%; not sure, 9%.
       Do you use the information and data that companies provide 
     on share-based plans in your evaluation of the firm's 
     performance and determination of its value?
       Answer. Yes, only when it is recognized as a compensation 
     in the income statement; 15%; yes, regardless of whether it 
     is recognized in the income statement, 66%; no, 19%.
       Survey results are based on a random polling of more than 
     18,000 AIMR members, with a 10% response rate.
       Do the current accounting requirements for share-based 
     payments need improving, in particular, for those plans 
     covering employees?
       Answer. Yes, 74%; no, 26%.
       Should the accounting method for all share-based payment 
     transactions (including employee stock option plans) require 
     recognition of an expense in the income statement?
       Answer. Total response: Yes, 83%; no, 17%.

  Mr. McCAIN. Mr. President, I rise today to introduce legislation with 
Senators Levin, Fitzgerald, and Durbin, entitled Ending the Double 
Standard for Stock Options Act. This legislation requires companies to 
treat stock options for employees as an expense for bookkeeping 
purposes if they want to claim this expense as a deduction for tax 
purposes. We introduced similar legislation in 1997 during the 105h 
Congress but unfortunately, the special interest with a vested stake in 
the status quo prevented this legislation from seeing the light of day.
  Currently, corporations can hide these multimillion-dollar 
compensation plans from their stockholders or other investors because 
these plans are not counted as an expense when calculating company 
earnings. Even the Federal Accounting Standards Board, FASB, recognized 
that stock options

[[Page S741]]

should be treated as an expense for accounting purposes. Accounting 
disclosure rules issued by FASB require that companies include in their 
annual reports a footnote disclosing what the company's net earnings 
would have been if stock option plans were treated as an expense.
  The latest scandals involving the collapse of Enron highlight the 
problem of misleading annual statements and financial statements. 
According to a recent analysis, from 1996 to 2000, Enron issued nearly 
$600 million in stock options, collecting tax deductions which allowed 
the corporation to severely reduce their payment in taxes. Whether or 
not Enron took advantage of current disclosure rules to hide their 
financial problems remains a question. The fact remains that current 
rules allow companies such as Enron to discuss as little as possible. 
And this prevents investors, Wall Street analyst, corporate executives, 
and auditors from properly understanding the bottom line of 
corporations.
  One might reasonably ask how an arcane accounting rule could have 
such a large impact on the bottom line of corporations. The answer lies 
in the growth and value of stock options as a means of executive 
compensation.
  We have heard the reports of executives making multimillion-dollar 
salaries, while average worker salaries stagnate or fall. According to 
one recent report, almost half of the earnings of the typical chief 
executive officer of a top company reflects stock options. Why 
shouldn't the value of this compensation package be included in 
calculating a company's earnings? How can stockowners evaluate the true 
value of employee compensation if the value is just buried in a 
footnote somewhere the annual report?
  No other type of compensation gets treated as an expense for tax 
purposes, without also being treated as an expense on the company 
books. This double standard is exactly the kind of inequitable 
corporate benefit that makes the American people irate and must be 
eliminated. If companies do not want to fully disclose on their books 
how much they are compensating their employees, then they should not be 
able to claim a tax benefit for it.
  This legislation does not require a particular accounting treatment; 
the accounting decision is left to the company. This legislation simply 
requires companies to treat stock options the same way for both 
accounting and tax purposes.
  I hope my colleagues will join us in cosponsoring this important 
legislation that will end the double standard for stock option 
compensation.
                                 ______
                                 
