[Congressional Record Volume 148, Number 47 (Wednesday, April 24, 2002)]
[House]
[Pages H1540-H1544]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PROVIDING FOR CONSIDERATION OF H.R. 3763, CORPORATE AND AUDITING
ACCOUNTABILITY, RESPONSIBILITY, AND TRANSPARENCY ACT OF 2002
Mr. SESSIONS. Mr. Speaker, by direction of the Committee on Rules, I
call up House Resolution 395 and ask for its immediate consideration.
The Clerk read the resolution, as follows:
H. Res. 395
Resolved, That at any time after the adoption of this
resolution the Speaker may, pursuant to clause 2(b) of rule
XVIII, declare the House resolved into the Committee of the
Whole House on the state of the Union for consideration of
the bill (H.R. 3763) to protect investors by improving the
accuracy and reliability of corporate disclosures made
pursuant to the securities laws, and for other purposes. The
first reading of the bill shall be dispensed with. All points
of order against consideration of the bill are waived.
General debate shall be confined to the bill and shall not
exceed one hour equally divided and controlled by the
chairman and ranking minority member of the Committee on
Financial Services. After general debate the bill shall be
considered for amendment under the five-minute rule. It shall
be in order to consider as an original bill for the purpose
of amendment under the five-minute rule the amendment in the
nature of a substitute recommended by the Committee on
Financial Services now printed in the bill. The committee
amendment in the nature of a substitute shall be considered
as read. All points of order against the committee amendment
in the nature of a substitute are waived. No amendment to the
committee amendment in the nature of a substitute shall be in
order except those printed in the report of the Committee on
Rules accompanying this resolution. Each such amendment may
be offered only in the order printed in the report, may be
offered only by a Member designated in the report, shall be
considered as read, shall be debatable for the time specified
in the report equally divided and controlled by the proponent
and an opponent, shall not be subject to amendment, and shall
not be subject to a demand for division of the question in
the House or in the Committee of the Whole. All points of
order against such amendments are waived. At the conclusion
of consideration of the bill for amendment the Committee
shall rise and report the bill to the House with such
amendments as may have been adopted. Any Member may demand a
separate vote in the House on any amendment adopted in the
Committee of the Whole to the bill or to the committee
amendment in the nature of a substitute. The previous
question shall be considered as ordered on the bill and
amendments thereto to final passage without intervening
motion except one motion to recommit with or without
instructions.
The SPEAKER pro tempore. The gentleman from Texas (Mr. Sessions) is
recognized for 1 hour.
Mr. SESSIONS. Mr. Speaker, for purposes of debate only, I yield the
customary 30 minutes to my friend, the gentlewoman from New York (Ms.
Slaughter), pending which I yield myself such time as I may consume.
During consideration of this resolution, all time yielded is for
purposes of debate only.
Mr. Speaker, the resolution before us today is a fair, structured
rule providing for the consideration of H.R. 3763, the Corporate and
Accounting Accountability, Responsibility, and Transparency Act of
2002.
The rule provides for 1 hour of general debate, equally divided and
controlled by the chairman and ranking minority member of the Committee
on Financial Services. All points of order against consideration of the
bill are waived.
The amendment in the nature of a substitute recommended by the
Committee on Financial Services now printed in the bill shall be
considered as the original bill for the purposes of amendment and shall
be considered as read. All points of order against the bill, as
amended, are also waived.
Only the amendments printed in the report of the Committee on Rules
accompanying the resolution are made in order. These amendments shall
be considered only in the order printed in the report and may be
offered only by a Member designated in the report. They shall be
considered as read and debatable for the time specified in the report,
equally divided and controlled by the proponent and an opponent. They
shall not be subject to amendment, and shall not be subject to a demand
for division of the question in the House or in the Committee of the
Whole. Points of order against the amendments are also waived.
Finally, the rule provides one motion to recommit, with or without
instructions.
Mr. Speaker, I am pleased that today we are going to debate the
Corporate and Auditing Accountability, Responsibility, and Transparency
Act of 2002, known as CARTA. Two weeks ago, the House considered and
passed the Pension Security Act, which focused on providing workers
with new options and resources concerning their pensions. Today, we are
considering legislation that affects the corporate accountability side
of that issue.
