[Congressional Record Volume 148, Number 100 (Monday, July 22, 2002)]
[House]
[Pages H5073-H5080]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            DYING FROM DEBT

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Mississippi (Mr. Taylor) is recognized for 5 minutes.
  Mr. TAYLOR of Mississippi. Mr. Speaker, in newspapers all across this 
great Nation today, the headline ran that yet another company had 
declared bankruptcy. This time it was WorldCom, and this time it was 
the largest bankruptcy in American history. Just a month ago it was 
Enron. A little time before that, it was Global Crossing. But in every 
instance, there was a common pattern, and that is little folks lost 
everything they owned because the big shots at the top lied to them 
about how broke their companies were.
  I say this because I think the same thing is happening with our 
Nation in that the little folks, the average Joes like the great young 
marine whom the gentleman from Massachusetts (Mr. Meehan) just told us 
about who lost his life in training at Camp Lejuene. The folks who 
serve us in the Coast Guard, the Navy, the Army, the folks who serve us 
every day, I think they are being cheated because the big shots are 
lying to them about just how broke this country is and just how broke 
their policies are making us.
  The gentleman from Illinois (Mr. Hastert) became the Speaker of the 
House on January 6 of 1999. On that day, our Nation's debt was 
$5,615,428,551,461.33. He has been Speaker now for about 1,300 days, 
and in that 1,300 days, we have voted to take care of rhinoceroses, we 
have named no telling how many post offices after great Americans, we 
honored the great Lindy Boggs today. But the Speaker somehow could not 
find time for this body to vote on what I think is the most important 
rule of all, and that is that one generation does not burden another 
generation with its bills. That is precisely what has been going on in 
this country, particularly since 1988.
  Mr. Speaker, prior to that time, we went all the way from when George 
Washington was President to 1988 and the Nation borrowed about $1 
trillion. That got us through American revolution, the War of 1812, the 
Spanish American War, the Civil War, the war with Mexico, World War I, 
World War II, Korea and Vietnam, and it borrowed about $1 trillion. The 
debt payment on that was fairly low, the amount of interest payment on 
that.
  Something changed during 1988. Somehow the mentality that says we are 
going to lower taxes, we are going to spend more money and we are going 
to stick our kids with the bill, and as long as they do not know about 
it; it is sort of like those little folks who own stock, only this time 
the little folks own stock in America and the big shots are bankrupting 
their country.
  Mr. Speaker, in the 1,300 days that you would not give us a vote on a 
Balanced Budget Amendment, our debt has increased by $511,040,208,939. 
Now, what does that mean? I mean some people say well, big debt is 
okay, because that means that is taxes I did not have to pay. Wrong. 
This is the equivalent of one generation going out and buying a car and 
saying, I do not care how much it costs because my kid is going to pay 
for it when they get to be 30 or 40, plus interest, so I do not care.
  I am going to go find the fanciest house in my home county and I do 
not care how much it costs because I am going to stick my grandkids 
with the bill. It is wrong. No parent would do that, no grandparent 
would do that, yet it is precisely what the political leadership of 
this country has been doing and, in the past 12 months, they made it 
worse. Because just like the folks at Enron and Global Crossing, they 
looked the American people in the eye and they lied to them about just 
how broke this country is.
  Remember the quote from the President of the United States, from the 
Speaker, from the gentleman from California (Mr. Thomas): ``We are 
awash in money.'' No, we were not. We were awash in debt. Because a 
year ago right now when those three people were saying that our Nation 
was $5,726,814,835,287 in debt. Just like anybody else who borrows 
money, we have to pay interest on that debt. And the biggest expense of 
this Nation is not defense, it is not health care, it is not taking 
care of veterans, it is not educating kids, and it is not building 
highways; it is squandering money on interest on the debt. We get 
nothing for it, and it costs us $1 billion a day down the rathole, and 
it is only getting worse.
  Not only are they stealing from the average Joe, but they are taking 
from the Social Security Trust Fund. We now owe the citizens of this 
great country $1,300,000,000,000 of Social Security that has been taken 
from the Social Security Trust Fund and used for other purposes. There 
is not a penny there. There is no lock box. From the Medicare trust 
fund they have stolen another $271 billion, that is a thousand times a 
thousand times a thousand times 271. Yet, they had the nerve to look us 
in the eye and say, Washington is awash in money.
  For my military retirees, we owe them $168 billion, a thousand times 
a thousand times a thousand times 168. For our Nation's civil service, 
the Capitol Hill policemen who are guarding this building right now, 
the FBI agents, the Customs agents, people who go out and protect our 
children, people who are looking for our children who have been 
kidnapped, they pay out of their own pockets into their retirement 
fund. It is supposed to be set aside for their retirement. We owe them 
$540 billion.
  Mr. Speaker, it is time that this body got a chance to vote on a 
Balanced Budget Amendment to the Constitution so that these shenanigans 
come to an end before this country dies the way Enron and Global 
Crossing and now WorldCom did, that the country dies from its own 
debts.