      By Mr. LEAHY (for himself and Mr. Durbin):
  S. 1941. A bill to authorize the President to establish military 
tribunals to try the terrorists responsible for the September 11, 2001 
attacks against the United States, and for other purposes; to the 
Committee on Armed Services.
  Mr. LEAHY. Mr. President, on November 13, 2001, President Bush signed 
a military order authorizing the use of military commissions to try 
suspected terrorists. This order stimulated an important national 
debate and led to a series of Judiciary Committee hearings with the 
Attorney General and others to discuss the many legal, constitutional, 
and policy questions raised by the use of such tribunals. Our hearings, 
and the continued public discourse, helped to clarify the scope of the 
President's order and better define the terms of the debate.
  For example, the Judiciary Committee held a hearing on November 28, 
2001, at which several legal experts challenged the validity of the 
military order. Philip Heymann of Harvard Law School, a former Deputy 
Attorney General, testified that the order was so broad that it 
amounted to a dangerous claim of executive power. In his view, the 
order improperly bypassed congressional review, undermined confidence 
in our civil justice system, and jeopardized relationships with our 
allies abroad. Retired Air Force Colonel Scott Silliman who is now at 
Duke Law School, questioned the President's authority to use military 
commissions with respect to the September 11 attacks absent authorizing 
legislation by Congress. Professor Silliman also echoed the comments of 
Professor Heymann, arguing that tribunals convened under the order 
could adversely impact our international credibility as a Nation under 
the rule of law.
  On December 4, 2001, Senator Schumer chaired another important 
hearing on the issue of military commissions. Harvard Law Professor 
Laurence Tribe testified at that hearing that ``Congress alone can 
avoid the constitutional infirmities that plague the Military Tribunal 
Order of November 13.'' Professor Tribe argued for the establishment of 
procedural guidelines to ensure the protection of defendants' due 
process rights, and called for Congress to set limits in consultation 
with the President. He cautioned that if the Administration acted on 
its own--under authority that Professor Tribe believed was 
constitutionally infirm, any convictions could later be overturned by 
the courts, with the result that dangerous individuals could be set 
free. By contrast, convictions obtained by military tribunals 
constituted under the authority of the Congress and the President 
acting together would more likely be shielded from constitutional 
challenge on appeal.
  At the same December 4 hearing, Cass Sunstein of the University of 
Chicago Law School testified that ``from the standpoint of both 
constitutional law and democratic legitimacy, it is far better if the 
President and Congress act in concert,'' adding that ``the executive 
branch stands on the firmest ground if it acts pursuant to clear 
congressional authorization.'' Professor Sunstein suggested that 
Congress limit the scope of military tribunals by allowing the use of 
military tribunals ``only on certain essential occasions.''
  Finally, on December 6, the Judiciary Committee heard from Attorney 
General Ashcroft on military commissions and a number of other 
unilateral actions taken by the Administration last fall. I believe 
that we had a constructive conversation that day, despite our 
disagreements on substantive points. The Attorney General took issue 
with anyone who dared question the thinking of the executive branch on 
such topics, charging them with ``fearmongering'' and aiding the 
terrorists. I would note, however, that several members of the 
Committee, including some of my colleagues from the other side of the 
aisle, suggested to the Attorney General that if military tribunals 
were used, they should provide a number of basic due process 
guarantees. Suggestions like these, coming from both Republicans and 
Democrats, are not intended to bait the Administration. Rather, 
constructive criticism can be, should be and has been useful in 
developing sound policy that can better protect Americans and American 
soldiers, particularly when they are serving abroad.

  The Attorney General testified at our hearing on December 6 that the 
President does not need the sanction of Congress to convene military 
commission, but I disagree. Military tribunals may be appropriate under 
certain circumstances, but only if they are backed by specific 
congressional authorization. At a minimum, as the distinguished senior 
Senator from Pennsylvania stated on this floor on November 15, ``the 
executive will be immeasurably strengthened if the Congress backs the 
President,'' Clearly, our government is at its strongest when the 
executive and legislative branches of government act in concert.
  We demonstrated this unified strength in negotiating the USA Patriot 
Act last fall. The Congress, the White House and the Department of 
Justice worked intensively for seven weeks to craft a bill that 
provided law enforcement agencies with the tools they said were needed 
to fight terrorism while preserving American values and democratic 
principles.
  In that same spirit, and with my friend, the senior Senator from 
Illinois, I am today introducing the Military Tribunal Authorization 
Act. This legislation would provide the executive branch with the 
specific authorization it now lacks to use extraordinary tribunals to 
try members of the al Qaeda terrorist network and those who cooperated 
with them.
  Specifically, this legislation authorizes the use of ``extraordinary 
tribunals'' for al Qaeda members, and for persons aiding and abetting 
al Qaeda in terrorist activities against the United States, who are 
apprehended in, or fleeing from, Afghanistan. It also authorizes the 
use of tribunals for those al Qaeda members and abettors who are 
captured in any other place where

[[Page S742]]

there is armed conflict involving the U.S. Armed Forces.
  Like the November 13 order, the Military Tribunal Authorization Act 
exempts U.S. citizens from the jurisdiction of the tribunals, as well 
as those individuals determined to be prisoners of war under the Geneva 
Convention. The bill also exempts individuals arrested while present in 
the United States, since our civilian court system is well-equipped to 
handle such cases. These exemptions are consistent with the 
Administration's treatment of Zacharias Moussaoui, the suspected 20th 
hijacker in the September 11 attacks, who is awaiting trial in Federal 
district court. A second terrorist suspect, Richard Reid, the so-called 
``shoe bomber,'' is also being tried in Federal district court. In 
fact, one of the nine charges against Reid, ``attempted wrecking of a 
mass transportation vehicle,'' is a new anti-terrorism offense that was 
created by the USA Patriot Act. Finally, the Administration has decided 
to bring Federal criminal charges against John Walker Lindh, who 
allegedly took up arms against Americans to fight with al Qaeda and the 
Taliban in Afghanistan.