Mr. Speaker, currently, more than half of all U.S. households invest
in mutual funds, pension funds, or 401(k) plans. The face of the
American investor is younger and more diverse than ever today. I firmly
believe that encouraging Americans to help secure their own future
through savings is vitally important for their own success. While
savings must begin with the individual, there are also ways that the
government can, must, and will help to encourage people to save.
The positive ripple effects of this bill are far-reaching. Restoring
investor confidence in the financial stability of companies doing
business in this country leads to more jobs and a stronger economy.
Increasing accessibility of timely and accurate investment information
helps American workers not only plan for retirement, but also better
assures them of a secure retirement. For those of us who are still
planning for our children's college educations, we can be assured that
greater corporate responsibility will help protect these and other
investments that, as American workers, we make.
This legislation focuses on several principles, all designed to
protect investors and employees.
First of all, we must restore confidence in accounting. In order to
ensure auditor independence, firms would be prohibited from offering
controversial consulting services to companies that they are also
auditing.
Additionally, under CARTA, a new public regulatory board with strong
oversight authority would be established, and under the direction of
the Securities and Exchange Commission, they would work together. This
bill recognizes that strong and healthy accounting companies that
provide investors with accurate information are critical to ensuring
the financial
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soundness of companies that investors rely upon.
CARTA also contains provisions that increase corporate disclosure and
responsibility. This bill increases the amount of information that
would be made available to American workers, investors, and the general
public. Instead of presenting this information using legal jargon,
investors would receive increased information in real time English and
in real time words, where they can understand the essence of not only
financial accountability, but also the financial standing of a company.
This is good news for me, because it means we do not need an advanced
accounting or legal degree in order to decipher the information. The
average American investor will be able to obtain meaningful
information, and they will be able to obtain it in a timely fashion.
CARTA also creates parity between senior corporate executives and
rank and file workers. During blackout periods, which are routine times
when a plan must undergo administrative or technical changes, employees
many times are unable to change or access their retirement accounts.
What we saw from Enron was an egregious example of disparity, where
corporate executives were able to sell off their investments and
preserve their savings while rank and file workers were barred from
making those same changes. CARTA would prohibit insider sales during
blackouts for every single employee.
I have also mentioned some additional responsibility that this bill
requires of the Securities and Exchange Commission. However, this
legislation also recognizes that we must make sure that the SEC has
adequate resources and staffing in order to do an effective job.
The SEC's budget would be increased by 62 percent, allowing them to
perform its additional tasks and oversight duties. Among those duties
would be regular and thorough reviews of the largest and most widely-
traded companies in America.
One thing that has come out from the seven Enron-related hearings in
the Committee on Financial Services alone is that investors are not
receiving the necessary unbiased information needed to make responsible
investment decisions. It is clear that Wall Street research practices
are in need of reform. CARTA also addresses this by directing the SEC
to study the new regulations and report back to Congress through annual
updates on the effectiveness of current rules and standards. This is a
critical step towards reducing and resolving conflicts of interest for
analysts.
Mr. Speaker, I would also like to today commend the chairman of the
Committee on Financial Services, the gentleman from Ohio (Mr. Oxley),
and the gentleman from Louisiana (Chairman Baker), for their efforts in
putting together a carefully crafted and balanced approach. When
something such as Enron happens, we as Members of Congress must fight
the temptation to react by overlegislating, thus doing more harm than
good. These two gentlemen, through their leadership, have made sure
that this did not happen.
I believe that the committee of the gentleman from Ohio (Chairman
Oxley) has diligently worked to make sure that the bill we consider
today is a balanced and appropriate step towards addressing issues
which were highlighted and brought to bear to all Americans as a result
of the collapse of Enron. I am pleased that this bill will help create
more jobs and strengthen our economy by restoring confidence in
corporate financial stability.
I urge my colleagues to support this fair rule. I urge my colleagues
to support the underlying legislation.
Mr. Speaker, I reserve the balance of my time.
Ms. SLAUGHTER. Mr. Speaker, I yield myself such time as I may
consume.
(Ms. SLAUGHTER asked and was given permission to revise and extend
her remarks.)
Ms. SLAUGHTER. Mr. Speaker, I thank the gentleman from Texas for
yielding me the customary 30 minutes.
This body is about to blow an extraordinary opportunity to address
the erosion of trust between the American people and the financial
institutions that wield enormous control over their lives.