[[Page H5074]]

                              {time}  2145
                            CORPORATE GREED

  The SPEAKER pro tempore (Mr. Platts). Under the Speaker's announced 
policy of January 3, 2001, the gentleman from Colorado (Mr. McInnis) is 
recognized for 60 minutes as the designee of the majority leader.
  Mr. McINNIS. Mr. Speaker, I intend this evening to spend a little 
time with you talking about a subject which, of course, is on the minds 
of many people across this country, and I want to look into it in some 
depth tonight so we can have an idea of where the problem rests, with 
what individuals the problem rests, and I intend to name these 
individuals by name, and what are some of the solutions.
  I think as Members of Congress, when we are elected to public office, 
we have an obligation not only to discuss the problems, but really our 
primary purpose in being elected back here is to try to come up with 
some solutions. It is always easy, always easy to determine about what 
the problem is. Sometimes it is easier than others. But what is more 
difficult is to come up with a solution. When we have tough problems 
back here, it requires that we cross the aisle. It requires that we 
take a nonpartisan approach, that we be as bipartisan as we can to come 
up with a solution that works for the American people.
  My topic this evening is corporate greed. And I can tell you that on 
one side of the aisle, and this is the last point that I will be as 
pointed here as I am going to be right now, but on the Democratic side 
of the aisle, including the minority leader, the gentleman from 
Missouri (Mr. Gephardt), says they are looking at this corporate greed 
as an opportunity to gain 40 seats. That is what they say. We are going 
to take 40 seats as a result of this corporate greed. What I am urging 
the gentleman and his followers over there to do is quit talking about 
the type of political gain you can get out of this. Do not talk about 
that while the house is burning. What I suggest you do is work with us, 
all of us together, seize upon this problem, and work out a solution 
before this begins to spin out of control.
  We have a stock market out there that is in trouble. And if you look 
at the fundamentals of that stock market, that stock market should not 
be in trouble. We have inventories that are down. We have corporate 
profits that are coming up. Our unemployment rate is staying low. Our 
inflation rate is staying low. There is a lot of good, promising signs 
that our recovery in this economy is forthcoming, that it is in 
progress. But we can shoot ourselves in the foot, and that is exactly 
what is happening when the likes of the gentleman from Missouri (Mr. 
Gephardt) come out here and say this is our opportunity to use it to 
our political advantage to gain 40 seats.
  But that talk aside, the problem that is happening to the retired 
people out there that were depending upon their retirement from some of 
these corrupt corporations, the employees that have lost their jobs out 
there by the tens of thousands because of corrupt CEOs, that is what 
the issue is. The American people, not for one moment the gentleman 
from Missouri (Mr. Gephardt) believes that the issue here should be a 
decision between what we are going to do in November with political 
congressional seats. They do not want that. They want to figure out how 
they are going to keep their jobs and what is going to happen to the 
rascals, and rascals is only a friendly word to use for these CEOs that 
have allowed corporate greed to overtake their ethics and moral 
standards of this country.
  These people are worse than bank robbers. Remember, a bank robber is 
generally a poor person robbing from a rich institution. The case I 
will talk about this evening are rich individuals in rich institutions 
robbing from the poor people. That is worse than a bank robber; and yet 
the gentleman from Missouri (Mr. Gephardt) and the Democrats decide 
that instead of trying to solve this problem and go after these people, 
to go after the Republican House seats.
  I am asking you to put it aside for a minute and join us as a team, 
all of us as a team, Democrats and Republicans, unaffiliated. As a team 
we need to address the corporate greed that has overtaken some of our 
chief executive officers. There are solutions out there, and there are 
solutions that can occur with bipartisan support. This House, under the 
leadership of the Speaker of the House, and, frankly, under the demands 
of the President of the United States will this week in my opinion, 
pass legislation that will be effective to help address this problem. 
But we can only do it if the gentleman from Missouri (Mr. Gephardt) and 
the more radical Democrats put aside their partisanship and work 
towards the solution of getting our hands on these corporate CEOs and 
these corporations that are making their money by misleading, by 
breaching their fiduciary duties to the people that are really their 
owners.
  I think it is helpful, and some of you have heard my comments in the 
last couple of weeks on the same topic, I do not mean to be repetitive, 
but I think it is important that we repeat some of the basics of 
corporations in this country so we have an idea, an understanding of 
what we are dealing with today.

