[Congressional Record Volume 148, Number 91 (Tuesday, July 9, 2002)]
[Senate]
[Pages S6436-S6444]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PUBLIC COMPANY ACCOUNTING REFORM AND INVESTOR PROTECTION ACT OF 2002
The PRESIDING OFFICER. Under the previous order, the Senate will
resume consideration of S. 2673, which the clerk will report.
The assistant legislative clerk read as follows:
A bill (S. 2673) to improve quality and transparency in
financial reporting and independent audits and accounting
services for public companies, to create a Public Company
Accounting Oversight Board, to enhance the standard setting
process for accounting practices, to strengthen the
independence of firms that audit public companies, to
increase corporate responsibility and the usefulness of
corporate financial disclosure, to protect the objectivity
and independence of securities analysts, to improve
Securities and Exchange Commission resources and oversight,
and for other purposes.
The PRESIDING OFFICER. The majority leader is recognized.
Amendment No. 4174
(Purpose: To provide for criminal prosecution of persons who alter or
destroy evidence in Federal investigations or defraud investors of
publicly traded securities, and for other purposes)
Mr. DASCHLE. Madam President, I have an amendment at the desk.
[[Page S6437]]
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from North Dakota [Mr. Daschle], for Mr. Leahy,
for himself, Mr. McCain, Mr. Daschle, Mr. Durbin, Mr. Harkin,
Mr. Cleland, Mr. Levin, Mr. Kennedy, Mr. Biden, Mr. Feingold,
Mr. Miller, Mr. Edwards, Mrs. Boxer, Mr. Corzine, and Mr.
Kerry, proposes an amendment numbered 4174.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
Mr. DASCHLE. Madam President, on behalf of Senator Leahy and others,
I offer this amendment which is identical to the Corporate and Criminal
Fraud Accountability Act, S. 2010, passed unanimously by the Judiciary
Committee some time ago.
I view the Leahy amendment as a necessary complement to the Sarbanes
bill. In fact, I think of them as two parts of a vital whole--one
element guarantees the truth and honesty of corporate accounting. The
other is a deterrent. It says that corporate misrepresentation will be
forcefully punished--with jail time.
We need both. We need to improve oversight and independence of the
accounting profession and hold corporate wrongdoers accountable for
their actions.
We need to act comprehensively to fulfill our promise to the American
people that integrity, honesty, and accountability will be restored to
our markets.
Last week Senator Leahy and I wrote to the President requesting his
views on this bill and the Sarbanes accounting reform bill.
Unfortunately, the President has not answered our letter yet. But I
hope to hear today--and I think we need to hear today--that he supports
and will sign both.
We welcome the President's apparent new enthusiasm for reforming our
corporate culture, and we look forward to working with him.
The administration needs to understand that the time for half
measures has long passed. The American people expect and deserve
comprehensive reform.
Combining the Leahy bill and the Sarbanes bill accomplishes just
that. The Sarbanes bill revamps the regulatory structure that protects
our markets. There will be better rules and a new oversight body to
send corporations and accountants a clear message that they must tell
the truth on their balance sheets.
The Leahy bill is every bit as vital. Let me summarize a few of its
provisions very quickly. The amendment has three aims: punishing
criminals; preserving evidence; and protecting victims.
The Leahy amendment punishes criminals by creating a tough new 10-
year felony for securities fraud. It provides prosecutors with a new
tool that is flexible enough to keep up with the most complex new fraud
schemes and tough enough to deter violations on the front end. It also
provides a mechanism to raise the fraud sentences that are already on
the books.
The amendment also preserves evidence of fraud. It creates two new
criminal anti-shredding provisions in federal law. As we say in the
Arthur Andersen case, even the most straight-forward obstruction of
justice cases can be difficult to prove under current law.
Senator Leahy's bill closes the loopholes and makes document
destruction in fraud cases an unambiguous crime.
The amendment does not just protect ``paper evidence,'' it also
protects valuable testimony from people. For the first time, the Leahy
bill creates federal protection for whistleblowers. People like Sherron
Watkins of Enron will be protected from reprisal for the first time
under federal law. This bill is going to help prosecutors gain
important insider testimony on fraud and put a permanent dent in the
``corporate code of silence.''
Finally, the amendment will protect victims of fraud. By extending
the time period during which victims can bring cases to recoup their
losses, the Leahy bill removes the reward for those fraud artists who
are especially gifted at concealing what they've done for lengthy
periods of time.
Cases where victims have lost their entire life savings should be
decided on the merits, not based on procedural hurdles that may now be
used to throw legitimate victims out of court.
The Leahy bill also prevents fraud artists from declaring bankruptcy
to shut out their victims. The amendment would accomplish this by
making security fraud debts nondischargeable in bankruptcy.
Again, the Leahy provisions enjoyed broad bipartisan support in the
Judiciary Committee when passed unanimously in April. They are needed
now more than ever, as the number and magnitude of corporate
misstatements continues to pile up and the lost jobs, lost pensions,
and ruined lives continue to mount.
We must act to punish criminals, no matter what color their collar. I
hope all Senators will support this amendment.
Madam President, the country will be listening intently to what the
President says this morning. A crucial test will be whether he
explicitly supports--and pledges to sign--the Sarbanes bill with the
Leahy legislation attached. We cannot restore confidence in the
integrity of our markets with anything else.
Senator Leahy is on the floor.
Mr. LEAHY. Will the majority leader yield?
Mr. DASCHLE. Yes.
The PRESIDING OFFICER. The Senator from Vermont is recognized.
Mr. LEAHY. Madam President, I very much appreciate what my good
friend, the distinguished majority leader, has said. I also compliment
him for his leadership on corporate accountability. Sometime ago, he
asked the Chairs of the various committees with possible jurisdiction
in this area to get together and craft comprehensive legislation. I
recall that meeting very well. I recall the majority leader--back at
the time of Enron, before WorldCom and these other business scandals
came forward--expressing his concern that not only is this a blight on
the business community, it is a blight on our system of doing things.
He also spoke about how terrible it was for those people, not only
workers who had their pensions tied up in the fortunes of the companies
they are working with and are relying on for truthfulness--what they
assumed is the truthfulness--of the accounting statements of those
companies, but also many other people who invest, whether it is a
farmer in South Dakota or a merchant in a small town in Vermont who is
putting savings in and hoping this will be part of his retirement.
The majority leader made it very clear to all of us that we were to
set politics aside, we were to set any kind of special interests aside,
and we were to bring up the best legislation possible for the people of
America. That was what Senator Daschle charged us to do, and that is
what I am trying to do with this amendment.
We have excellent accounting reform legislation, S. 2673, crafted by
Chairman Sarbanes and the Senate Banking Committee. I commend Senator
Sarbanes and the other members of the Banking Committee--for their
bipartisan leadership. Senator Sarbanes had people on both sides of the
aisle come out with this legislation, and I am proud to cosponsor it.
My amendment is to add to Senator Sarbanes' legislation, not to
detract from it. As he knows, I offered to add a criminal penalty and
other provisions that are within the jurisdiction of the Judiciary
Committee.