  A significant question raised about the November 13 order is that it 
vests the President with plenary and unreviewable discretion to 
determine who is subject to trial by military tribunal. The President's 
order also implied that those who were arrested under its terms could 
be held indefinitely. Detainees were to receive a ``full and fair 
trial,'' but no explanation of the terms ``full'' and ``fair'' is 
offered. While the Administration has deferred providing any 
explanation to the development of regulations by the Secretary of 
Defense, requests for an opportunity to review and be consulted about 
the draft regulations have been denied. This leaves introduction of 
legislation showing how military tribunals may be constituted to 
comport with constitutional mandates and values as one of the few 
avenues to inform the process in development of regulations.
  The Military Tribunal Authorization act defines the jurisdiction and 
procedure of tribunals in a way that ensures a ``full and fair'' trial 
for anyone detained. Under the bill, the Secretary of Defense is 
charged with elaborating on the procedures that the tribunals must 
follow and publishing any draft regulations in the Federal Register.
  First, the bill makes clear that tribunals may adjudicate violations 
of the law of war, including international laws of armed conflict and 
crimes against humanity, targeted against U.S. persons. Wars have 
rules, as defined by the Geneva Conventions and other international 
agreements. These rules protect civilians from harm and define how 
captured soldiers must be treated Under the bill, individuals who 
violated those rules by targeting innocent American civilians can face 
trial in a military tribunal. In addition, individuals who committed 
crimes against humanity, such as murder, torture, or other inhumane 
acts, may face charges in a tribunal.
  Second, on the length of detention, the bill authorizes detention of 
individuals subject to military tribunals for as long as the President 
certifies that the United States is in armed conflict with al Qaeda or 
Taliban forces in Afghanistan or elsewhere, or that an investigation, 
prosecution or post-trial proceeding against the detainee is ongoing. 
The certification must be made every six months.
  Third, on the conditions of confinement, the bill requires that 
detainees be ``treated humanely,'' which is consistent with the Body of 
Principles for the Protection of All Persons under Any Form of 
Detention or Imprisonment, a resolution adopted by the United Nations 
General Assembly in 1988. this includes adequate food, water, shelter, 
clothing and medical treatment, hygienic conditions, the necessary 
means of personal hygiene, and the free exercise of religion. Detention 
determinations and the conditions of detention are subject to review by 
the Court of Appeals for the D.C. Circuit.
  Fourth, the bill incorporates basic due process guarantees, including 
the right to independent counsel. In imposing this requirement, I am 
not suggesting that suspected terrorists deserve special treatment. 
Rather, the bill follows well-established standards for indigent 
defense. In the first of its ``Ten Commandments'' of public defense 
programs, the Department of Justice calls for full independence of 
defense counsel and judicial functions. The department's ``Ten 
Commandments'' also require that counsel's ability, training, and 
experience must be matched to the complexity of the case. Providing 
independent counsel and judicial review is critical to ensuring that 
any convictions are free from political influence. An independent 
process with experienced counsel will also safeguard against otherwise 
valid convictions being overturned for violations of due process or 
incompetent counsel.

  Under the terms of this bill, tribunals would be required to apply 
reasonable rules of evidence to ensure that material admitted at trial 
was of probative value. Defendants would be presumed innocent until 
proven guilty, and proof of guilt must be established beyond a 
reasonable doubt. Defendants may not be compelled to testify against 
themselves. Finally, defendants could appeal their convictions and 
sentences to a higher tribunal, the U.S. Court of Appeals for the Armed 
Forces.
  These procedures do not, as some have claimed, provide greater 
protections to suspected terrorists than we offer our own soldiers. 
These are, rather, the very basic guarantees provided under various 
sources of international law, including the Geneva Conventions, the 
International Covenant on Civil and Political Rights, the Universal 
Declaration of Human Rights, and the Statute of the International 
Criminal Tribunal for former Yugoslavia, among others. Several of the 
procedural protections are also drawn from the U.S. Rules of Courts-
Martial and the Military Rules of Evidence. In addition, the trial 
procedure statute of the Uniform Code of Military Justice, which is 
cited in the President's military order, recommends that the President 
apply to military commissions the principles of law and rules of 
evidence that are generally recognized by the federal district courts.
  I submit for the record a list the international conventions that 
serve as sources for the eighteen procedural protections included in my 
bill. As the ABA resolution urges, in establishing military tribunals, 
we should ``give full consideration to the impact . . . as precedents 
in . . . the use of international legal norms in shaping other nations' 
responses to future acts of terrorism.'' Respecting those international 
legal norms, will redound to the benefit of Americans.
  It is important to note that last week the President reevaluated his 
position on a related issue. He decided to apply the Geneva Conventions 
to Taliban captives. This decision sends a signal to the world that the 
United States respects the Geneva Conventions and expects them to be 
applied to American soldiers captured overseas. I commend Secretary 
Powell, who supported this application of the Geneva Conventions. I 
also commend Secretary Rumsfeld, whose draft rules on military 
commissions contained a number of important procedural protections. 
Both Secretaries Powell and Rumsfeld have worked to bring the original 
military order and subsequent decisions over detention within the 
framework of international law. I urge the Administration to follow 
this example of flexibility and inclusiveness by working with Congress 
to establish tribunals that are authorized by statute and consistent 
with international law.
  Finally, the bill comes down squarely on the side of transparency in 
government by providing that tribunal proceedings should be open and 
public, and include public availability of the transcripts of the trial 
and the pronouncement of judgment. The only exceptions are for 
demonstrable reasons of national security or the necessity to secure 
the safety of observers, witnesses, tribunal judges, counsel or other 
persons.
  In sum, the Military Tribunal Authorization Act establishes a legal 
framework for proceedings that are truly ``full and fair.'' The 
provisions of this bill track very closely with recommendations arrived 
at independently by the American Bar Association and issued on February 
4, 2002. The ABA calls on the executive branch to provide due process 
guarantees similar to those used in courts-martial, including a number 
of rights included in this

