[Congressional Record Volume 148, Number 95 (Monday, July 15, 2002)]
[House]
[Pages H4670-H4673]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       RECOMMENDING VIGOROUS PROSECUTION OF CORPORATE WRONGDOERS

  The SPEAKER pro tempore (Mr. Shuster). Under the Speaker's announced 
policy of January 3, 2001, the gentleman from Colorado (Mr. McInnis) is 
recognized for 60 minutes.
  Mr. McINNIS. Mr. Speaker, I have heard the gentleman from Ohio (Mr. 
Strickland), and I have heard the previous speaker make a little 
comment about political donations. I hope the gentlemen have the 
opportunity to read the article this morning about the Democratic 
Party, the Democratic National Committee, and their $100,000 
sponsorship. They were hosted by Bristol-Myers this weekend. That is 
the prescription drug company. I think that is what these guys are 
talking about.
  The gentleman from Ohio (Mr. Strickland) I have a good deal of 
respect for. He is very capable, a bright gentleman. But I would like 
the gentleman to show me anybody on this House floor, anybody on this 
House floor who opposes seniors.
  He makes a statement out here on the House floor about, well, we 
should be the party, I guess he is referring to the Democrats, we 
should be the party that comes back here because the Republicans are 
against seniors. I challenge the gentleman from Ohio (Mr. Strickland) 
to show me one Republican or one Democrat or one Independent or 
Socialist, whatever our one party is registered as, show me one person 
on this House floor, just one, I say to the gentleman, that is opposed 
to seniors.
  I do not know anybody opposed to seniors. That is as absurd as the 
statement we hear in here, well, they are against education. Show me 
one Congressman, show me one elected official in this Nation, whether 
it is a State representative, whether it is a school board member, 
whether it is a city council member, whether it is a Congressman, 
whether it is an appointed position in our political system, a cabinet 
member, that is opposed to education.
  These statements are absurd on their face. They should not be made in 
a debate, where we really want results, or we want solutions. The 
prudent man is not going to come up here and accuse the other side of 
being against seniors: they do not support seniors, they do not like 
seniors, they want prescription care costs to continue to skyrocket. 
There is nobody in this country that wants that. I do not know anybody 
opposed to seniors.
  If Members really want to get progress, if they really want to have 
bipartisan efforts towards a solution, do not stand up here and 
blatantly make statements that the other side is opposed to education, 
or the other side is opposed to seniors. We do not get anywhere doing 
that.
  So I would suggest, constructively and in a positive fashion, to my 
colleagues to entertain a few more positive statements. Maybe they do 
not agree with the process, or maybe they have a disagreement with one 
of the proposals dealing with a matter that impacts seniors. Then 
address the proposal, instead of doing the politically expedient thing, 
and that is to take a jab at the other party by saying, well, they 
oppose seniors, in whole.
  Obviously, Mr. Speaker, that is not the purpose of me being here 
today, although I do mention it; and it was with interest that Bristol-
Myers, who announced last week, one of these corporations that is 
looking at restating their earnings, or they took some income in by 
prepay of customers when they picked up their drugs at the pharmacy, I 
do want to note that as the Democrats, as they were attacking us this 
evening, take a look at who hosted their event this weekend, this last 
weekend.
  So both parties need to be very careful about that kind of thing, 
because there is some corporate sickness out there.
  Let me give an example. Go to any shopping mall we can find in the 
country and look for the most beat-up car, the most beat-up automobile 
we can find on the shopping mall lot and tell people around there that 
you are going to steal the car so somebody will call the police and say 
you are stealing the car. Then drive that car off the parking lot. Try 
and steal the car.
  Do Members know what is going to happen in our society? No matter 
what the value of the car, and let us just say it is the biggest piece 
of junk we would ever see in our life, and the car is worth $200, that 
is all anybody would give us, $200, probably to drive it straight to a 
junkyard, you drive it off, get it on the street, and immediately the 
police, the law enforcement in our Nation, the police will stop the 
vehicle. They will surround you.
  I used to be a police officer, and I know what it is like to make a 
stolen car arrest. We do not go up and issue a ticket. We get out of 
the car, hold a weapon on them, a deadly weapon, and we aim it at them, 
right where we could kill them if they tried to make any kind of move 
towards us. We demand and order them out of their car.