Make no mistake, the outrage of our constituents is real. They are
fed up with corporate fraud and abuses that have produced massive
layoffs and wiped out the life savings of thousands of working
families. The American people have voiced their outrage to this body
through every medium available: letters, e-mails, hearings, interviews,
you name it. They have shared stories of devastation, of loss, and
dreams deferred, all in the hope that Congress would act to prevent
future scandals.
Global Crossing's North American headquarters are located in my
district in Rochester, New York. I am sure Members remember Global
Crossing. The company was the darling of Wall Street, yet somehow it
managed to plummet from a net worth of $22 billion to $750 million in
the span of less than a year, not too far from AOL Time Warner, we hear
this morning.
In the wake of its collapse, the lives of thousands in my district
were shattered, all because the promised safeguards failed at every
level. My people got a hard lesson on how companies cheat, overstate,
or obscure their financial disclosures in an effort to charm analysts
and to manipulate investor expectations.
On March 9, I hosted a public forum in Rochester where 250 people
came to share their experiences. One Global Crossing employee noted,
and I quote, ``Many former employees have been economically devastated
as a result of corporate greed and the mismanagement of Global
Crossing. People have spent their life savings and have had to cash in
their deflated retirement/401(k) plans just to survive these last few
months after Global Crossing abruptly ceased their promised severance
payments. Some former employees are now forced to file bankruptcy
themselves, while others may lose their homes, have had to drastically
change their lifestyles, and are barely surviving.''
Mr. Speaker, my constituents want real reform, not cosmetic changes,
to correct the systemic flaws that brought about such havoc in our
community. Quite simply, the market failed us, just as it did with the
employees and shareholders of Enron.
I had hoped to send good news back today. I had hoped to tell my
constituents that this underlying bill is the real thing, that the
measure before us will restore confidence and integrity to the markets,
and produce tough and effective reforms. But this bill does none of
that. Indeed, it creates merely the illusion of reform. In what has
become standard operating procedure in this body, corporate interests
are the winners.
As for my colleagues, I wish I could say that what hit my community
was an isolated event. I wish I could say that with the underlying bill
in place, this would never happen in Members' communities. But even the
sponsors of the measure acknowledge more Global Crossings and Enrons
may come to light. In the months ahead, another Member of Congress will
have to face thousands of panicked constituents wondering what happened
to their future.
Mr. Speaker, the underlying bill simply sidesteps the problem. It
does not provide for a strong, independent regulator for the auditing
industry, but simply punts Congress' job to the Securities and Exchange
Commission. To be blunt, this job is much too important to delegate. We
need to create a powerful regulatory board to set strict standards for
auditor independence, with sweeping investigative and disciplinary
powers over audit firms.
{time} 1045
The underlying bill pays lip service to the issue of auditor
independence, but provides no guarantees that an auditor will not be
compromised by payments received from his client for his consulting
services. It does not ban auditors from performing nonaudit services
that create conflicts of interest. Moreover, the bill says nothing
about the revolving door between auditors and their clients. Enron, for
example, hired several Arthur Andersen auditors, even though auditors
who are angling for jobs from their customers are unlikely to show much
independence from them.
The bill is also silent on the rotation of audit firms. If an auditor
knew that after a few years a different outside
[[Page H1542]]
auditor would scrutinize its efforts, this would create a strong
incentive to keep the numbers honest. But the half-measures contained
in the bill continue. For instance, the bill protects corporate
wrongdoers by making it more difficult to go to court to stop officers
and directors who engage in deliberate misconduct. The bill does not
hold corporate CEOs accountable by requiring them to certify the
accuracy of their financial statements, as the Democrat substitute
would do.
The underlying bill allows Enron executives and other dishonest CEOs
to keep their ill-gotten gains, rather than requiring them to surrender
stock bonuses and other incentive pay, as the Democrat bill provides.
The underlying bill would simply study the issue. Moreover, individual
investors and victims of securities fraud who want to hold the industry
accountable for wrongdoing will face major legal hurdles. The
committee-reported bill also does nothing to prevent securities
analysts' conflicts of interest, even after investigations by New York
Attorney General Eliot Spitzer exposed numerous examples of analysts'
false or misleading advice to investors.
Mr. Speaker, I urge my colleagues to support real reform.
Mr. Speaker, I reserve the balance of my time.
Mr. SESSIONS. Mr. Speaker, I yield such time as he may consume to the
gentleman from California (Mr. Dreier), the favorite son from San
Dimas, who is the chairman of the Committee on Rules.