  Remember that corporations are not a body in themselves. They are not 
a human body, obviously. They are a structure that we made up in this 
country under our system. And corporations are a systemic model, so to 
speak, of how to carry out business that represents the interests of 
numerous individuals.
  Keep in mind that not all corporations are bad. In fact, most 
corporations do a pretty good job. We have a lot of wonderful products 
in this country that are the results of corporations, both small 
corporations and big corporations. The mainstay of this economy is not 
the big corporations like the Enrons or the Global Crossings or the 
Adelphia Cable Company or the Tycos or the K-Marts. The mainstay is 
small business and there are a lot of small businesses in this country 
that are corporations. You can go down town anywhere USA and you will 
find them that have incorporated, and they have the local drug store on 
the corner or they have a little taxi cab service and they have 
incorporated or maybe a little airport charter store and they have 
incorporated. It would be a mistake, you cannot throw all corporations 
into the same net as the Enron Corporation. But you have to take the 
Enrons and the Worldcoms and the Tycos and the K-Marts and the 
corporations like that that have done bad and do something about it. 
You have to march them to jail. You have to bring discipline into the 
process.
  Corporate structure in this country will only work as long as you 
have integrity as a part of the foundation. Of course, you have to have 
the other fundamentals. You have to have a legal structure. You have to 
have profit. But you have to have that integrity, and that integrity is 
a part of checks and balances that makes sure that the corporations, as 
Adam Smith would say, do not get out of hand; that we do not end up 
with a monolithic society where monopolies control everything.
  Let us talk about the corporate structure and what responsibilities 
there are for the various people involved in the corporate structure. 
Now, this little diagram I put together, this probably would not pass 
in a classroom setting in Harvard Business School, but it is something 
I think we can all work with. And I think it is something that we can 
understand as I go through my discussion this evening.
  The corporation. Remember, the very basic part of the corporation are 
the owners of the corporation, the owners of the business and that is 
what it is. It is a business, and it does not have to be a lots of 
owners. My wife, for example, her family are ranchers and they have a 
small ranch. And they probably have, I do not know, maybe 10 
shareholders, maybe eight shareholders in their corporation. So we are 
not necessarily talking about large corporations. But for the benefit 
of this evening's discussion, let us talk about this structure. Here 
are your shareholders.
  Now, a corporation like Enron or a good corporation that seems to be 
viable, IBM or Coke or some of these others, General Electric, General 
Motors, they have millions of shareholders. They have millions of 
owners. And, obviously, because even the largest owner, for example, of 
General Motors may only own a fraction of 1 percent, what these 
shareholders have done is