[[Page S743]]

bill. It also urged the Administration to work with Congress in 
defining the rules for military commissions.
  Passage of authorizing legislation would ensure the constitutionality 
of military tribunals and protect any convictions they might yield, 
while at the same time showing the world that we will fight terrorists 
without sacrificing our principles. We can also show by example how we 
expect our soldiers and nationals to be treated if they are swept into 
foreign courts or tribunals.
  Our government is at its strongest when its executive and legislative 
branches act in concert. I provided earlier drafts of this legislation 
to the Attorney General and Secretary of Defense, but received no 
response. With the introduction of this bill, I again invite the 
Administration's cooperation and comment.
  I ask unanimous consent that the text of the bill and the sectional 
analysis be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1941

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Military Tribunal 
     Authorization Act of 2002''.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) The al Qaeda terrorist organization and its leaders 
     have committed unlawful attacks against the United States, 
     including the August 7, 1998 bombings of the United States 
     embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania, the 
     October 12, 2000 attack on the USS Cole and the September 11, 
     2001 attacks on the United States.
       (2) The al Qaeda terrorist organization and its leaders 
     have threatened renewed attacks on the United States and have 
     threatened the use of weapons of mass destruction.
       (3) In violation of the resolutions of the United Nations, 
     the Taliban of Afghanistan provided a safe haven to the al 
     Quaeda terrorist organization and its leaders and allowed the 
     territory of that country to be used as a base from which to 
     sponsor international terrorist operations.
       (4) The United Nations Security Council, in Resolution 
     1267, declared in 1999 that the actions of the Taliban 
     constitute a threat to international peace and security.
       (5) The United Nations Security Council, in Resolutions 
     1368 and 1373, declared in September 2001 that the September 
     11 attacks against the United States constitute a threat to 
     international peace and security.
       (6) The United States is justified in exercising its right 
     of self-defense pursuant to international law and the United 
     Nations Charter.
       (7) Congress authorized the President on September 18, 
     2001, to use all necessary and appropriate force against 
     those nations, organizations, or persons that he determines 
     to have planned, authorized, committed, or aided the 
     September 11 terrorist attacks or harbored such organizations 
     or persons, in order to prevent any future acts of 
     international terrorism against the United States, within the 
     meaning of section 5(b) of the War Powers Resolution.
       (8) The United States and its allies are engaged in armed 
     conflict with al Qaeda and the Taliban.
       (9) Military trials of the terrorists may be appropriate to 
     protect the safety of the public and those involved in the 
     investigation and prosecution, to facilitate the use of 
     classified information as evidence without compromising 
     intelligence or military efforts, and otherwise to protect 
     national security interests.
       (10) Military trials that provide basic procedural 
     guarantees of fairness, consistent with the international law 
     of armed conflict and the International Covenant on Civil and 
     Political Rights (opened for signature December 16, 1966), 
     would garner the support of the community of nations.
       (11) Article I, section 8, of the Constitution provides 
     that the Congress, not the President, has the power to 
     ``constitute Tribunals inferior to the Supreme Court; . . . 
     define and punish . . . Offenses against the Law of Nations; 
     . . . make Rules concerning Captures on Land and Water; . . . 
     make all Laws which shall be necessary and proper for 
     carrying into Execution the foregoing Powers and all other 
     Powers vested by this Constitution in the Government of the 
     United States, or in any Department or Officer thereof.''.
       (12) Congressional authorization is necessary for the 
     establishment of extraordinary tribunals to adjudicate and 
     punish offenses arising from the September 11, 2001 attacks 
     against the United States and to provide a clear and 
     unambiguous legal foundation for such trials.

     SEC. 3. ESTABLISHMENT OF EXTRAORDINARY TRIBUNALS.

       (a) Authority.--The President is hereby authorized to 
     establish tribunals for the trial of individuals who--
       (1) are not United States persons;
       (2) are members of al Qaeda or members of other terrorist 
     organizations knowingly cooperating with members of al Qaeda 
     in planning, authorizing, committing, or aiding in the 
     September 11, 2001 attacks against the United States, or, 
     although not members of any such organization, knowingly 
     aided and abetted members of al Qaeda in such terrorist 
     activities against the United States;
       (3) are apprehended in Afghanistan, fleeing from 
     Afghanistan, or in or fleeing from any other place outside 
     the United States where there is armed conflict involving the 
     Armed Forces of the United States; and
       (4) are not prisoners of war within the meaning of the 
     Geneva Convention Relative to the Treatment of Prisoners of 
     War, done on August 12, 1949, or any protocol relating 
     thereto.
       (b) Jurisdiction.--Tribunals established under subsection 
     (a) may adjudicate violations of the law of war, 
     international laws of armed conflict, and crimes against 
     humanity targeted against United States persons.
       (c) Authority To Establish Procedural Rules.--The Secretary 
     of Defense, in consultation with the Secretary of State and 
     the Attorney General, shall prescribe and publish in the 
     Federal Register, and report to the Committees on the 
     Judiciary of the Senate and the House of Representatives, the 
     rules of evidence and procedure that are to apply to 
     tribunals established under subsection (a).