                              {time}  2145

  You have them lay on the pavement. You immediately go up. You take 
that car thief. You put them in handcuffs. You take them back to your 
police unit and you take them to jail. That is exactly what you do for 
somebody that steals a junk car. And yet today what we are witnessing 
in this country is corporate thievery the likes that we have never 
seen.
  Last week we had a guy named Scott Sullivan, 40 years old or so, who 
was the chief financial officer for a corporation called WorldCom. And 
he was up here testifying in front of the United States Congress. 
Actually he refused to testify. But he was up here in front of the 
committee with a big smirk on his face. He took away tens and tens and 
tens of millions of dollars away from that corporation. By the way, he 
has never been in handcuffs. He has never ever been surrounded by 
police officers with their weapons drawn. And while he was smirking in 
front of that committee, as he was full of himself, construction 
continued on his 20 or $25

[[Page H4671]]

million home that he is building in Florida at the expense of not only 
the stockholders of WorldCom, not only the bondholders of WorldCom, but 
probably the most important components of WorldCom Corporation and that 
is the employees. How many employees of WorldCom saw their pensions 
wiped out, saw many, many years of service?
  Now, understand that WorldCom is not that old of a corporation. What 
they did is went out and acquired other companies, companies that had 
been in business for a long, long time; companies that had employees 
who had worked for them for many, many years; faithful employees, had 
dedicated their careers to that company. And WorldCom bombed and Scott 
Sullivan and his boss, Bernie Ebbers, who went to the board of 
directors and borrowed $400 million from the corporation, walked away 
with a loan of $400 million, not from a bank where anybody else has to 
go to get their loans, from the board of directors, the people that he 
wined and dined.
  One of the directors, in fact, he supplied him a jet for a year. 
Actually he leased him a private jet. This jet probably cost the 
corporation 50 to 100 to maybe $200,000 a month for that jet. And the 
president of the corporation loaned it to a member of the board of 
directors, leased it to him for a dollar a year. Those people are 
having these mansions built while they are testifying or appearing in 
front of the committee. And all of these thousands of employees of 
WorldCom, and many more to come, there will be layoffs, WorldCom will 
very likely file bankruptcy this week. It makes me ill to see the likes 
of Scott Sullivan building that mansion in Florida at the expense of 
our society. So I want to talk a little bit about that this evening.
  I will keep my comments to about 30 minutes because we will shift 
from that to agriculture. Let me start out with kind of a basic lesson, 
and that is how corporations are formed. Remember that in America not 
all corporations are bad. In fact, most corporations are not bad. Most 
corporations in America, if you figure by the number of corporations, 
are small family businesses.
  I will give you an example. My wife's family is in the ranching 
business. They have that incorporated. It is a small corporation. Her 
dad runs the ranch and he is the president of the corporation. She and 
her brothers are on the board of directors. Her mom is chairman or the 
vice president of the corporation. So there are a lot of small 
businesses that are corporations. A lot of your friends in their little 
businesses are incorporated. So not all corporations are bad, just like 
not all priests are bad, but you have got a few bad apples.
  The thing to think about is what is the structure of a corporation? 
Where are the checks and balances for a corporation? Our society works 
because we have checks and balances. What are the checks and balances 
of a corporation, and where do those checks and balances go wrong? What 
went wrong? Why did the system not correct itself?
  Well, let us look at the structure of a corporation, and specifically 
look at the checks-and-balances system. A corporation consists of 
shareholders. Those are people in this country, a lot of people who 
have no idea that they own shares in a corporation or are actually 
shareholders probably through their mutual funds or through their 
pension funds. What they do is they put their retirement funds in trust 
for an organization that then turns around and uses those proceeds to 
buy stock in corporations. And there are a lot of people that have 
owned stock. Many Americans over the years, over the history of this 
country. The old corporations, the General Electrics, the General 
Motors, the car manufacturers like Ford and Chrysler and people like 
that. So the shareholders come together. They are the owners of the 
corporation. They are the people that invest the money, that put the 
capital, that is what the money is called, they put the capital in to 
purchase that and form that corporation.
  What they do is oversee, because if you own a $30 share of Chrysler 
Corporation or a share of some other company out there, you are not 
going to be involved in the day-to-day management of a corporation like 
Chrysler, for example. What you do is the shareholder gets together and 
they elect people to represent them in the corporation, and the people 
that they elect are called the board of directors.