Mr. DREIER. Mr. Speaker, I thank my friend for yielding me time and I
congratulate him on his superb management of this measure.
Mr. Speaker, I would like to say that I believe it is important for
us to realize that we faced what clearly was one of the most
devastating and horrible business failures in our Nation's history with
the collapse of Enron. I know that there was a temptation by many to
politicize this issue and take what clearly was a business failure and
somehow determine that it was a political failure and that there were
some political figures to blame.
I think that the work that the gentleman from Ohio (Mr. Oxley) and
the Committee on Financial Services has done is a very clear
demonstration that there is recognition in a bipartisan way of this
substitution that there was a business failure. And the debate that we
will proceed with today makes in order two substitutes from our
Democratic colleagues and three amendments from our Democratic
colleagues which will allow for a full airing of this question.
I think that with the vote that came from the committee, Mr. Speaker,
by a margin of 49 to 12, demonstrates that Democrats and Republicans
alike have come together to deal with this very serious problem.
As my friend, the gentleman from Dallas, Texas (Mr. Sessions)
mentioned, there are tremendous numbers of Americans who are members of
what is called the investor class. In fact, many believe that over half
of the American people are involved in 401(k)s, individual retirement
accounts, or some other kind of investments. And it is obvious that
there have been some problems with accounting and auditing. That is
clearly an understatement. We have seen some very serious problems come
forth and we have seen some abuse that has been reported by executives
juxtaposed to employees in companies when it has come specifically to
the blackout period of time when executives have been able to sell
their stock and employees have not been able to.
This legislation is designed to address some of the very serious
problems that exist in the area of accounting and auditing, and it is
also designed to provide, once again, a level of confidence forever for
those members of the American public who are part of the investor
class.
It is my hope that we will see more and more Americans participate as
members of the investor class. Our goal is to try and make sure that
there is enough opportunity for everyone to be part of what President
Kennedy loved to call that rising tide that lifts all ships.
I think that this bill will go a long way towards instilling that
level of confidence that is necessary. The rule, as has been
acknowledged by both sides, is very fair. We in the majority have again
turned ourselves inside out to make sure that we provide an opportunity
for those in the minority to be heard on this, and they clearly will
have that opportunity as we proceed with debate today.
I urge my colleagues, Mr. Speaker, to vote for the rule and for the
underlying legislation and we will have a full and rigorous debate on
all of the amendments that will take place between now and then.
Ms. SLAUGHTER. Mr. Speaker, I yield 5 minutes to the gentlewoman from
Ohio (Mrs. Jones).
Mrs. JONES of Ohio. Mr. Speaker, I rise this morning in opposition to
this rule and the current legislation.
I have the privilege of serving on the Committee on Financial
Services as well as serving on the Committee on Small Business. I had
the privilege and opportunity to ask questions of Harvey Pitt, the SEC
chairman. I had the privilege and opportunity to ask questions of the
CEO of Arthur Andersen, CEO of Enron, and the CEO of Global Crossing.
And what I have to say to the American public this morning is, in the
course of that questioning I have never seen any men more arrogant in
my life. I have never seen any men who believe that they did not need
to respond to the questions of the American public on their conduct.
If, in fact, the exhibition of the questions and answers before that
committee are any indication of the conduct of the CEOs of large
companies, then clearly this legislation that we put on the floor this
morning does not go far enough to deal with the issue of CEO
responsibility.
I stand in support of a Democratic substitute that would strengthen
corporate responsibility and executive accountability by requiring CEOs
and CFOs to certify the accuracy of their firm's financial statements,
subjecting them to criminal penalties for lying. If the rest of us are
subject to criminal penalties for lying, why should they not be?
I will give you a perfect example. When I asked the Global Crossing
CEO what his salary is, he said, Mrs. Jones, it is a matter of public
record. And I said, sir, it may well be, but I want you to answer my
question for the record. He said it was $3.5 million. He failed to
disclose at that point that he got a $10 million loan forgiveness to
become the CEO of Global Crossing.
Let us go on to say that it is important as Members of this Congress
that we restore the public's trust in the CEOs and CFOs of large
companies in which we invest. Clearly, not everyone is an investor, but
there are those, like those who are members of the Public Employees
Retirement System of the State of Ohio, who lost their compensation as
a result of the Enron situation or the California Public Employee
Retirement System. I believe we need greater accountability. And while
we are doing this, let us not just sit back and give something to the
public where we say we are doing something when in reality the bill
does not go far enough.