     SEC. 4. PROCEDURAL REQUIREMENTS.

       (a) In General.--The rules prescribed for a tribunal under 
     section 3(c) shall be designed to ensure a full and fair 
     hearing of the charges against the accused. The rules shall 
     require the following:
       (1) That the tribunal be independent and impartial.
       (2) That the accused be notified of the particulars of the 
     offense charged or alleged without delay.
       (3) That the proceedings be made simultaneously 
     intelligible for participants not conversant in the English 
     language by including translation or interpretation.
       (4) That the evidence supporting each alleged offense be 
     given to the accused.
       (5) That the accused have the opportunity to be present at 
     trial.
       (6) That the accused have a right to be represented by 
     counsel.
       (7) That the accused have the opportunity--
       (A) to respond to the evidence supporting each alleged 
     offense;
       (B) to obtain exculpatory evidence from the prosecution; 
     and
       (C) to present exculpatory evidence.
       (8) That the accused have the opportunity to confront and 
     cross-examine adverse witnesses and to offer witnesses.
       (9) That the proceeding and disposition be expeditious.
       (10) That the tribunal apply reasonable rules of evidence 
     designed to ensure admission only of reliable information or 
     material with probative value.
       (11) That the accused be afforded all necessary means of 
     defense before and after the trial.
       (12) That conviction of an alleged offense be based only 
     upon proof of individual responsibility for the offense.
       (13) That conviction of an alleged offense not be based 
     upon an act, offense, or omission that was not an offense 
     under law when it was committed.
       (14) That the penalty for an offense not be greater than it 
     was when the offense was committed.
       (15) That the accused--
       (A) be presumed innocent until proven guilty, and
       (B) not be found guilty except upon proof beyond a 
     reasonable doubt.
       (16) That the accused not be compelled to confess guilt or 
     testify against himself.
       (17) That, subject to subsections (c) and (d), the trial be 
     open and public and include public availability of the 
     transcripts of the trial and the pronouncement of judgment.
       (18) That a convicted person be informed of remedies and 
     appeals and the time limits for the exercise of the person's 
     rights to the remedies and appeals under the rules.
       (b) Imposition of the Death Penalty.--The requirements of 
     the Uniform Code of Military Justice for the imposition of 
     the death penalty shall apply in any case in which a tribunal 
     established under section 3 is requested to adjudge the death 
     penalty.
       (c) Public Proceedings.--Any proceedings conducted by a 
     tribunal established under section 3, and the proceedings on 
     any appeal of an action of the tribunal, shall be accessible 
     to the public consistent with any demonstrable necessity to 
     secure the safety of observers, witnesses, tribunal judges, 
     counsel, or other persons.
       (d) Confidentiality of Evidence.--Evidence available from 
     an agency of the Federal Government that is offered in a 
     trial by a tribunal established under section 3 may be kept 
     secret from the public only when the head of the agency 
     personally certifies in writing that disclosure will cause--
       (1) identifiable harm to the prosecution of military 
     objectives or interfere with the capture of members of al 
     Qaeda anywhere;
       (2) significant, identifiable harm to intelligence sources 
     or methods; or
       (3) substantial risk that such evidence could be used for 
     planning future terrorist attacks.
       (e) Review.--
       (1) Procedures required.--The Secretary of Defense shall 
     provide for prompt review of convictions by tribunals 
     established under section 3 to ensure that the procedural 
     requirements of a full and fair hearing have

[[Page S744]]

     been met and that the evidence reasonably supports the 
     convictions.
       (2) United states court of appeals for the armed forces.--
     The procedures established under paragraph (1) shall, at a 
     minimum, allow for review of the proceedings of the tribunals 
     by the United States Court of Appeals for the Armed Forces 
     established under the Uniform Code of Military Justice.
       (3) Supreme court.--The decisions of the United States 
     Court of Appeals for the Armed Forces regarding proceedings 
     of tribunals established under section 3 shall be subject to 
     review by the Supreme Court by writ of certiorari.

     SEC. 5. DETENTION.