  Now the board of directors are very, very important people, very 
important people for a corporation. They are the trustees of the 
corporation, so to speak. They are a fiduciary duality, not only to the 
shareholders of the corporation, but they also have a fiduciary duty in 
their responsibilities that they carry out on behalf of the 
corporations. And they have a fiduciary duty not to act in their own 
self-interest, not to act in such a way that they make themselves rich 
at the expense of the corporation.
  We are seeing this time after time after time. These corporations 
that are in trouble today, I can tell you one of the points that the 
checks and balances failed, the check point that failed is right there 
on your board of directors. You can take a look at Enron Corporation. 
You can take a look at Kmart Corporation. You can look at WorldCom. You 
can look at Adelphia. You can look at TYCO Corporation. These are 
people that self-enriched themselves. Instead of carrying out their 
fiduciary duties to protect the shareholders, to represent the 
shareholders, because of the fact that they were induced for self-
enrichment, in other words, put money in their own pockets, put it in 
their own pockets, they did this. They walked away from their very 
fundamental duties as a member of the board of directors. So we are 
having a failure in the system in some of these companies.
  Well, the board of directors, remember, they were elected by the 
shareholders. They then turn around and they hire a president. They 
hire a president or a chief executive officer to run the corporation.
  Now, the board of directors is not intended to be there every day, 
but the president of the corporation is. The president then installs 
his management team. And the management team in turn hires the 
employees underneath the management team that carry out the duties of 
the corporation. Now, obviously, these employees are very important, 
but the employees do not serve on the board of directors. The employees 
have to trust that the board of directors has the best interest of the 
corporation, which is the shareholders, in mind and the employees in 
mind. They have a lot of trust. These employees, they have a lot of 
trust in this board of directors. A lot of trust in that board of 
directors, and they got let down.
  Without exception, in every one of these corporations you read about 
in Wall Street or you read about in your morning newspaper that are 
deceiving the shareholders, that are deceiving the American public, in 
every one of those cases you will see a fallacy or a letdown of the 
fiduciary duties by the board of directors.
  Now, theoretically under the structure of a corporation, the board of 
directors should have legal counsel and they should have auditors. I do 
not have to say much about what has happened to the auditing profession 
with some of these corporations. What has happened, frankly, is they 
got in bed with the board of directors and they got in bed with the 
president. They have thought about self-enrichment. If there is one 
word that has led to the downfall of many of these major corporations, 
and I am not so concerned about the corporation as I am the employees 
of these corporations, the thousands and thousands of employees that 
are without their jobs, that their pension plans are wiped out, their 
savings plans are wiped out. They are not young people any more. They 
do not have a career ahead of them. Their career is behind them, and it 
gets wiped out. There is one word that describes all of that and that 
word is called self-enrichment. Self-enrichment.
  The auditors did not do their job. I will tell you in the banking 
business, the auditors, when the Federal Government goes in and audits 
that bank, you cannot give the auditor his pencil. You cannot buy them 
a cup of coffee. You do not know those auditors. They do not go with 
you afterwards and have dinner. They do not go out and party with you. 
They do not socialize with you on weekends. That is what an auditor 
should be.
  An auditor should be at arm's length. But that is not what happened. 
These

[[Page H4672]]

little symbols mean arm's length. That is not what happened. What 
happened is the auditors, and in the case of the TYCO Corporation, the 
legal counsel got in with the president and the CEO, and this is the 
president who does not pay taxes on his art, sales taxes, so you can 
imagine what other deceivement he has worked on the American public, 
and the legal counsel gets in and starts paying himself bonuses of $20 
or $30 million a year and then structures the bonuses in such a way 
that he can hide it from the board of directors. Or if the board of 
directors figures it out, he can say, do not worry, the reports that we 
give to the shareholders, and every year the board reports to the 
shareholders in what is called an annual report, I can structure our 
pay in such a way that we do not have to reveal it in this report to 
the shareholders. Because if the shareholders found out that the 
auditors were in bed with us or if the shareholders found out that our 
attorney was paid $30 million a year for bonuses, they might get upset 
about it. So how do we conceal it from them? And that is exactly what 
they did in TYCO.