My amendment is cosponsored by Senator McCain and the majority
leader, Senators Durbin, Harkin, Cleland, Levin, Kennedy, Biden,
Feingold, Miller, Edwards, Boxer, Corzine, Kerry, Schumer and
Brownback. Our amendment is identical to S. 2010, the Corporate and
Criminal Fraud Accountability Act that was reported unanimously by both
Republicans and Democrats in the Judiciary Committee on April 25.
Again, following the very clear direction the distinguished majority
leader gave us when he said we have to protect the people of this
country, we have to make sure corporate America can do its best to help
our economy, this would create tough new penalties for securities fraud
and would preserve evidence of fraud to make sure there is
accountability for crimes that not only cheat investors but rob the
markets themselves of the public trust. The markets have stolen the
public's trust.
[[Page S6438]]
According to press reports, President Bush has changed his mind on
corporate reform and may support new penalties for corporate fraud, and
I welcome the President's change of heart. The Corporate and Criminal
Fraud Accountability Act creates tough, new, criminal penalties for
corporate fraud, and Senator Daschle and I have written to the
President asking for his support.
The time for watching and hand-wringing is over. We have to take
action to start the slow but critical process of restoring confidence
in the books of our publicly traded companies.
The collapse of Enron has become a symbol of a corporate culture
where greed has been inflated and accountability devalued.
Unfortunately, Enron is no longer alone. Joined by Arthur Andersen,
Global Crossing, Tyco, Xerox, and, most recently, WorldCom, the
misrepresentations about the financial health of our Nation's largest
companies have shaken confidence in our financial markets.
If we do nothing to learn and apply the repeated lessons of the last
months, we are only going to compound the problem. That was obviously
the belief of the unanimous Judiciary Committee vote when the committee
approved S. 2010. Innocent consumers, investors, and employees depend
on stock investments for their children's college funds, for their
retirement nest eggs, and for their savings. Every week brings news of
a new financial scandal. Just look at the effect on the stock market.
It has been devastating. This has repercussions not just for companies
that depend on our capital markets to grow their businesses and our
economy, but certainly also for the average American family. More than
one in every two Americans invest in our financial markets, and they
are watching what we do here. They deserve action.
Those who defraud investors should be held accountable for their
crimes. The Leahy-McCain amendment, the Corporate and Criminal Fraud
Accountability Act, is all about accountability and transparency--two
bedrocks of our market.
The PRESIDING OFFICER. The Chair states that the majority leader has
yielded for a question only while retaining the floor. Is that the
intent of the majority leader?
Mr. DASCHLE. Madam President, it was my intention to yield for a
question, but I thank the distinguished chair of the Judiciary
Committee for his extraordinary leadership and the effort he has made
to bring this legislation to the floor.
This is the Leahy amendment and, as I noted, it passed unanimously in
large measure because I think he was able to work with our colleagues
on both sides of the aisle.
I am happy to yield the floor so he and others may seek recognition.
Mr. LEAHY. My question would be this to the majority leader: Would he
agree, in his experience, that nothing would focus the attention more
of those executives who have defrauded their own companies and
investors than the idea that they would actually go to jail for it, and
not walk off with hundreds of millions of dollars?
Mr. DASCHLE. Madam President, it is for that reason that I believe
this package ought to be viewed in its entirety. The Sarbanes bill lays
out the framework. The Leahy bill lays out the penalties for violating
that framework. So I don't know that you can have one without the other
and not have a complete package.
So I appreciate very much the work of the Judiciary Committee, and
the chair of the Judiciary Committee especially, for the work in
allowing this package to come to the floor. I thank him again for the
contributions he made.
Several Senators addressed the Chair.
Mr. LEAHY. Madam President, I seek recognition in my own right.
The PRESIDING OFFICER. The Senator from Texas is recognized.
Amendment No. 4175 to Amendment No. 4174
Mr. GRAMM. Madam President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
Mr. LEAHY. Madam President, parliamentary inquiry.
The PRESIDING OFFICER. The Senator from Vermont.
Mr. LEAHY. What is the rule on recognition? Is it not the Senator who
seeks recognition first?
The PRESIDING OFFICER. The Chair understands that the managers of the
amendment are entitled to be recognized.
Mr. LEAHY. On my amendment? May I be recognized on my own amendment
which is pending before the Chair? Is that correct?
The PRESIDING OFFICER. The managers of the legislation have priority.
Mr. LEAHY addressed the Chair.
The PRESIDING OFFICER. The Senator from Texas, the manager of the
underlying bill.
Mr. LEAHY. Would the managers of the amendment include the
distinguished senior Senator from Kentucky? Is he one of the managers?
The PRESIDING OFFICER. The managers of the legislation are the
Senator from Maryland and the Senator from Texas.
Mr. LEAHY. The distinguished Presiding Officer has recognized,
however, the Senator from Kentucky.
The PRESIDING OFFICER. The Chair has recognized the Senator from
Texas. The clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from Texas [Mr. Gramm], for Mr. McConnell,
proposes an amendment numbered 4175 to amendment No. 4174.
Mr. GRAMM. Madam President, I ask unanimous consent that the reading
of the amendment be dispensed with.
The PRESIDING OFFICER. Is there objection?
Mr. LEAHY. I object.
The PRESIDING OFFICER. Objection is heard. The clerk will continue.
The assistant legislative clerk continued with the reading of the
amendment.
The PRESIDING OFFICER. The Senator from Vermont.
Mr. LEAHY. Madam President, I want to make sure people understand
what the Leahy-McCain amendment is. I realize there may be those who
want to amend it to make life easier.
The PRESIDING OFFICER. Will the Senator from Vermont suspend? The
regular order is the reading of the amendment.
Mr. LEAHY. I ask unanimous consent that the reading of the amendment
be dispensed with.
The PRESIDING OFFICER. Is there objection to calling off the reading
of the amendment? Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To provide for certification of financial reports by labor
organizations and to improve quality and transparency in financial
reporting and independent audits and accounting services for labor
organizations)
At the end of the amendment add the following:
SEC. 302. CORPORATE AND LABOR ORGANIZATION RESPONSIBILITY FOR
FINANCIAL REPORTS AND DISCLOSURE REQUIREMENTS.
(a) Financial Reports.--
(1) Certification of reports.--
(A) Certification of periodic reports.--Each periodic
report containing financial statements filed by an issuer
with the Commission pursuant to section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d))
shall be accompanied by a written statement by the chief
executive officer and chief financial officer (or the
equivalent thereof) of the issuer.
(B) Certification of financial reports by labor
organizations.--
(i) In general.--Each financial report filed by a labor
organization with the Secretary of Labor pursuant to section
201(b) of the Labor-Management Reporting and Disclosure Act
of 1959 (29 U.S.C. 431(b)) shall be accompanied by a written
statement by the president and secretary-treasurer (or the
equivalent thereof) of the labor organization.