       (a) In General.--The President may direct the Secretary of 
     Defense to detain any person who is subject to a tribunal 
     established under section 3 pursuant to rules and regulations 
     that are promulgated by the Secretary and are consistent with 
     the rules of international law.
       (b) Duration of Detention.--
       (1) Limitation.--A person may be detained under subsection 
     (a) only while--
       (A) there is in effect for the purposes of this section a 
     certification by the President that the United States Armed 
     Forces are engaged in a state of armed conflict with al Qaeda 
     or Taliban forces in the region of Afghanistan or with al 
     Qaeda forces elsewhere; or
       (B) an investigation with a view toward prosecution, a 
     prosecution, or a post-trial proceeding in the case of such 
     person, pursuant to the provisions of this Act, is ongoing.
       (2) Certification and recertification.--A certification of 
     circumstances made under paragraph (1) shall be effective for 
     180 days. The President may make successive certifications of 
     the circumstances.
       (c) Disclosure of Evidence.--Evidence that may establish 
     that an accused is not a person described in subsection (a) 
     shall be disclosed to the accused and his counsel, except 
     that a summary of such evidence shall be provided to the 
     accused and his counsel when the Attorney General personally 
     certifies that disclosure of the evidence would cause 
     identifiable harm to the prosecution of military objectives 
     in Afghanistan, to the capture of other persons who are 
     subject to this Act or reside outside the United States, or 
     to the prevention of future terrorist acts directed against 
     Americans. A summary of evidence shall be as complete as is 
     possible in order to provide the accused with an evidentiary 
     basis to seek release from detention.
       (d) Detention Review.--The United States Court of Appeals 
     for the District of Columbia Circuit shall have exclusive 
     jurisdiction to review any determination under this section 
     that the requirements of this section for detaining an 
     accused are satisfied.
       (e) Conditions of Detention.--A person detained under this 
     section shall be--
       (1) detained at an appropriate location designated by the 
     Secretary of Defense;
       (2) treated humanely, without any adverse distinction based 
     on race, color, religion, gender, birth, wealth, or any 
     similar criteria;
       (3) afforded adequate food, drinking water, shelter, 
     clothing, and medical treatment;
       (4) sheltered under hygienic conditions and provided 
     necessary means of personal hygiene; and
       (5) allowed the free exercise of religion consistent with 
     the requirements of such detention.

     SEC. 6. SENSE OF CONGRESS.

       It is the sense of Congress that the President should seek 
     the cooperation of United States allies and other nations in 
     conducting the investigations and prosecutions, including 
     extraditions, of the persons who are responsible for the 
     September 11, 2001 attacks on the United States, and use to 
     the fullest extent possible multilateral institutions and 
     mechanisms for carrying out such investigations and 
     prosecutions.

     SEC. 7. DEFINITIONS.

       In this Act:
       (1) September 11, 2001 attacks on the united states.--The 
     term ``September 11, 2001 attacks on the United States'' 
     means the attacks on the Pentagon in the metropolitan area of 
     Washington, District of Columbia, and the World Trade Center, 
     New York, New York, on September 11, 2001, and includes the 
     hijackings of American Airlines flights 77 and 11 and United 
     Airlines flights 175 and 93 on that date.
       (2) United states person.--The term ``United States 
     person'' has the meaning given that term in section 101(i) of 
     the Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 
     1801(i)).

     SEC. 8. TERMINATION OF AUTHORITY.

       The authority under this Act shall terminate at the end of 
     December 31, 2005.
                                  ____


    Military Tribunal Authorization Act of 2002--Section-by-Section 
                                Analysis