I think it is important that we look to auditor independence and
industry oversight. When I questioned the Arthur Andersen head, as well
as Mr. Pitt, it was clear that in the past we have not done a good job
of distinguishing between auditor and the consultant. And this
legislation, in my opinion, does not go far enough to distinguish and
keep them from being in the position of saying, oh, your company is in
great shape, when in reality it is not.
Mr. Speaker, it is clear that we need to be in a position to
distinguish between those two roles so that never again do we find
ourselves in the position of having the possibility of an Arthur
Andersen, being the accounting firm that is looked upon as the greatest
accounting firm in the world upon which all of us rely, when in fact,
behind the scenes, and I am not saying all Arthur Andersen employees
were involved in the process, but in fact the name Arthur Andersen was
consistent with who you invested in.
Mr. Speaker, again, I believe it is important that any legislation
that we deal with this morning deals with the independence in the
auditor industry as well as dealing with issues of conflict of
interest. And so, therefore, I again rise in opposition to the rule,
and with all respect to the chairman and this great effort in dealing
with this legislation, we need greater corporate
[[Page H1543]]
accountability and CEO accountability. And we do not need just a study
about what CEOs do in a possible conflict of interest, we need some
legislation that addresses the conflict.
Mr. SESSIONS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, we have heard a lot of political rhetoric about how the
Federal Government should be engaged in the oversight of companies, the
oversight of CEOs. We hear about how CEOs are arrogant and think that
what they want to think should not fall into compliance of what many of
us others think. But the fact of the matter is that we live in an
environment where the free market has an opportunity to have success
and have failure. The free market has that balance which they have to
follow, and, in fact, we did; we have learned something as a result of
the circumstance with Enron. But that balance continues to come back to
us, and we as Republicans, while listening to the exact same words and
the questions that were spoken throughout these committee hearings,
also heard something that the Federal Reserve Chairman Alan Greenspan
said, and I would like to quote him at this time. He said,
We have to be careful, however, we have to be careful with
how the Congress and the American public react. We should not
look to a significant expansion of regulations as the
solution to current problems.
I believe that perhaps this statement made by the Federal Reserve
Chairman is among the most important, and one that Members of Congress
should take seriously as our duties as Members of Congress, and
understand that while we saw, and many of us sat by helplessly and
watched as the Enron problem began and then got worse, and then we
watched the fall-out from it, we should learn lessons from what
happened and not overreact. We should not go out and place rules and
regulations across the entire industry, not only in accounting
practices but also across CEOs at other companies, that will cause them
to do the wrong things, which will cause them to not share information.
That is where this carefully crafted legislation by the gentleman
from Ohio (Mr. Oxley) and this fabulous committee are not going to
overreact. They are going to look at what will be the essence of a
comeback for America, confidence that people will have. And our message
is very clear today. We want more jobs and create a stronger economy.
We want to make sure that confidence in financial services is what we
get, not overregulation. We want to make sure that there is more secure
retirement in retirement plans by providing investor information and
accountability, not rules and regulations that will inhibit people and
give them another skirt to hide behind.
We want to make sure that savings is available for people who are
just like my wife and I, who are saving for college for our children,
and we want to make sure that the corporate responsibility becomes a
part of a person's own financial plan also. That is why we are not
going to fall victim to believing that emotions should override common
sense.
This plan that the gentleman from Ohio (Mr. Oxley) and the Committee
on Financial Services put together on the floor today is not only
common sense but is something that will provide confidence for our
future.
Mr. Speaker, I reserve the balance of my time.
Ms. SLAUGHTER. Mr. Speaker, I yield 4 minutes to the gentleman from
Texas (Mr. Bentsen).
(Mr. BENTSEN asked and was given permission to revise and extend his
remarks.)
Mr. BENTSEN. Mr. Speaker, on the underlying bill, let me say first of
first off that I think the rule is a pretty good rule. There have been
a lot of rules in this House that were not particularly good. This time
the Committee on Rules saw fit to make a number of amendments in order.
I wish that was the norm rather than the exception, but I appreciate
the fact that that was the case on this bill.