(ii) Definition.--In this subparagraph, the term ``labor
organization'' has the meaning given the term in section 3 of
the Labor-Management Reporting and Disclosure Act of 1959 (29
U.S.C. 402).
(2) Content.--The statement required by paragraph (1) shall
certify the appropriateness of the financial statements and
disclosures contained in the periodic report or financial
report, and that those financial statements and disclosures
fairly present, in all material respects, the operations and
financial condition of the issuer or labor organization.
(3) Conforming amendment.--Section 201(b) of the Labor-
Management Reporting and Disclosure Act of 1959 is amended,
in the matter preceding paragraph (1), by inserting ``(and
accompanied by the statement described in section
302(a)(1)(B) of the Public Company Accounting Reform and
Investor Protection Act of 2002)'' after ``officers''.
(b) Reporting Requirements.--
(1) Financial reporting for labor organizations equivalent
to required reporting
[[Page S6439]]
of public companies.--Section 201 of the Labor-Management
Reporting and Disclosure Act of 1959 (29 U.S.C. 431) is
amended by adding at the end the following:
``(d)(1) In the case of a labor organization with gross
annual receipts for the fiscal year in an amount equal to
$200,000 or more, the information required under this section
shall be reported using financial reporting procedures
comparable to procedures required for periodic and annual
reports of public companies pursuant to sections 12(g), 13,
and 15 of the Securities and Exchange Act of 1934 (15 U.S.C.
78l(g), 78m, and 78o).
``(2)(A) Such information shall be reviewed by a certified
public accountant using generally accepted auditing standards
applicable to reporting companies under the Securities and
Exchange Act of 1934.
``(B) Such audit shall be conducted subject to requirements
comparable to the requirements under section 10A of the
Securities Exchange Act of 1934 (15 U.S.C. 78j-1).
``(3) Such information shall be reported using generally
accepted accounting procedures comparable to the procedures
required for public companies under sections 12(g), 13, and
15 of the Securities and Exchange Act of 1934 (15 U.S.C.
78l(g), 78m, and 78o).
``(4) The authority provided under this subsection shall be
in addition to the authority provided under subsection (b)
and section 208, regarding reporting procedures and review of
information required under this section.''.
(2) Remedies and penalties for violations of reporting
requirements.--Section 210 of the Labor-Management Reporting
and Disclosure Act of 1959 (29 U.S.C. 440) is amended--
(A) by striking ``Whenever'' and inserting ``(a)
Whenever''; and
(B) by adding at the end the following:
``(b)(1) If the Secretary finds, on the record after notice
and opportunity for hearing, that any person has willfully
violated any provision of section 201(d), the Secretary may
impose a civil monetary penalty in an amount not to exceed
the amount for any comparable violation under section 21B(b)
of the Securities Exchange Act of 1934 (15 U.S.C. 78u-2).
``(2) In the case of a violation of an auditing requirement
under section 201(d)(2) by a public accountant, the Secretary
may impose a civil monetary penalty in the same manner as
penalties are imposed under section 10A(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78j-1(d)).
``(3) For purposes of any action brought by the Secretary
under paragraph (1), any person who knowingly provides
substantial assistance to another person in violation of a
provision of section 201(d), or of any rule or regulation
issued under such section (including aiding, abetting,
counseling, commanding, or inducing such violation) shall be
deemed to be in violation of such provision to the same
extent as the person to whom such assistance is provided.
``(c)(1) Any person who makes or causes to be made any
statement in any report or document required to be filed
under section 201(d) which statement was at the time, and in
the light of the circumstances under which it was made, false
or misleading with respect to any material fact, shall be
liable to any person (not knowing that such statement was
false or misleading) who relied upon such statement. A person
seeking to enforce such liability may sue at law or in equity
in any court of competent jurisdiction.
``(2) In any such suit the court may, in its discretion,
require an undertaking for the payment of the costs of such
suit, and assess reasonable costs, including reasonable
attorneys' fees, against either party litigant.
``(3) The recovery and statute of limitation provisions of
subsections (b) and (c) of section 18 of the Securities
Exchange Act of 1934 (15 U.S.C. 78r) shall apply for purposes
of any action under this subsection.
``(d) In any action arising under subsection (c) or (d) or
in connection with any provision of section 201(d), the
provisions of section 27(c) of the Securities Act of 1933 (15
U.S.C. 77z-1(c)) regarding abusive litigation shall apply.''.
(3) Regulations.--Not later than 1 year after the date of
enactment of this Act, the Secretary of Labor, shall
promulgate such regulations as the Secretary determines
necessary to carry out the provisions and purposes of this
subsection (including the amendments made by this subsection)
and to ensure the provisions of this subsection are carried
out in a manner comparable to the manner any similar
provisions are carried out by the Securities and Exchange
Commission.
The PRESIDING OFFICER. The Senator from Vermont.
Mr. LEAHY. Madam President, so people understand what the Leahy-
McCain amendment is, it is the Corporate and Criminal Accountability
Act. It is about accountability, and it is about transparency. I think
everybody--investors, corporate managers, or anybody else--will tell
you that accountability and transparency are the bedrock of our
economy, of our markets.
If one is going to invest in a company, one wants to know what the
company does and what the books say. One wants to be able to rely upon
their reports.
Transparency will instill confidence, and accountability helps
enforce transparency and forthright financial decisions. We do not just
rely on the better angels of our nature; we rely on the fact that
somebody is going to be there to enforce it.
We cannot stop greed, but we can stop greed from succeeding. This
bipartisan amendment is going to send wrongdoers to jail and save
documents from the shredder, and that sends a powerful and clear
message to potential wrongdoers: Don't do it.
The measure enjoys wide support. The amendment is supported by law
enforcement officials, regulators, and numerous whistleblowers, and
consumer protection advocates. I have letters of support from these
advocates, and I will, at the end of my statement, ask consent to print
them in the Record.
Let me summarize some of the provisions. This bipartisan amendment
has three prongs to restore accountability: punishing and preventing
fraud, preserving the evidence of fraud, and protecting victims of
fraud.
S. 2010, as unanimously reported, accomplishes these goals in a
number of ways. It is going to create a tough new Federal felony for
securities fraud for a 10-year maximum penalty. The idea of 10 years in
the slammer is going to focus the attention of those who are more
interested in taking their money and hiding it in offshore bank
accounts.
As one who was a prosecutor, I was surprised to learn that unlike
bank fraud, health care fraud, and even bankruptcy fraud, there is no
specific Federal crime of securities fraud to protect victims of fraud
related to publicly traded companies.
Can you imagine, Madam President, while all this talk has been going
on, it turns out there is no specific crime of securities fraud. This
bill would create such a felony with a tough 10-year jail sentence.
The amendment provides for a review of the existing sentencing
guidelines for fraud cases and for organizational misconduct to make
them tougher as well.
The new crimes and enhanced criminal penalties in this bill were
worked out among Senators Hatch, Schumer, and me, and unanimously
supported by the Judiciary Committee, and I thank Senators Hatch and
Schumer for their support.