  Let me give you a few examples of where this structure has failed, 
and almost without exception, in fact, I do not think we can find 
exception on the examples I will give you, you will find a breakdown 
either with the legal counsel, the attorneys, a breakdown with the 
auditors that started getting too cozy. They started getting contracts 
with the president. They started getting opportunities to put other 
companies together where they could self-enrich themselves. Enron is 
the perfect example of that. Andrew Fastow, who was the chief financial 
officer on the management team, goes out and makes separate companies, 
makes a sweetheart deal with the auditors, makes sweetheart deals with 
the attorneys, and pays himself $30 million to run these partnerships.
  By the way, where is Andrew Fastow this evening? He is in his multi-
million dollar home in Texas. In Enron's bankruptcy, does he have to 
give that up? No, in Texas and Florida you get to keep your home from 
bankruptcy, so Scott Sullivan gets to stay in his $20 million home and 
Andrew Fastow gets to stay in his.
  I can tell you if you went in and stole one hour of electricity from 
Enron, you would suffer more of a penalty than any of those people have 
suffered so far as far as criminal behavior is concerned. But let me go 
back here. I will point out to you where this breakdown occurred, where 
it has either been the board has not exercised proper oversight over 
the management or the management has gotten too cozy with the board and 
got the board intimidated to ask the management, where the management 
has concealed numbers with the auditors or concealed it from the 
auditors, or they got the legal counsel to buy into some of these 
deals.
  Guess who the losers are? The losers in this case are at the bottom 
and top of this chart. The bottom, most important, the employees. They 
lose. They lose everything. Next, the shareholders. They lose. They 
lose everything. Now the shareholders knew there was some risk when 
they bought the stock, but they did not expect risk of fraud, but they 
knew there was a risk when they bought it. But the employees, they did 
not know there was a risk that the management would defraud the 
corporation, that management would walk away with multi-million dollar 
homes and money in accounts probably hidden all over the world. They 
did not know that.
  Let us take a look at some of these examples. Well, let us take a 
look at a few examples here of where the corporate structure went wrong 
because some of the individuals contained within that corporate 
structure were focused on self-enrichment, broke or breached their 
fiduciary duties to their employees, to their customers, to their 
shareholders, to their profession, the accounting profession, which is 
an honorable profession. They breached their duties to the legal 
profession, which is an honorable profession. In any one of these cases 
you will see individuals who breached. They are thieves. They lied. 
They stole. These are two-bit crooks. That is exactly what they are, 
two-bit crooks. Remember my comparison at the beginning of the speech 
about you steal a car and the police surround you with their guns 
drawn. That is exactly what should have happened to the executives of 
these companies once they determine that they have stolen, these two-
bit crooks.
  Take a look at Kmart Corporation. How many employees lost their jobs 
because of the Kmart Corporation? What happened with the chief 
executives at Kmart? They went and got the board and the corporation to 
loan them money. The president of the corporation, I think the vice 
president of Kmart got the corporation to loan them millions of 
dollars; millions. Remember, the numbers we talked about tonight are 
not thousands of dollars, hundreds of dollars. They did not loan you a 
candy bar, a pen or a pencil. These are millions. We talk about numbers 
in the millions.
  So Kmart Corporation executives loaned themselves millions of 
dollars, and then what did they do? They go back to the corporation and 
say we know it is a loan. Let us make it a grant. What does a grant 
mean? It means you do not have to pay back the loan. So at the expense 
of the employees of the Kmart Corporation, at the expense of the 
customers of the Kmart Corporation, at the expense of the shareholders 
of Kmart Corporation, the executives of Kmart Corporation go get this 
money. And what do they do a week after they get the loans? Forgiven. 
In other words, you do not have to pay me back.