       Sec. 1. Short Title. The Military Tribunal Authorization 
     Act of 2002.
       Sec. 2. Findings. This section outlines twelve findings, 
     including that the al Qaeda terrorist organization and its 
     leaders committed unlawful acts against the United States on 
     September 11, 2001 and on prior occasions; the U.S. is 
     justified in exercising its right to self-defense under 
     international law and the U.N. Charter; the Congress 
     authorized the President to use all necessary force against 
     those who committed, aided or abetted the September 11 
     attacks in order to prevent future attacks, within the 
     meaning of the War Powers Resolution; military trials may be 
     appropriate to protect public safety, to protect classified 
     information used as evidence, and to protect national 
     security interests; Article I, section 8 of the Constitution 
     provides that the Congress, not the President, has the power 
     to constitute tribunals and to define and punish offenses 
     against the law of nations; and congressional authority is 
     necessary to establish extraordinary tribunals to adjudicate 
     offenses arising from the September 11 attacks.
       Sec 3. Establishment of Extraordinary Tribunals. The 
     President is authorized to establish tribunals to try non-
     U.S. persons who are al Qaeda member (and persons aiding and 
     abetting al Qaeda in terrorist activities against the United 
     States); are apprehended in Afghanistan, apprehended fleeing 
     from Afghanistan, or apprehended in or fleeing from any other 
     place where there is armed conflict involving the U.S. Armed 
     Forces; and are not prisoners of war, as defined by the 
     Geneva Conventions. Tribunals may adjudicate violations of 
     the laws of war targeted against U.S. persons. The Secretary 
     of Defense is charged with promulgating rules of evidence and 
     procedure for the tribunals.
       Sec. 4. Procedural Requirements. Rules for tribunals shall 
     require (1) an independent and impartial proceeding; (2) that 
     the accused be informed of the charges against him; (3) that 
     proceedings be conducted with simultaneous translation for 
     non-English speakers; (4) that the accused be shown the 
     evidence against him; (5) that the accused be present at 
     trial if he so chooses; (6) that the accused have the right 
     to be represented by counsel; (7) that the accused have the 
     right to respond to the evidence, and to obtain exculpatory 
     evidence from the prosecution; (8) that the accused have the 
     right to confront and cross-examine adverse witnesses, and to 
     offer witnesses; (9) an expeditious trial and disposition; 
     (10) that the rules of evidence admit only reliable 
     information of probative value; (11) that the accused be 
     afforded all necessary means of defense; (12) that 
     convictions be based only upon proof of individual 
     responsibility; (13) that a conviction may not be based on an 
     act, offense, or omission that was not an offense under law 
     when committed; (14) that the penalty for conviction not be 
     greater than it was when the offense was committed; (15) that 
     the accused is presumed innocent until proven guilty, and 
     that proof of guilt be established beyond a reasonable doubt; 
     (16) that the accused may not be compelled to confess guilt 
     or testify against himself; (17) that trials to be open and 
     public and include public access to transcripts and 
     pronouncement of judgment, with the exceptions described 
     below; and (18) that convicted persons be informed of 
     available remedies and appeals. The bill follows the 
     Uniform Code of Military Justice in requiring a unanimous 
     vote for imposition of the death penalty.
       Trial proceedings will generally be accessible to the 
     public with limited exceptions for demonstrable public safety 
     concerns. The bill allows for evidence to be kept secret from 
     the public where disclosure may compromise national security 
     or intelligence sources.
       Convictions may be appealed to the U.S. Court of Appeals 
     for the Armed Forces. Any decisions of that court regarding 
     proceedings of tribunals are subject to review by the U.S. 
     Supreme Court by writ of certiorari.
       Sec. 5. Detention. This section authorizes detention of 
     individuals who are subject to a tribunal under section 3. In 
     order to detain an individual under the authority of this 
     section, the President must certify that the U.S. is in armed 
     conflict with al Qaeda or Taliban forces in Afghanistan or 
     elsewhere, or that an investigation, prosecution or post-
     trial proceeding against the detainee is ongoing. This 
     certification must be made every 6 months.
       Evidence that may establish that an accused is not subject 
     to detention under this section shall be disclosed to the 
     accused, except that a summary of such evidence will be 
     provided if the Attorney General certifies that disclosure 
     would cause certain identifiable harms. Detentions under this 
     section may be appealed to the U.S. Court of Appeals for the 
     D.C. Circuit.
       This section also defines the conditions of detention, 
     requiring that detainees be treated humanely. Humane 
     treatment includes adequate food, water, shelter, clothing 
     and medical treatment, hygienic conditions, the necessary 
     means of personal hygiene, and the free exercise of religion. 
     Detention determinations and the conditions of detention are 
     subject to review by the Court of Appeals for the D.C. 
     Circuit.
       Sec. 6. Sense of the Congress. This section calls for the 
     President to seek the cooperation of U.S. allies and other 
     nations in the investigations and prosecutions of those 
     responsible for the September 11 attacks. It also calls for 
     the President to use multilateral institutions to the fullest 
     extent possible in carrying out such investigations and 
     prosecutions.
       Sec. 7. Definitions. This section defines the terms, 
     ``September 11, 2001 attacks on the U.S.,'' and ``U.S. 
     person.'' The latter takes its meaning from the definition of 
     the term ``U.S. person'' in the Foreign Intelligence 
     Surveillance Act of 1978, and includes a citizen of the 
     United States or an alien lawfully admitted for permanent 
     residence.
       Sec. 8. Termination of Authority. Authority under the act 
     terminates on December 31, 2005.
                                 ______
                                 
      By Mr. CAMPBELL:
  S. 1944. A bill to revise the boundary of the Black Canyon of the 
Gunnison

[[Page S745]]

National Park and Gunnison Gorge National Conservation Area in the 
State of Colorado, and for other purposes; to the Committee on Energy 
and Natural Resources.
  Mr. CAMPBELL. Mr. President, today I introduce the Black Canyon of 
the Gunnison National Park and Gunnison Gorge National Conservation 
Area Boundary Revision Act of 2002. This bill improves upon my earlier 
efforts designating the initial park and conservation area.
  The Black Canyon of the Gunnison Gorge is a national treasure to be 
enjoyed by all. The park's combination of geological wonders and 
diverse wildlife make it one of the most unique natural areas in North 
America.
  The first person to survey the canyon, Abraham Lincoln Fellows, noted 
in 1901, ``our surroundings were of the wildest possible description. 
The roar of the water . . . was constantly in our ears, and the walls 
of the canyon, towering half mile in height about us, were seemingly 
vertical.'' Similarly, today, visitors can enjoy hiking the deep gorge 
to the Gunnison River raging below, or look overhead to marvel at 
eagles and peregrine falcons soaring in the sky.
  This bill modifies the legislative boundary of the Gunnison Gorge 
National Conservation Area allowing even greater access to the park's 
many recreational opportunities including boating, fishing, and hiking.
  This important legislation would expand the National Park by 2,725 
acres, for a total of 33,025 acres. The Conservation area will be 
increased by 5,700 acres, for a total of 63,425 acres. In total this 
bill adds 7,296 acres to provide habitat for several listed, 
threatened, endangered and BLM sensitive species including, the Bald 
Eagle, the River Otter, Delta Lomation, Clay-Loving Buckwheat.
  This legislation helps preserve a unique national resource and a 
source of national pride.
  I urge quick passage of this important bill. I ask that the text of 
the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1944

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Black Canyon of the Gunnison 
     National Park and Gunnison Gorge National Conservation Area 
     Boundary Revision Act of 2002''.