The Leahy-McCain amendment also creates two new anti-shredding
penalties which set clear requirements for preserving financial audit
guides and close loopholes in current anti-shredding laws.
These provisions close loopholes in current laws and set a clear
requirement that corporate audit documents must be saved for 5 years.
We, incidentally, picked that time period because that is the statute
of limitation for most Federal crimes.
These provisions are crucial in preventing recurrences of what
happened at Arthur Andersen.
These provisions will preserve evidence that helps law enforcement
officers and prosecutors focus immediately on the evidence. It takes a
few minutes to warm up the shredder, but it can take years for
prosecutors and victims to put together a case without key documents.
The amendment protects corporate whistleblowers. Senator Grassley and
I worked out these bipartisan measures in the Judiciary Committee. I
thank the Senator from Iowa for his assistance and his constant
leadership over the years on whistleblower rights.
When sophisticated corporations set up complex fraud schemes,
corporate insiders are often the only ones who can disclose what
happened and why.
Unfortunately, the Enron case also demonstrates the vulnerability of
corporate whistleblowers to retaliation under current law. This is a
memo from outside counsel to Enron management. They were afraid there
might be a whistleblower. It said:
You also asked that I include in this communication a
summary of the possible risks associated with discharging (or
constructively discharging) employees who report allegations
of improper accounting practices.
Then he goes on to give them the good news:
Texas law does not currently protect corporate
whistleblowers. The supreme court has twice declined to
create a cause of action for whistleblowers who are
discharged. . . .
[[Page S6440]]
In other words, if they dare tell about corporate misdeeds, fire
them, it is not going to hurt.
After this high-level employee of Enron reported improper accounting
practices, the Enron executives were not thinking about firing the
accountants who were doing wrong; they wanted to fire the
whistleblower, their own employee. Why? Because they were pocketing the
money. They were getting that money out to their bank accounts as fast
as they could, and they did not want anybody to say so.
The bipartisan whistleblower protections are supported by the
National Whistleblower Center, the Government Accountability Project,
and Taxpayers Against Fraud. They call S. 2010 ``the single most
effective measure possible to prevent further recurrences. . . . ''
The measure lengthens the statute of limitation by extending it from
the earlier of 1 year from discovery or 3 years from the fraud to 2
years from discovery or 5 years from the fraud.
Senators Feinstein and Cantwell worked hard to craft a fair
compromise on this provision in the Judiciary Committee.
Indeed, the last two SEC Chairmen from both parties, Arthur Levitt
and Richard Breeden, both agreed that the current short statute of
limitations is unfair to fraud victims.
Attorney General Christine Gregoire testified before the Judiciary
Committee in the Enron State pension fund litigation that the current
short statute has forced some States to forego claims against Enron.
In Washington State alone, the short statute of limitations could
cost hard-working State employees--firefighters and police officers--
nearly $50 million in lost Enron investments.
Last week, Xerox announced it was restating its revenue back 5 years
by $6.4 billion. Madam President, as a law student, I remember sitting
in the gallery listening to the distinguished Senator from Illinois,
Mr. Dirksen, give his well-known speech: ``A billion here and a billion
there, and soon you're talking about real money.''
Imagine a corporation claiming they made a mistake in their revenue
of $6.4 billion for the past five years. The disclosures raise the
specter of innocent investors who, through no fault of their own, will
be barred from recouping losses.
We make the debt from security law violations nondischargeable in
bankruptcy. We protect fraud victims by amending the bankruptcy code to
make judgments and settlements based upon security law violations
nondischargeable. Corporate leaders should not be allowed to take the
money, run, file bankruptcy, and keep from ever paying any securities
fraud judgment. The State security regulators strongly support this
change. You cannot have one set of rules which say if you steal $500
from a store, you can go to jail. But if you steal $50 million from the
corporate boardroom, keep the money. That makes no sense. Everywhere I
went in the State of Vermont last week, people were saying: If I
committed an act, if I stole something, if I cash a bad check for $100,
I run the risk of going to jail.
But what do you do if you get $50 million or $100 million? You are
home free.
Criminal conduct deserves criminal penalties. Corporate CEOs who rob
their company, who rob the pension funds of their employees, who rob
the trust of the American people, are criminals. They ought to go to
jail.
The steel bars, maybe that will give a conscience to some of these
people like Kenneth Lay and others who obviously do not have one. This
gives prosecutors, the investigators, and victims the tools to hold
corporate wrongdoers accountable.
The people who are involved in such massive criminal activity ought
to pay. The American people ought to know they will have to pay. If
they don't, there will be a whole lot more fraud.
I ask unanimous consent to have a number of letters printed in the
Record.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
Taxpayers Against Fraud,
Washington, DC.
Government Accountability Project,
Washington, DC, July 5, 2002.
Dear Senator: The Government Accountability Project (GAP)
and the Taxpayers Against Fraud (TAF) reaffirm our support
for the Leahy Corporate and Criminal Fraud Accountability
amendment to S. 2673, the Public Company Accounting Reform
and Investor Protection Act of 2002.
Initially introduced as S. 2010, the Corporate and Criminal
Fraud Accountability Act, was unanimously reported by the
Senate Judiciary Committee on May 6, 2002. This amendment is
a landmark proposal. It promises to make whistleblower
protection the rule rather than the exception for those
challenging betrayals of corporate fiduciary duty enforced by
the Securities and Exchange Commission. It would be the
single most effective measure to prevent recurrences of the
Enron and Worldcom debacles as well as similar threats to the
nation's financial markets, shareholders and pension holders.
GAP is a nonprofit, nonpartisan public interest law firm
dedicate since 1976 to helping whistleblowers, those
employees who exercise freedom of speech to bear witness
against betrayals of public trust that they discover on the
job. GAP has led the campaign for passage of nearly all
federal whistleblower laws over the last two decades. TAF is
a nonprofit, nonpartisan public interest organization
dedicated to combating fraud against the Federal Government
through promotion and use of the federal False Claims Act and
its qui tam whistleblower provisions. TAF supports effective
anti-fraud legislation at the federal and state level.
The Leahy amendment to S. 2673 is outstanding good
government legislation. It closes the loopholes that have
meant whistleblowers proceed at their own risk when warning
Congress, shareholders, and their own management's Board
Audit Committees of financial misconduct threatening the
health of their own company, investor confidence and the
nation's economy. We hope we can count on your support to add
this state of the art whistleblower protection system in S.
2673. If you have any questions regarding the Leahy
amendment, please call Tom Devine at GAP (202-408-0034 ext.
124), or Doug Hartnett (ext. 136).
Sincerely,
Jim Moorman,
Executive Director, TAF.
Tom Devine,
Legal Director, GAP.
____
North American Securities
Administrators Associations, Inc.,
Washington, DC, July 5, 2002.
Hon. Patrick Leahy,
Washington, DC.
Dear Senator Leahy: NASAA supports S. 2673, The Public
Company Accounting Reform and Investor Protection Act of
2002, and opposes efforts to weaken its provisions. State
securities regulators believe there is an immediate need to
restore investor confidence in our securities markets.