                              {time}  2200

  They sign their own papers saying the corporation does not have to be 
paid back. They take it into bankruptcy. Where are those executives 
with Kmart Corporation this evening? They are probably filling their 
bellies at a local steakhouse.
  Let us look at WorldCom. I have talked about WorldCom a little, but 
let us talk about the loans again. How can you have a board of 
directors, for example, where the chief executive officer, Bernie 
Ebbers, allows one of the board members to have one of the 
corporation's private jets for $1 a year, $1 a year? Do my colleagues 
think that board member's going to stand up to Bernie Ebbers when 
Bernie Ebbers said, look, I need $400 million.
  Why did that board director not say we are not bank, we represent the 
shareholders, we represent the employees? We are not going to loan you 
$400 million. What do you mean you want it forgiven, $400 million. But 
that is not what happened. In WorldCom, they gave Bernie Ebbers $400 on 
a so-called loan.
  Then Scott Sullivan dances in. Scott Sullivan's a little numbers guy, 
the guy who wears the green shades. He is the one that moves numbers, 
moves expenses into capital expenditures so that he can show higher 
income so his bonus is higher. Scott Sullivan takes out millions and 
million of dollars. What is Scott Sullivan doing tonight? Right here. 
Here is what Scott Sullivan, and Gary Winnick of Global Crossing. 
Global Crossing, Gary Winnick's been here before. He walked out with 
900-and-some million dollars. I want you to see what they are doing 
tonight. You see that headline in USA Today, ``Homes of the Rich and 
the Infamous.'' There is Gary Winnick's home in Bel Air, California, 
$90 million. Here is Scott Sullivan's home and I have got a poster.
  Let me show you Scott Sullivan's home. That is were Scott Sullivan is 
this evening. While I am giving this speech, he is sitting somewhere in 
that mansion. That is a $20 million mansion. He is the guy. He is the 
accountant. He is the one that broke his fiduciary duties to WorldCom. 
And where are most of the employees of WorldCom this evening, the ones 
that do not have jobs? Probably sitting there in a family room with 
their family in tears, trying to figure out what they are going to do, 
all because of the corruption of these individuals.
  We have got to nail these people. The Bush administration, I think, 
has made a solid commitment to do that. They ought to have the IRS at 
these people's doors. They ought to have the Securities and Exchange 
Commission at these people's doors; and by the way, kudos to the 
Securities and Exchange Commission and kudos to the Justice Department.
  The Justice Department today under the President's direction came out 
with indictments against Adelphia,

[[Page H4673]]

that is the cable company where the family took $3.5 billion out of the 
corporation, not million, $3.5 billion out of that corporation, self-
enrichment, but they got indicted today. Good, good, good.
  Every one of these people I speak about ought to be indicted. 
Andersen corporation, they are the auditors. Where are their fiduciary 
duties? Unfortunately, because we have got a few crooked two-bit 
crooks, two-bit accountants in Andersen, they brought the whole 
corporation down.
  I hope that the Justice Department or the Attorneys General of these 
various States or whatever local enforcement agency can do it brings 
charges against the individuals. There are a lot of good hardworking 
people for Andersen corporation, and a few of these auditors who got 
money in their pockets, who became the two-bit crooks, brought down the 
entire corporation.
  How many jobs were lost with Andersen, 20, 30,000? How many of them 
were crooked, couple hundred? The rest of the people were hardworking 
people, but they have lost their careers thanks to the people at the 
very top of Andersen who did not maintain their fiduciary duties to the 
people of that corporation.
  ImClone Systems Incorporated, oh, what an ironic situation there. 
That is the Martha Stewart case. How ironic that Martha Stewart sells 
her stock the day before the announcement is made, which everybody 
knows will result in the stock collapsing, and the president of the 
corporation, close friend of hers and close friend of her daughter, 
start taking a look at the interrelationships that exist. I am not 
talking about sexual relationships. I am talking about looking at the 
interrelated business transactions they have with the auditors, with 
the lawyers, with their buddies at these parties. Take a look at how 
many fiduciary duties were breached as a result of that.
  Who suffered there? Every investor that did not know to sell their 
stock. Ironically, Martha Stewart had some kind of divine message to 
sell her stock right before the thing collapsed, the day before, hours 
before it collapsed. What about the poor suckers that bought that? What 
about the employees of that corporation? Does the president of that 
corporation and the chairman of the board of that corporation feel good 
tonight about what he has put those employees through?