     SEC. 2. BLACK CANYON OF THE GUNNISON NATIONAL PARK BOUNDARY 
                   REVISION.

       (a) Establishment.--Section 4(a) of the Black Canyon of the 
     Gunnison National Park and Gunnison Gorge National 
     Conservation Area Act of 1999 (16 U.S.C. 410fff-2(a)) is 
     amended--
       (1) by striking ``There is hereby established'' and 
     inserting the following:
       ``(1) In general.--There is established''; and
       (2) by adding at the end the following:
       ``(2) Boundary revision.--The boundary of the Park is 
     revised to include the addition of not more than 2,725 acres, 
     as depicted on the map entitled `Black Canyon of the Gunnison 
     National Park and Gunnison Gorge NCA Boundary Modifications' 
     and dated January 22, 2002.''.
       (b) Administration.--Section 4(b) of the Black Canyon of 
     the Gunnison National Park and Gunnison Gorge National 
     Conservation Area Act of 1999 (16 U.S.C. 410fff-2(b)) is 
     amended--
       (1) by striking ``Upon'' and inserting the following:
       ``(1) Land transfer.--
       ``(A) In general.--On''; and
       (2) by striking ``The Secretary shall'' and inserting the 
     following:
       ``(B) Additional land.--On the date of enactment of the 
     Black Canyon of the Gunnison National Park and Gunnison Gorge 
     National Conservation Area Boundary Revision Act of 2002, the 
     Secretary shall transfer the land under the jurisdiction of 
     the Bureau of Land Management identified as `Tract C' on the 
     map described in subsection (a)(2) to the administrative 
     jurisdiction of the National Park Service for inclusion in 
     the Park.
       ``(2) Authority.--The Secretary shall''.

      SEC. 3. GRAZING PRIVILEGES AT BLACK CANYON OF THE GUNNISON 
                   NATIONAL PARK.

       Section 4(e) of the Black Canyon of the Gunnison National 
     Park and Gunnison Gorge National Conservation Area Act of 
     1999 (16 U.S.C. 410fff-2(e)) is amended--
       (1) in paragraph (1)--
       (A) by redesignating subparagraphs (B) and (C) as 
     subparagraphs (C) and (D), respectively; and
       (B) by inserting after subparagraph (A) the following:
       ``(B) Transfer.--If land authorized for grazing under 
     subparagraph (A) is exchanged for private land under this 
     Act, the Secretary shall transfer any grazing privileges to 
     the private land acquired in the exchange in accordance with 
     this section.''; and
       (2) in paragraph (3)--
       (A) in subparagraph (A), by striking ``and'' at the end;
       (B) by redesignating subparagraph (B) as subparagraph (D);
       (C) by inserting after subparagraph (A) the following:
       ``(B) with respect to the permit or lease issued to 
     LeValley Ranch Ltd., a partnership, for the lifetime of the 2 
     limited partners as of October 21, 1999;
       ``(C) with respect to the permit or lease issued to Sanburg 
     Herefords, L.L.P., a partnership, for the lifetime of the 2 
     general partners as of October 21, 1999; and''; and
       (D) in subparagraph (D) (as redesignated by subparagraph 
     (B))--
       (i) by striking ``partnership, corporation, or'' in each 
     place it appears and inserting ``corporation or''; and
       (ii) by striking ``subparagraph (A)'' and inserting 
     ``subparagraphs (A), (B), or (C)''.

     SEC. 4. ACQUISITION OF LAND.

       (a) Authority To Acquire Land.--Section 5(a)(1) of the 
     Black Canyon of the Gunnison National Park and Gunnison Gorge 
     National Conservation Area Act of 1999 (16 U.S.C. 410fff-
     3(a)(1)) is amended by inserting ``or the map described in 
     section 4(a)(2)'' after ``the Map''.
       (b) Method of Acquisition.--
       (1) In general.--Land or interest in land acquired under 
     the amendments made by this Act shall be made in accordance 
     with section 5(a)(2)(A) of the Black Canyon of the Gunnison 
     National Park and Gunnison Gorge National Conservation Area 
     Act of 1999 (16 U.S.C. 410fff-3(a)(2)(A)).
       (2) Consent.--No land or interest in land may be acquired 
     without the consent of the landowner.

     SEC. 5. GUNNISON GORGE NATIONAL CONSERVATION AREA BOUNDARY 
                   REVISION.

       Section 7(a) of the Black Canyon of the Gunnison National 
     Park and Gunnison Gorge National Conservation Area Act of 
     1999 (16 U.S.C. 410fff-5(a)) is amended--
       (1) by striking ``(a) In General.--There is established'' 
     and inserting the following:
       ``(a) Establishment.--
       ``(1) In general.--There is established''; and
       (2) by adding at the end the following:
       ``(2) Boundary revision.--The boundary of the Conservation 
     Area is revised to include the addition of not more than 
     5,700 acres, as depicted on the map entitled `Black Canyon of 
     the Gunnison National Park and Gunnison Gorge NCA Boundary 
     Modifications' and dated January 22, 2002.''.

                          ____________________