[[Page H5075]]

they are you and I, there are more people in America today that are 
shareholders than at any time in the history of this country. And that 
is good. That is real good.
  The problem is that if we do not reinstill the high level of 
standards of integrity and moral character in these corporations, we 
will see this large number of everyday Americans who are shareholders 
begin to reduce itself, and that hurts the system.
  The more people we can get involved in the investment and in the 
business of our country, the better it is for the country. The better 
it is for the business. The better it is for the individuals. So 
shareholders are really the foundation in the corporation. They pool 
their money together so that they can build a business. And that is 
exactly what has happened.
  Now, the shareholders are represented by a number of different people 
and different people have different duties to the shareholders. Again, 
keep in mind the shareholders are the owners. For example, here, the 
shareholders elect a board of directors.
  Now, what is a board of directors? A lot of people will tell you that 
the chief executive officer, which in the old days was called the 
president of the corporation, that the president of the corporation was 
really the person who ran that corporation. That is not true. The chief 
executive officer and, remember, that president and chief executive 
officer, for the purpose of my discussion this evening, these terms are 
synonymous. You can trade them off. So we will talk CEOs.

  The CEO of that corporation is not the top individual of that 
corporation. He or she answers to the board of directors and answers to 
the shareholders. And here in this particular case, this is the 
fundamental structure, you have the shareholders who elect the board of 
directors. This is an election year; and they elect these board of 
directors to represent their interests, the interests of the 
shareholders. They do not elect this board of directors to represent 
the interests of the chief executive officer. The chief executive 
officer is simply a tool in the operation of this corporation.
  Now, this sounds a little mundane; but you have to have a pretty good 
understanding of this to figure out where this fraud is taking place, 
why the checks and balances in our corporate structure in this country 
have broken down, what we need to do to bring back solutions.
  Let us talk about some of those checks and balances. We know that the 
shareholders elect a board of directors to represent the shareholders, 
to help provide a vision. And a lot of times the board of directors, 
you have two different types of boards, you have two different types of 
board members. You have an inside director on the board. An inside 
director is somebody who is employed with the company, and in almost 
all of the companies that I am aware of, the chief executive officer is 
also a member of the board of directors. But because the chief 
executive officer is employed by the corporation, he or she is 
considered to be an inside director.
  An outside director is someone who is not employed by the 
corporation, but, rather, has some type of business, theoretically, 
some type of business expertise outside the corporation that can bring 
that expertise to the corporation to benefit the corporation in 
guidance and to represent the shareholders.
  So, first of all, you have the shareholders. They elect the board of 
directors to represent them and then the board of directors to run the 
corporation hires the chief executive officer, and that is this box 
right here. Now, the chief executive officer represents, runs the day-
to-day operations of the corporation. And, remember, the chief 
executive officer is not the top official in the company. The chief 
executive officer has to answer to a board of directors. The board of 
directors has a responsibility to be sure that the chief executive 
officer is carrying out his or her duties.
  On top of that, the board of directors has a fiduciary duty to the 
shareholders to be sure that their chief executive officer meets the 
kinds of standards and is able to run the corporation.
  Now, the CEO, we have a little box right here to my left that I call 
``insiders.'' You hear a lot lately, and we will go over some of the 
corporations, you hear a lot lately about insiders, people inside the 
corporation who get special knowledge, who know when the stock is going 
to go up or down; and they have a special advantage, and they have an 
advantage over somebody outside the corporation, especially on a 
publicly traded corporation.
  Well, we know that, and the Security Exchange Commission, and in this 
country it has been the law for a long time, there are certain rules 
that insiders have to follow. They cannot deal stock, for example. 
Generally, they cannot buy or sell stock based on inside knowledge on a 
public corporation. They have got to be able to disclose that kind of 
thing. It is very obvious that fraud has been committed.
  Take the example of ImClone. ImClone is the one that you probably 
better know as the corporation matter that is involving Martha Stewart. 
There you have insiders of the corporation who know that a particular 
drug was not going to receive approval by the Federal Drug 
Administration. They also knew that as soon as word got out to the 
shareholders, to the people for whom they worked, that as soon as word 
got out the value of that share would collapse. So what did the 
insiders do? They went and sold their stock, and they called their 
buddies like Martha Stewart and others and made sure they could also 
sell their stock before the general knowledge within the corporation 
became known. That is what is called inside knowledge.
  The same thing with K-Mart Corporation. The same thing with Adelphia 
Cable. The same thing with TYCO. The same thing with Enron Corporation. 
That is an example we have had around for several months. WorldCom. 
Scott Sullivan who, by the way, has a $19 million home down in Florida 
that he is living in, a lot of it is based on insider knowledge. The 
same thing with Global Crossing. Gary Winnick out in Bel Air, 
California, building a $90 million home.
  These people are robber barons. They were trading on inside knowledge 
because they are insiders. And, unfortunately, in many of those cases, 
the board of directors, who had a fiduciary responsibility to oversee 
these people, in many cases did not oversee them. They joined the 
robber barons. They help rob the shareholders of value.

