[Congressional Record Volume 148, Number 49 (Friday, April 26, 2002)]
[Extensions of Remarks]
[Pages E637-E638]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




CORPORATE AND AUDITING ACCOUNTABILITY, RESPONSIBILITY, AND TRANSPARENCY 
                              ACT OF 2002

                                 ______
                                 

                               speech of

                         HON. JOHN CONYERS, JR.

                              of michigan

                    in the house of representatives

                       Wednesday, April 24, 2002

       The House in Committee of the Whole House on the State of 
     the Union had under consideration 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:

  Mr. CONYERS. Mr. Chairman, I rise today to criticize the wholly 
inadequate auditing reforms passed today by the House. We in the 
Congress must stand up to big business and protect working Americans 
and their retirement savings.
  HR 3763 will not make the wholesale changes necessary to restore 
investor confidence. This legislation will not hold corporate

[[Page E638]]

Chief Executive Officers accountable for fraudulent actions. It will 
not hold CEO's responsible for the accuracy of their companies 
financial statements. This legislation allows CEO's like Enron's Ken 
Lay to keep inflated salaries and bonuses while robbing innocent 
employees and investors. This legislation actually encourages the 
deceptive behavior that allows executives to pocket millions of dollars 
while their employees lose their health care benefits, retirement 
savings, and their confidence in the corporate elite.
  Everyone is being affected by the failure of major corporations. 
Earlier this year DCT Inc., a metro Detroit corporation, went bankrupt 
and gave employees an hour's notice of lay-offs instead of the sixty 
days required by federal law. DCT employees were left without health 
care, back vacation pay, and matching 401K retirement funds. Their 
final paychecks bounced and, adding insult to injury, banks still 
charged the laid off workers $25 for the bounced paychecks.
  Obviously no company is immune from financial difficulties, but it is 
hard to accept when the corporate elite are insulated from financial 
failures at the expense of the average worker. Kmart, for example, 
recently entered bankruptcy. Kmart retirement stock options that were 
worth $35,000 last August are now worth less than $1,800. Nonetheless, 
a judge recently approved a $1.5 million salary for Kmart's new CEO, a 
signing bonus of $2.5 million, and incentives worth another $1.875 
million dollars. A bankrupt company is paying its new and unproven CEO 
upwards of $4 million dollars, while the average store worker faces an 
uncertain future. HR 3673 does nothing to prevent abuses to the common 
worker.
  HR 3763 was intended to eliminate conflicts of interest between 
corporations and their auditors. However, much to this House's 
discredit, HR 3763 is a facade for regulation of ethical conduct that 
doesn't even prevent auditors from holding stock in the companies they 
audit. The legislation asks the SEC to ``study'' industry disclosure 
practices but does nothing to guarantee accuracy and transparency in 
existing disclosures. The American worker needs strong reform, both by 
corporations and by the SEC, in order to ensure that audits are 
accurate and reflect the true earnings of corporations and to eliminate 
conflicts of interest between corporations and their auditors.
  My colleague, Congressman Dennis Kucinich, offered a substitute to 
the Republican bill that would have created a Bureau of Audits within 
the Securities and Exchange Commission. This Bureau would have 
generated unbiased audits, by removing auditing itself from the private 
sector. This proposal would have removed the auditor from the pay of 
the audited. Federal auditors would create an environment of 
neutrality, thereby fostering accurate and fair audits.
  The Democratic substitute offered by Congressman John LaFalce, 
Ranking Member on the Financial Services Committee, would have mandated 
corporate responsibility and executive accountability by subjecting 
executives to criminal penalties for knowingly misleading investors, 
employees, and the financial community. Executives should be criminally 
liable for false representations regarding corporate assets that they 
are supposed to protect. Ken Lay and other members of the Enron 
executive board, their friends and families, which include members of 
the Bush Administration, profited from the losses of investors and 
employees. Tougher penalties would make it far less likely that future 
Enron's would occur. Enron isn't an isolated case, white collar fraud 
cases like it are popping up all over the place against companies such 
as Global Crossing, Qwest Communications and others. Their accountants, 
investment bankers and lawyers are now being investigated for possible 
collusion by regulatory agencies in Washington and by Congress itself.
  Today, my colleagues turned a deaf ear to the voice of thousands that 
were affected by corporate fraud and deception. Instead the House has 
winked at the financial elite that have forsaken their fiduciary duty 
for personal gain. Hopefully, our colleagues in the Senate will improve 
on this fig leaf of reform and enact legislation that will truly 
strengthen the hand of the SEC and ensure the quality and independence 
of corporate auditors.

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