  We talked about Enron, Tyco. What a ripoff Tyco was. Take a look at 
the attorney for Tyco. The legal profession, why does the local bar in 
that State, the legal profession not have this guy up for disbarment? 
That attorney of Tyco ought to be in front of the State bar of New York 
trying to fight for his license to practice law, but he is not. I hope 
somebody from New York asks their State bar association why the 
attorney for Tyco is not in front of their bar fighting for his legal 
license. He ought to go to jail; and of course, I am addressing the 
Members on the floor, but I would hope that he might hear my comments 
here.
  Here is what ought to happen to him: Go to jail, just like that 
monopoly card. Now, some people say you are giving a charged speech 
tonight, you are speaking with a lot of emotion tonight, you are making 
a lot of charges.
  I am not just making them on this. I can pull up another chart. 
Sunbeam Corporation, Global Crossing and I could talk for quite a bit 
of time on that, Conseco, Waste Management. The reason I feel so deeply 
committed to this issue, the reason I feel so strongly about this is 
our system has to work based on consumer confidence, based on 
credibility.
  The system has to have self-correction in it. If one side gets out of 
kilter, the other side kicks in so you keep it generally in balance. We 
have got to make sure that the prudent standards are upheld.
  What is happening is I am not so concerned about Scott Sullivan's $20 
million home in Florida or Gary Winnick's home out there in California, 
$90 million. I am concerned about why the system did not catch them 
earlier, why is the system not in balance.
  What about the employees of these corporations? What about all those 
people for Global Crossing or Enron or WorldCom, just about to lose it, 
why did not all those people, they are wiped out. That is why I am 
emotional this evening.
  It was not the Democrats, although Sunbeam and Conseco and several of 
those occurred under the Clinton administration. It was not the 
Republican administration, although we have had this last couple of 
weeks. This is not a partisan issue. This is not politicians who have 
gone astray, who are corrupt or a massive bribery scandal. That is not 
what we are talking about here. This is a breakdown that must be 
addressed immediately by very aggressive and active and unforgiving 
prosecution of the people who have violated the trust of the employees 
and who have violated the trust of the shareholders and who have 
violated their fiduciary responsibilities to their professions and to 
the corporations and the people for whom they work.
  That is not asking too much. I hope in the next few weeks we see 
action like we have seen from the Bush administration in the last 24 
hours, and that is criminal indictment against those families with the 
Adelphia Cable Corporation that stole 2.3 or 3.3, I cannot remember, 
but I can tell you it was in the billions. We need indictments. We 
ought to have indictments every day.
  We ought to have the IRS. About 6 weeks ago, the IRS announced they 
are going to start doing random audits. They will come down here and 
just randomly pick somebody seated behind me and say hey, they may make 
$40,000 a year, we are going to audit them. IRS ought to give up their 
random audits and focus audits strictly on these people, like that 
lawyer with Tyco, like WorldCom, like the Kmart people.
  We need to come together on this, Republicans and Democrats. Again, 
it is not a Republican issue; it is not a Democrat issue. It is an 
issue that challenges the very business community, which we need in 
this country. This is a cleansing process. We have got to make sure 
that we cleanse correctly. We have got to make sure we get the cancer 
out, and it does require active prosecution and active pursuit of these 
two-bit crooks. They should not be treated any better than the way we 
treat somebody that steals a car. They ought to be treated exactly like 
that and that is go directly to jail and do not collect your $200 as 
you pass go.
  Enough of that subject, Mr. Speaker. Mr. Speaker, we have a 
fascinating half an hour. I would like to have my colleague, we have 
chatted about it, on agriculture, the gentleman from Nebraska (Mr. 
Osborne). All my colleagues know of his reputation. Obviously, he is 
one of the most reputable people here. His integrity is impeccable, and 
his knowledge on agriculture is second to none. I would like to at this 
point in time yield the balance of my time to the gentleman from 
Nebraska (Mr. Osborne) so we can have some discussions on the issue of 
agriculture and farming.

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