Passage of the Leahy amendment, which incorporates S. 2010,
the Corporate and Criminal Fraud and Accountability Act of
2002, into the accounting reform bill would send a strong
deterrent message to potential securities violators by
providing prosecutors with new and better tools to punish
those who defraud our nation's investors. Our focus is on
Section 4, which would prevent the discharge of certain debts
in bankruptcy proceedings. At the present time, the
bankruptcy code enables defendants who are guilty of fraud
and other securities violations to thwart enforcement of the
judgments and other awards that are issued in these cases.
We support passage of the Leahy amendment because it
strengthens the ability of regulators and individual
investors to prevent the discharge of certain debts and hold
defendants financially responsible for violations of
securities laws. This issue is of great interest to state
securities regulators, and we hope you'll support it on the
Senate floor.
In addition, state securities regulators enclose Title V of
S. 2673--Analyst Conflicts of Interest--in its current form
and strongly oppose any amendment to this title that would
reduce our ability to investigate wrongdoing and take
appropriate enforcement actions against securities analysts.
An amendment drafted by Morgan Stanley was circulated that,
we believe, would have prohibited state securities regulators
from imposing remedies upon firms that committed fraud, if it
involved securities analysts and perhaps even broker-dealers
that deal with individual investors. Clearly this approach is
ill-advised, especially in today's climate. What message
would be sent to Main Street investors if the states'
investigative and enforcement authority were weakened?
(Additional information on this proposal was delivered to
your office last week.)
Please vote for passage of S. 2673, for the Leahy
amendment, and against any amendments to curtail state
securities enforcement actions.
Sincerely,
Joseph P. Borg,
NASAA President, Alabama Securities Director.
Christine A. Bruenn,
NASAA President-elect, Maine Securities Administrator.
[[Page S6441]]
____
American Federation of Labor and
Congress of Industrial Organization,
Washington, DC, April 17, 2002.
Hon. Patrick Leahy,
Senate Judiciary Committee, Washington, DC.
Legislative Alert!
Dear Senator Leahy: The sudden and spectacular collapse of
Enron has jeopardized the retirement security of millions of
hardworking Americans and exposed systemic failures of our
securities laws. If we are to prevent future Enrons and
restore the credibility of America's capital markets,
aggressive reform is required. This week the Judiciary
Committee will markup S. 2010, the Corporate and Criminal
Fraud Accountability Act of 2002, which is an important part
of this effort and deserves your support.
The measures embodied in S. 2010 will help protect working
families and their retirement funds from future Enrons by
strengthening the penalties for securities and accounting
fraud, and destruction of audit papers. The bill provides
strong civil and criminal penalties for conduct such as
document shredding by auditors and conspiracies to defraud
investors; and bars those who commit securities fraud from
using the bankruptcy system to avoid compensating the victims
of such fraud. It also lengthens the statute of limitations
for civil lawsuits by the victims of securities fraud, making
it more difficult for those who commit these crimes to escape
having to compensate their victims.
S. 2010 is an important part of the comprehensive reforms
Congress needs to enact in response to the conflicts in the
capital markets exposed by the collapse of Enron. The AFL-CIO
urges you to support S. 2010 at this week's Judiciary
Committee markup.
Sincerely,
William Samuel
Director, Department of Legislation.
____
Consumers Union,
Washington, DC.
Re Support for S. 2010, the Corporate and Criminal Fraud
Accountability Act of 2002
Consumer Federation of America,
Washington, DC, April 16, 2002.
Dear Senator: Consumers Union and the Consumer Federation
of America urge your support for S. 2010, the Corporate and
Criminal Fraud Accountability Act of 2002, sponsored by
Senator Patrick Leahy, when it comes before the Judiciary
Committee for markup on Thursday. This proposal adds
important provisions to the civil and criminal laws, which
will both, deter and when necessary, punish securities fraud.
Enhancing Enforcement and Sanctions for Securities Fraud
S. 2010 takes the following important steps to strengthen
enforcement and penalties for securities fraud:
It creates a new felony for the act of defrauding
shareholders of publicly traded companies.
It creates a new felony for destruction of evidence or
creation of evidence with intent to obstruct a federal agency
or criminal investigation.
It provides whistleblower protection to employees of
publicly traded companies when they act lawfully to disclose
information about fraudulent activities within their company.
It enhances the ability of state attorneys general and the
SEC to use civil RICO to enforce existing law; currently only
the US attorney general has such authority currently under
RICO.
Adopting a Realistic Statute of Limitations
S. 2010 also increases the ability of defrauded investors
to recover their losses by lengthening the statute of
limitations. The bill would set the statute of limitations to
the earlier of 5 years after the date of the fraud or three
years after the fraud was discovered.
The current statute of limitations, the result of a 5-4
vote in a 1991 Supreme Court decision, sets up an
unrealistically short timetable for bringing private suits
and needs to be corrected. Former President Bush's SEC
Chairman Richard Breeden, former President Clinton's SEC
Chairman Arthur Levitt, and state securities regulators have
all supported an extension of the statute of limitations.
Suits by defrauded investors have long been recognized by
securities regulators, including former SEC Chairman Levitt,
as an important deterrent against fraud. Moreover, securities
fraud is often well-concealed and not readily apparent to
investors until, in some cases, years after the fraud has
been committed. As Chairman Levitt testified in 1995 before
the Senate Banking Committee, ``Extending the statute of
limitations is warranted because many securities frauds are
inherently complex, and the law should not reward the
perpetrator of a fraud who successfully conceals its
existence for more than 3 years.''
Justices O'Connor and Kennedy, in their vigorous dissent in
the 1991 Supreme Court case, also supported a longer statute
of limitations. Justice Kennedy wrote, ``The most extensive
and corrupt schemes may not be discovered within the time
allowed for bringing an express cause of action under the
1934 Act. Ponzi schemes, for example, can maintain the
illusion of a profit-making enterprise for years, and
sophisticated investors may not be able to discover the fraud
until long after its perpetration . . . By adoption of a
three year period of response, the Court makes a 10(b) action
all but a dead letter for many injured investors who by no
conceivable standard of fairness or practicality can be
expected to file suit within three years after the violation
occurred. In so doing, the Court also turns its back on the
almost uniform rule rejecting short periods of response for
fraud-based actions.''
Indeed, some states' pension funds may have to forego
claims against Enron for securities fraud that occurred in
the late 1990s because of this short statute of limitations.
Washington State's Attorney General discussed this problem
when she testified before your Committee in February of this
year. ``In fact, for Washington State, our claim in the
[Enron] case is for approximately $50 million, when in fact
our losses are in excess of $100 million. But because of the
statute of limitations, we're not able to make that claim.''
(underlining added).
The current statute of limitations rewards those who are
able to conceal their fraud for a relatively short time with
immunity from private liability. It also includes a limit of
one-year from the time of discovery, which encourages a rush
to the courthouse.
The criminal conduct surrounding the collapse of Enron, and
the fact that many claims for fraud will be time-barred by
the current short statute of limitations, have drawn
attention to the need for reform. S. 2010 includes important
investor protection measures. We urge your support for this
bill in the Judiciary Committee April 18.