A lot is going to be said about the underlying bill, the substitutes,
and the amendments in today's debate. I just want to say, having sat
through a number of the hearings on Enron and looked at the other
issues, the underlying bill is a good bill and I supported it in
committee. I do not think we should view the underlying bill as a
panacea. And I think if there is anything that we get out of this
debate today, it is going to be that the Congress has to very clearly
put itself on record, both to the public, including the investor class
as one of our colleagues mentioned, as well as to the regulators, and
particularly the Securities and Exchange Commission, exactly what it is
we expect them to do.
{time} 1100
I think all of us believe in the sanctity of free markets. We have
the most efficient markets in the world in the United States, but one
of the reasons why the markets are so efficient is because we have a
very strong disclosure system so that investors have an understanding
of what it is they are buying. Anytime we have corporate managers or
their advisers who disguise or withhold information from the market, we
are distorting those markets; and we put at risk not just investors who
are abused or hurt by that, but we put at risk the entire market system
itself.
So I think, on the one hand, the gentleman from Texas is correct, we
do not want to overregulate; but on the other hand, I think we should
be very cautious not to underregulate because if we do, we will not
have efficient markets, we will not have the efficient distribution of
capital at a reasonable price, and the economy as a whole will suffer
and we will not have confidence in the markets from investors, which is
a growing group of people, including a lot of pensioners in my district
who lost their savings because of what happened at Enron.
I think that the House should look at the legislation, whatever it is
we end up passing, which I have my ideas of what exactly will pass and
will not pass, as a start and not a finish because our goals should be
to ensure that there is fair and sufficient disclosure in the markets,
that there is a level playing field in the markets for all investors,
not just some investors. I think there is a lot to be offered on all
sides, and I want to commend the committee for at least having some
sense of an open rule today to allow a number of amendments to be
offered.
Mr. SESSIONS. Mr. Speaker, I yield myself such time as I may consume.
I appreciate the comments of the gentleman from Texas (Mr. Bentsen).
His service not only to this body but also to this Nation has been well
deserved and done well, and I believe what he speaks about is the
fairness of not only what the Committee on Rules has done today to make
sure that there are two substitutes and other actions that will be
available so the minority can be debated today, can be brought for full
debate on the floor but also about our ability to not overregulate.
By not overregulating means that we will in essence bring the light
of day, which is the best of all standards. The light of day will now
be available not only to the SEC for them to have the ability to come
and look at companies with that authority and responsibility of the
Federal Government but also some changes of the things that we have
learned as a result of the Enron circumstance with accounting firms.
I believe that what the gentleman from Texas (Mr. Bentsen) has talked
about means that this is a fair opportunity today on this floor to talk
about problems that have been seen, and this is yet another opportunity
for this body to address things that we see; and I am proud of what we
are doing here.
Mr. Speaker, I would like to inquire how much time is remaining on
both sides.
The SPEAKER pro tempore (Mr. Shimkus). The gentleman from Texas (Mr.
Sessions) has 13\1/2\ minutes. The gentlewoman from New York (Ms.
Slaughter) has 18 minutes remaining.
Ms. SLAUGHTER. Mr. Speaker, I yield back the balance of my time.
Mr. SESSIONS. Mr. Speaker, I yield myself such time as I may consume.
We have had a vigorous debate about this important rule that is in
front of us. I would ask the Members to give due consideration to
supporting this bill.
Mr. LaFALCE. Mr. Speaker, the bill before us today presents an
opportunity to restore confidence and integrity to our markets and
right the wrongs demonstrated by the dramatic failure of Enron and
Global Crossing. Unfortunately, the Rules Committee has seen fit to
close off debate on most of the critical issues that plague our capital
markets. The House
[[Page H1544]]
should have had the opportunity to discuss the modest and reasonable
package of amendments I put before the Rules Committee to strengthen
this woefully inadequate bill.
This House should have the opportunity to consider and debate
thoughtfully proposals to strengthen H.R. 3763, the so-called Corporate
and Auditing Accountability, Responsibility, and Transparency Act of
2002. This bill claims to address many of the financial disclosure and
accounting issues raised by the collapse of Enron. Unfortunately, the
kinds of financial abuses that led to this unprecedented debacle will
not be stopped--or even very much impeded--by this Republican bill. It
is cosmetic and simply pretends to bring about reform. ``Don't look for
a major overhaul of the accounting industry soon,'' says the Wall
Street Journal in a recent article criticizing the Oxley bill because
it ``punts'' overhaul ``to just where the industry would like it--the
Securities and Exchange Commission.''