                              {time}  2200

  Not just the shareholders, but the responsibility to the public at 
large, and instead of coming out with a better product, like a good 
toothpaste or a better car, instead of doing that, they decided that in 
the short run, it would be better to cheat the people, cheat the 
shareholders. I can tell my colleagues anytime we have a chief 
executive officer like Gary Winnick with Global Crossing, like the 
Adelphia Cable Company and the Regis family there, or the Enron 
corporation with Andrew Fastow, who paid himself $30 million, where was 
the board of directors? Take a look at Kmart, the Charles Conaway, 
Bernie Ebbers, I have got a bunch of names I can give my colleagues 
here. Conseco, Steve Hilbert.
  Any time we see a problem with the chief executive officer of whether 
they are overpaid or whether they are improperly using inside 
knowledge, whether they have improperly disclosed inside knowledge, we 
will find two things. One, they are doing it for their own self-
enrichment, to make themselves wealthier, as demonstrated by the Scott 
Sullivans of Florida, by the way he is protected from bankruptcy by a 
$20 million home, or Gary Winnick with a 90-million-plus home in Bel 
Air, California. We will see, number one, it is self-enrichment, and 
two, we will find negligence on the board of directors.
  Can my colleagues tell me that the board of directors for Enron 
Corporation, for example, were carrying out their fiduciary duties in 
representing the shareholders and allowed Andrew Fastow to go out there 
and create several satellite companies? And just to be a little 
sarcastic, I guess, or a little smartie, he named them after Star Wars 
characters, and then paid himself $30- or $40- or $50 million on top of 
the money that he paid to his buddies.
  I mean anytime we find a bad CEO, we are going to find generally a 
bad board of directors. I am not talking about a bad CEO who misreads 
the market. I am talking about a CEO that has got a problem with 
morality, that

[[Page H5076]]