Sincerely,
Sally Greenberg,
Senior Counsel.
Travis Plunkett,
Legislative Director.
____
U.S. Public Interest
Research Group;
Washington, DC, April 17, 2002.
No More Enrons--Support S. 2010, the Corporate and Criminal
Fraud Accountability Act of 2002
Dear Member of the Senate Judiciary Committee: We are
writing on behalf of the members of state Public Interest
Research Groups to urge your strong support for S. 2010, the
Corporate and Criminal Fraud Accountability Act of 2002,
sponsored by Senator Patrick Leahy, when it comes before the
Judiciary Committee for markup on Tuesday. This proposal adds
important provisions to the civil and criminal law to both
deter and, when necessary, punish securities fraud. Please
oppose weakening amendments.
S. 2010 takes the following important steps to strengthen
enforcement and penalties for securities fraud:
It creates a new felony for the act of defrauding
shareholders of publicly traded companies.
It creates a new felony for destruction of evidence or
creation of evidence with intent to obstruct a federal agency
or criminal investigation.
It provides whistleblower protection to employees of
publicly traded companies when they act lawfully to disclose
information about fraudulent activities within their company.
It enhances the ability of state attorneys general and the
SEC to use civil RICO to enforce existing law; currently only
the U.S. attorney general has such authority currently under
RICO.
Importantly, S. 2010 also increases the ability of
defrauded investors to recover their losses by lengthening
the statute of limitations. The bill would reasonably and
sensibly set the statute of limitations to the earlier of 5
years after the date the fraud occurred or three years after
the fraud was discovered. A securities law violation is often
a complex, multi-year enterprise. Indeed, Enron's recent
accounting restatements went back five years. Under the
fraudster-friendly current law, some state pension fund
claims against Enron may be time-barred.
S. 2010 includes numerous important investor protection
measures to assist whistleblowers, fraud victims, and law
enforcement agencies. We urge your strong support for this
bill to help restore investor confidence in the Judiciary
Committee April 18. Please oppose weakening amendments. For
more information about the full state PIRG platform to
protect employees, investors and taxpayers from future Enron/
Andersen debacles, please visit http://www.enronwatchdog.org.
Please contact me with questions at either 202-546-9707x314
or [email protected].
Sincerely,
Edmund Mierzwinski,
Consumer Program Director.
____
National Whistleblower Center,
Washington, DC, April 17, 2002.
Hon. Maria Cantwell,
Senate Judiciary Committee, Washington, DC.
Dear Senator Cantwell: The National Whistleblower Center
strongly supports S. 2010, the Corporate and Criminal Fraud
Accountability Act of 2002. This law would protect employees
who disclose Enron-related fraud to the appropriate
authorities.
One of the most notorious loopholes in current
whistleblower protection law exists under the securities
laws, in which employees who report fraud against
stockholders have no protection under federal law. It is
[[Page S6442]]
truly tragic that employees who are wrongfully discharged
merely for reporting violations of law, which may threaten
the integrity of pension funds or education-based savings
accounts, have no federal protection.
This point was made abundantly clear by the recently
released internal memorandum from attorneys for Enron.
According to Enron's own counsel, employees who were blowing
the whistle on Enron's misconduct were not protected under
federal law, and could be subject to termination.
Unfortunately, the Enron attorney was correct.
It is imperative that the next time a company like Enron
seeks advice from counsel as to whether they can fire an
employee, like Sharon Watkins (who merely disclosed potential
fraud on shareholders), the answer must be a resounding
``no.'' That can only happen if the Corporate and Criminal
Fraud Accountability Act is enacted into law.
Respectfully submitted,
Kris J. Kolesnik,
Executive Director.
____
National Association
of Attorney General,
Washington, DC, July 3, 2002.
Dear Senator: It has come to my attention that the
substance of S. 2010, the Corporation and Criminal Fraud
Accountability Act of 2002, will be offered as an amendment
to S. 2673, the Public Company Accounting Reform and Investor
Protection Act of 2002, as early as next week.
I have attached a letter to Senator Leahy from seven
Attorneys General written last April in support of the
substance of S. 2010, in order to make these views known as
you consider this legislation.
If you have any questions or concerns, please feel free to
call Blair Tinkle, NAAG's Legislative Director at 202-326-
6258.
Sincerely,
Lynne Ross,
Executive Director.
____
National Association of
Attorneys General,
Washington, DC, April 17, 2002.
Hon. Patrick Leahy,
Chairman, Senate Judiciary Committee, U.S. Senate,
Washington, DC.
Dear Chairman Leahy: We would like to take this opportunity
to express our support for your bill, S. 2010, the Corporate
and Criminal Fraud Accountability Act of 2002, which is
pending before the Senate.
As you know, the proposal would allow state Attorney's
General to seek to enjoin racketeering activities under the
federal RICO statute. Such added authority would enhance the
ability of Attorneys General to protect their citizens from
unlawful activities by organizations both within and outside
the borders of our individual states.
In addition, to restore accountability, S. 2010 provides
prosecutors new and better tools to effectively prosecute and
punish criminals who defraud investors by:
Creating a new, 10-year felony specifically aimed at
securities fraud.
Enhancing fraud and obstruction of justice statutes where
evidence is destroyed and in fraud cases, where there are
many victims or where any victim is financially devastated.
Creating two new document destruction felonies establishing
a new felony shredding crime and requiring the preservation
of audit documents for 5 years.
Creating new protections for corporate whistleblowers.
Finally, the bill protects victims' rights by:
Protecting securities fraud victims from discharge of their
debts in bankruptcy.
Extending the statute of limitations in securities fraud
cases.
We appreciate your efforts to enact this important
legislation. Please feel free to contact us if we can provide
further assistance in this effort.
Sincerely,
Carla J. Stovall, Attorney General of Kansas, President
of NAAG; Hardyress, Attorney General of Oregon,
Chairman, Enron Bankruptcy Working Group; Christine
Gregsire, Attorney General of Washington; William H.
Sorrell, Attorney General of Vermont; Ms. Edmonds,
Attorney General of Oklahoma, President-Elect of NAAG;
Thurbert E. Baker, Attorney General of Georgia; Betty
D. Montgomery, Attorney General of Ohio.
Mr. LEAHY. I appreciate the distinguished majority leader introducing
this amendment and yielding to me.
I yield the floor.
The PRESIDING OFFICER. The Senator from Georgia.
Mr. MILLER. I was going to send an amendment to the desk but I
understand there is one pending. I ask unanimous consent I have up to 8
minutes to discuss this amendment now, which I will send later.
Mr. McCONNELL. Reserving the right to object, and I probably will
not, I hoped for an opportunity to briefly explain the second-degree
amendment that is pending at the desk. If the Senator thinks it might
be helpful just to determine the order of discussion, perhaps it is
more appropriate to discuss the amendment that is pending over one that
might have been pending.
Mr. MILLER. The Senator from Kentucky is correct. I would like to get
in the queue somewhere along the line.