This bill does virtually nothing to correct the systemic flaws in our
financial reporting system. It fails to strengthen oversight of
auditors and accountants, and fails to hold corporate executives fully
accountable for their misdeeds. Unless major improvements are made,
H.R. 3763 will do nothing to restore integrity to our financial markets
and will not protect the savings and pensions plans of millions of
Americans that remain threatened by future Enrons.
The House should have had the opportunity today to work its will on
several key areas.
First, I offered an amendment in the Rules Committee to create a
powerful new regulatory board to ensure that auditors will be truly
independent and objective. My amendment provided for a regulator that
(1) sets audit and quality standards for auditors of public companies;
(2) possesses sweeping investigative and disciplinary powers over audit
firms; and (3) is controlled by a board comprised of public members--
not the accounting industry. My amendment took a decidedly different
approach than H.R. 3763, which punts almost all of the functions and
powers of the regulator to the SEC. Only a regulator with explicit
powers and duties, and a defined composition, such as the one I
proposed, will ensure that the abuses we witnessed in the Enron debacle
will not be repeated.
In addition, the Republican bill purports to prohibit auditors from
providing their audit clients with two consulting services: financial
reporting systems design and internal auditing. In fact, the bill
prohibits nothing. Instead, it simply codifies existing SEC rules that
provide only very limited restrictions on these services. In contrast,
my amendment clarifies the definitions of these two services in a way
that will actually ban them. In the case of any non-audit consultant
services that are not prohibited, my amendment requires approval by the
audit committee of the firm's board of directors.
Second, in a spirit of bipartisanship and comity with our Republican
friends. Mr. Kanjorski and I have taken President Bush's proposals on
corporate responsibility and executive accountability and prepared an
amendment to give them legislative substance and real teeth. Rather
than implement the President's proposals, the GOP bill either regresses
from current law or does nothing to hold CEOs accountable. It amazes me
that the Republican bill summarily rejected the President's own plan to
promote corporate responsibility.
So our amendment, also rejected by the Rules Committee, did three
things to implement the Bush plan. First, it requires CEOs and CFOs to
certify the accuracy of their firms' financial statements. Violation of
this provision would carry with it criminal (in the event that the
violation is willful), civil, and other penalties provided for under
the securities laws. H.R. 3763 contains no similar provision. It is
essential that Congress require officers of public companies to stand
behind their public disclosures. That is the absolute minimum we should
require.
Second, this amendment required corporate officers who falsify their
financial statements to surrender their compensation, including stock
bonuses and other incentive pay. it empowered the Securities and
Exchange Commission (SEC), in an administrative proceeding, or in
court, to seek such a disgorgement. H.R. 3763 requires only a study of
the question: should guilty CEOs forfeit their stock bonuses.
Third, this amendment empowered the SEC to bar officers and directors
from serving in that capacity for a public company if they are found
guilty of wrongdoing and determined to be unfit. It would also remove
judicial hurdles to seeking such a bar in court. Incredibly, the
Republican bill actually makes ti harder to obtain officer and director
bars. It codifies restrictive judicial standards that would make it
substantially more difficult for the SEC to obtain officer and director
bars--a change which the head of the SEC's Enforcement Division has
stated publicly is highly problematic. In this regard, H.R. 3763 is a
serious step backward.
The Rules Committee even refused to allow debate on my amendment that
gave shareholders a voice in executive compensation decisions by
requiring that a majority of shareholders approve any stock options
plan for an officer or director. H.R. 3763 does not include a similar
provision. Would anyone argue on this floor that shareholders should
not have a voice in the lucrative stock option plans of officers and
directors. After all, it is the shareholders who own public companies,
not management.
Finally, the Rules Committee refused to give this body an opportunity
to debate and vote on an amendment to ensure that stock analysts are
truly independent and objective. My amendment achieved this by (1)
barring analysts from holding stock in the companies they cover; (2)
prohibiting analysts' pay from being based on their firms' investment
banking revenue; and (3) barring their firm's investment banking
department from having any input into analysts' pay or promotion. As
with other important issues in this legislation, H.R. 3763 only
requires a study.
Today we are on the verge of squandering an opportunity for real
reform. I urge my colleagues to consider our substitute and do
something real to prevent the next Enron.
Mr. SESSIONS. Mr. Speaker, I yield back the balance of my time, and I
move the previous question on the resolution.
The previous question was ordered.
The resolution was agreed to.
A motion to reconsider was laid on the table.
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