Mr. REID. I ask the question of the Senator from Kentucky, How long
does the Senator from Kentucky wish to speak?
Mr. McCONNELL. I will be happy to wrap up in 5 or 6 minutes. I want
to summarize what the amendment is about.
Mr. SARBANES. Madam President, I ask unanimous consent the Senator
from Kentucky be recognized for 5 minutes to speak to the second-degree
amendment that has been offered, that is pending, and that be followed
by the Senator from Georgia to speak for 8 minutes.
Mr. MURKOWSKI. Madam President, I wonder if I may be recognized after
the sequence that has been discussed for about 1 minute.
Mr. REID. I object.
The PRESIDING OFFICER. Is there an objection to the original request
of the Senator from Maryland?
Mr. REID. I do not object to the original 13 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Kentucky will proceed.
Mr. McCONNELL. I thank my friend from Georgia. I will briefly discuss
the second-degree amendment. I expect to vote for the underlying bill,
but we ought to, in the name of equity, apply the same principles in
the underlying bill we are seeking to apply to corporations to labor
unions.
The amendment I sent to the desk requires union financial statements
to be audited by an independent accountant using procedures that mirror
those of public companies under Federal securities laws. It imposes
civil penalties for violations of these new auditing requirements that
mirror those imposed on the Security Exchange Act of 1934. Third, it
requires that the Union President and Secretary-Treasurer certify the
accuracy of financial reports, mirroring a similar requirement for CEOs
and CFOs in the Sarbanes bill.
We are debating how to better oversee and enforce the audit
requirements for large corporations that were first established under
the Securities Act of 1933. It may shock many to learn that labor
unions are not even required to have independent audits of the
financial statements they file with the Department of Labor--or should
I say that they are required to file. Many unions apparently thumb
their nose at the requirement. A study by the Office of Labor
Management Standards found that 34 percent of all unions filed late
financial reports or no reports at all.
If we are serious about protecting the investing public from the
financial fraud of corporations and accountants, we should be equally
serious about protecting the day-to-day American worker--the plumbers,
the machinists, the longshoremen, and the steelworkers--from the
financial fraud of union officials.
One prominent union official recently said that:
Over the coming months you will no doubt hear more about
the Enron scandal and the many thousands of people who have
lost their pensions because of corporate greed.
I agree with that. What we do not hear enough of are the stories of
union greed. It is only fair to share some of them today. I have a
rather long list I will discuss later in the debate, but let me cover a
few of them in my allotted time. We have heard of Arthur Andersen, but
has anyone heard of Thomas Havey? That is the accounting firm where a
partner confessed to helping a bookkeeper conceal the embezzlement of
hundreds of thousands of dollars from a worker training fund of the
International Association of Ironworkers. And in an eerie parallel to
the Enron scandal, the Havey accountants revealed startling
information--10 years ago, the then General Counsel for the Ironworkers
Union said that if the accounting firm refused to assist in the union
scheme to conceal financial mismanagement, the accounting firm should
be fired. Sadly, the accounting firm complied.
We have all heard of Global Crossing, but has anyone heard of ULLICO?
That is the multibillion-dollar insurance company owned primarily by
unions and their members' pension funds that invested $7.6 million in
Global Crossing. Apparently, ULLICO directors received a sweetheart
investment deal that allowed them to make millions on the sale of
stock. The union pension
[[Page S6443]]
funds, however, dried up with Global Crossing's demise.
There is much more. An accountant within the National Association of
Letter Carriers embezzled more than $3.2 million from union funds over
an 8-year period to buy 8 cars, 2 boats, 3 jet skis, a riding mower,
and 105 collectable dolls. A former official of the Laborers' Union
District Council in Oregon, Idaho, and Wyoming is in jail for accepting
hundreds of thousands of dollars in kickbacks for directing money into
a ponzi-like investment scheme that defrauded Oregon labor unions of
$355 million.
I have a number of additional examples that I wish to get to later,
but I do want to say in summary, again, what my amendment is about,
just so everyone will understand as we move subsequently to a vote. It
first requires union financial statements to be audited by an
independent accountant using procedures that mirror those of public
companies under the Federal securities laws; second, it imposes civil
penalties for violations of these new auditing requirements that mirror
those imposed under the Securities Exchange Act of 1934; and, third and
finally, it requires that the Union President and Secretary-Treasurer
certify the accuracy of their financial reports, which mirrors a
similar requirement for CEOs and CFOs in the Sarbanes bill.
I yield the floor.
Mr. SARBANES. Will the Senator yield for a question?
Mr. McCONNELL. Yes.
Mr. SARBANES. Of course, there is a special statutory arrangement
that governs labor organizations. I take it this proposal--has this
come to us from the Department of Labor?
Mr. McCONNELL. I say to the Senator from Maryland, it did not come
from the Department of Labor. It came from my office. This is something
we have been looking at over the last week or 10 days, thinking that,
since the very worthwhile requirements of corporations and accounting
firms, under the bill of the Senator from Maryland, make sense if we
are looking to protect investors, we should also protect union members
from similar kinds of casual exploitation.
Mr. SARBANES. But under the Labor Management Reporting and Disclosure
Act, the Department has certain authorities it can invoke in dealing
with the kind of problems the Senator has outlined. At least that is my
understanding under the current state of the law. Is that correct?
Mr. McCONNELL. I don't know what the position of the Department of
Labor is on the amendment I am offering. But it is my belief that if
the amendment were not necessary, we would not be offering it here
today. This is something I am sure we are going to discuss further as
we move along.
Mr. SARBANES. I am sure the Senator would be able to find out from
the Secretary.
Mr. McCONNELL. I expect I could find out from the Secretary of Labor,
but I chose not to do that.
Mr. GRAMM. I don't know whether you could or not.
Mr. McCONNELL. She has her job and I have mine.
Amendment No. 4176
The PRESIDING OFFICER. The Senator from Georgia is recognized under
the previous order.
Mr. MILLER. Madam President, I ask unanimous consent the pending
amendment be temporarily set aside so I be allowed to offer an
amendment.
The PRESIDING OFFICER. Is there objection to the request? Without
objection, it is so ordered.
The clerk will report.
The bill clerk read as follows:
The Senator from Georgia [Mr. Miller] proposes an amendment
numbered 4176.
Mr. MILLER. Madam President, I ask unanimous consent the reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To amend the Internal Revenue Code of 1986 to require the
signing of corporate tax returns by the chief executive officer of the
corporation)
At the end add the following new title:
TITLE VIII--CORPORATE TAX RETURNS
SEC. 801. SIGNING OF CORPORATE TAX RETURNS BY CHIEF EXECUTIVE
OFFICER.
(a) In General.--Section 6062 of the Internal Revenue Code
of 1986 (relating to signing of corporation returns) is
amended by striking the first sentence and inserting the
following new sentence: ``The return of a corporation with
respect to income shall be signed by the chief executive
officer of such corporation.''.
(b) Executive Date.--The amendment made by this section
shall apply to returns filed after the date of the enactment
of this Act.
Mr. GRAMM. Will the Senator yield?
There is a little bit of confusion. I want to be sure he is setting
aside the entire amendment, the Leahy and the McConnell amendment, and
he is offering a first-degree amendment? That is what I understood when
I talked to the Senator and to what I had agreed.
The PRESIDING OFFICER. That is the Chair's understanding.
Mr. SARBANES. No. What was the request? I thought the unanimous
consent request was to set aside the McConnell amendment and offer the
Miller amendment to the Leahy amendment.
Mr. GRAMM. It was the pending amendment.
Madam President, I wanted to be sure that we set aside both Leahy and
McConnell. This is a new issue, a first-degree amendment. That was the
basis that I understood it on and on the basis of that I had no
objection to it.
The PRESIDING OFFICER. The Chair understands the Senator from Georgia
was going to offer an amendment that would be considered at a different
time, an independent first-degree amendment, to be spoken about now and
considered at a later time. Is that the understanding of the Senator
from Vermont?
Mr. LEAHY. Reserving the right to object, I want to make sure I fully
understand. What is the request?
The PRESIDING OFFICER. There is no request pending.
Mr. LEAHY. I am sorry. I thought there was a request to lay aside my
amendment.
The PRESIDING OFFICER. That request has been granted.
Mr. LEAHY. But then my--what is the parliamentary situation with my
amendment? Maybe that is the best way to ask it.
The PRESIDING OFFICER. The Senator from Georgia obtained the consent
to set aside the pending amendment in order to offer a first-degree
amendment.
Mr. LEAHY. I understand.
Mr. SARBANES. Would the call for the regular order at the completion
of the statement of the Senator from Georgia, or disposition of his
amendment, bring back before the body the Leahy amendment?
The PRESIDING OFFICER. Yes, it would.
Mr. LEAHY. The Senator from Georgia spoke to me earlier. I do not
want in any way to interfere with that. I do want to accommodate him. I
just wanted to make sure, also for my own schedule, where we stood.
I thank the distinguished Presiding Officer and I thank the
distinguished chairman of the committee and of course I thank the
distinguished Senator from Georgia.
Mr. MILLER. I thank the Senator from Vermont and the Senator from
Texas.
Madam President, there is a good old boy from down in Georgia named
Jerry Reed, who went to Nashville several years ago and made it big as
a tremendous guitar picker, singer, and songwriter. He had a big hit a
while back. Maybe some of you remember it. It was called ``She Got the
Gold Mine and I Got the Shaft.''
I thought about that song of Jerry Reed's as I watched what has
happened lately on the corporate scene. The big shots of Enron and
WorldCom and others, they got the gold mine while the poor employees
and the innocent stockholders got the shaft.
If a picture is worth a thousand words, take a look at this gold
mine. It was built partly on the backs of those Georgia schoolteachers
who, each month, put their hard-earned money into the Georgia teachers'
retirement fund. The fund in Georgia lost $78 million from Enron and
another $6 million from WorldCom. Think how many monthly contributions
by how many struggling teachers that represents. And think about those
other thousands of employees who have lost their life savings, not even
to mention the thousands of employees who have lost their jobs--at
least 450 jobs were wiped out in Georgia alone so far.
Yes, a few big shots got the gold mine and a lot of little folks got
the shaft.
[[Page S6444]]
I am as probusiness as anyone in this body. I yield to no
officeholder when it comes to supporting business issues. As Governor
and Senator, I have worked to give tax cuts and tax incentives and pay
for the training of their employees--all to provide a probusiness
environment in which the entrepreneurial spirit can thrive and prosper
and create jobs. But, folks, there comes a time when so much greed and
so many lies become so bad--even if it is only by a few--that something
meaningful has to be done. We must act quickly to protect the investor,
provide some security for the worker, and restore confidence in the
marketplace because, make no mistake about it, today we have a crisis
in the integrity of corporate America.
That is why I have worked with Senator Sarbanes in perfecting his
bill, and I strongly support it. I am pleased that it is before us this
week. I also commend President Bush for making the strong
recommendations he is going to be making in New York.
But I think we need to do at least one other thing, so I have a
simple amendment. It is only two short paragraphs in length, but it
goes to the very essence of fairness. It simply says that, when the
taxman cometh, we all--workers and high-dollar bosses alike--must face
him just alike, without any go-betweens or liability firewalls or
corporate veils.
This is how it would work. There is a standard tax form called 1040.
I know there are more sophisticated ones for big business, but the
principle I am getting at is the same. This is what it says:
Under penalties of perjury, I declare that I have examined
this return and accompanying schedules and statements, and to
the best of my knowledge and belief they are true, correct
and complete.
And then it is signed here by Joe Sixpack. Joe Sixpack of America
signs those kinds of forms. There were more than 14 million of those
forms filed in April. If Joe Sixpack is required to sign this oath for
his family, why shouldn't Josepheus Chardonnay be required to sign that
same oath for his corporation?
So my little amendment simply requires that henceforth the chief
executive officer of all publicly owned and publicly traded
corporations must sign the corporation's annual Federal tax return.
Currently, there is an IRS rule that corporations can designate any
corporate officer to sign their tax return. That will not get it. Let's
be specific. Let's put it into law: The CEO is the one who is to sign
the tax return and must be accountable for it.
Where I come from it is expected that those being paid ``to mind the
store'' should at least know whether the store is losing or making
money.
Harry Truman had a sign on his desk in the Oval Office that said,
``The Buck Stops Here.'' For Truman, it meant that he was accountable.
He took the blame. He suffered the consequences when things went bad.
For some of today's CEOs, it is just the opposite. They want no
accountability. They shift the blame to others. They hide behind that
corporate veil. And, it seems, they rarely if ever pay the
consequences.
Their former workers cancel plans for their children to go to college
while they sip from champagne flutes in their mansions in Boca and
Aspen.
For these CEOs, Truman's famous sign has changed from ``The Buck
Stops Here'' to ``The Bucks Go Here.''
Our system of collecting taxes is based upon the premise that
individual taxpayers will take all steps necessary to ensure that the
financial information in the tax return is accurate.
If Joe Sixpack fudges the numbers, he doesn't get a pass from paying
penalties or going to jail. I find it outrageous that the same is not a
part of the mind set for those in the corporate culture.
If any CEO is not willing to sign the company tax return--if they are
not willing to take steps to satisfy themselves that their corporation
is accurately reporting financial information--then those CEOs have no
right to the prestige and respect that goes with the position they
hold.
What is good for the goose is good for the gander. So I urge my
colleagues to simply hold our CEOs to the same standard that we now
impose upon our average wage earners.
Treat them the same, ``Treat 'em'' the same. That is the American
way. That is what the voters out there want us to do and that is what
they expect us to do. ``Treat 'em'' the same.
And you can take that back home this summer and explain it. Some of
these other reforms, I fear, will be more difficult to explain.
Treat 'em the same.
I yield the floor.
The PRESIDING OFFICER. The Senator from Alaska.
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