has got a problem with honesty, that fudges the figures, like Scott 
Sullivan or Bernie Ebbers, that moves expenses, capitalizes them 
instead of expenses, and I know that is kind of an accounting term, but 
these kind of things are fundamental to a board of directors. They know 
what is going on. If they do not know what is going on, they are 
breaching their duties.
  Let us go on. So this is what we would call basically the insiders of 
the corporation, the board of directors, the CEO and so on. They reach 
outside the corporation generally for two separate functions. One of 
them is outside auditing. A good chief executive officer looks at the 
outside auditor, and of anybody they want to be honest with them, if 
they are a good chief executive officer, the one group of people they 
especially want to be straightforward with them and not hide anything 
are the outside auditors because they are the ones who can tell them 
whether their strategy is working or not. They are the ones who can 
tell them, hey, the company, the business is going in the wrong 
direction; hey, our productivity is down; hey, you have got too much 
expense over here, you are not expensing properly over here. The 
auditors should be noncompromised.
  We have seen what has happened over time and, of course, the perfect 
example there is Arthur Andersen Corporation. It is an auditing firm, 
and what happens? Unfortunately, there were a lot of good employees 
with Arthur Andersen and there were a lot of people who retired from 
that company who saw their entire retirements eliminated because of the 
misbehavior by a few of the employees of this corporation, but those 
particular employees, the auditors, the accountants, they got too cozy 
with the management.
  What happened in Enron's case? They had their auditors who are 
supposed to be at arm's length, are supposed to give an honest 
assessment of the status of the corporation, and we can look at it. It 
happened in Global Crossing. It happened with Kmart. It happened with 
Sunbeam. It happened with ImClone, Xerox Corporation, where the 
auditors who were supposed to give an independent and frank assessment 
of the corporation, they did not do it, and then Enron Corporation, 
what happened is the auditors, they were auditors by day, consultants 
by night.
  What do I mean by that? Arthur Andersen Corporation, for example, 
with Enron would collect maybe $14 million a year to do auditing, but 
they also collected $40 or $50 or $60 million a year to do consulting. 
Do my colleagues think that when they give the CEO bad news that they 
are going to want to give him the bad news if they have a consulting 
arm of their corporation that makes a lot more money off him? Too cozy.
  There is a solution to that, and that is we require auditors to stick 
to the business that they are there for. They are not in the consulting 
business. They are not there to self-enrich themselves at the expense 
of the shareholders or at the expense of the employees, and of anybody, 
any classification on my chart that is the most unfortunate group of 
people, it is the employees. They are the ones who got hit the hardest. 
They are the ones who risked their jobs. In many cases, tens of 
thousands lost their jobs, and it is pretty upsetting when we see 
people who did not have meager retirements, had those retirements wiped 
out, while Gary Winnick of Global Crossing lives in a $90 million 
mansion in Bel Air or Andrew Fastow in Dallas today, as I am speaking 
right now, sitting in a multimillion dollar home, or Scott Sullivan 
down there with the WorldCom, Scott Sullivan. He is still building his 
$20 million home.
  These people have betrayed not just the shareholders but they have 
also betrayed the very people that worked so hard for them, and this is 
where accountability comes in. These people should have been revealed 
very early on. None of these little cooking-the-book maneuvers, none of 
this fraud that took place, none of this deceit to the board of 
directors or even with the board of directors to the shareholders, none 
of this should have occurred had the auditors been on their toes, had 
the auditors done what they were supposed to be doing.
  In the case, for example, of Enron, Arthur Andersen did not do what 
they were supposed to be doing. In fact, they cozied up to the 
management because they could self-enrich themselves. That is what we 
are seeing happening here.
  By the way, we are not seeing poor people, hardworking poor people 
that are enriched by this. We are seeing in a lot of cases people that 
are already wealthy and have to become wealthier. We see these people, 
the wealthiest people of the company, robbing the least fortunate 
people of the company. Let me continue on here.
  We have got to fix the auditing and, of course, the most obvious 
thing for auditing is to draw what they call a Chinese wall. We draw a 
wall between the auditing aspect of a company and the consulting. There 
is a need for consulting, corporate consulting, but in my opinion, it 
should not have anything at all to do with the auditing branch. Audits 
should be separate. The auditor should not be allowed to have any type 
of conflict of interest with the corporation. They should not be 
allowed to own stock in the corporation that they are auditing. They 
should not even get a free cup of coffee from the corporation that they 
are auditing. They should not announce their arrival. They should go 
in, they should do their work, they should summarize their results 
outside the corporate offices.
  Arthur Andersen actually had offices set up in the Enron office 
building. They mingled, had coffee, ate lunch, played golf, went to the 
theater and did investments with the very people they were supposed to 
keep an eye on. There is a saying, when the cat is away, the mice will 
play, and that is exactly what happened.
  One of our checks-and-balances on these corporations were bad, and 
let me say, again, not all of them were bad. We have a lot of good 
companies out there that produce a lot of good products that treat 
their employees right, and we have a lot of people who have jobs and we 
want to preserve their jobs. Jobs are very important, but the fact is, 
here, the cat, the auditor, went away and what happened? The mice did 
play. So we have got to work on that.
  Legal counsel, we have got legal counsel out there. I used to 
practice law. I know what they have to do. I know what the code of 
ethics is. That attorney with Tyco, and I can give my colleagues his 
name, general counsel, Mark Belnick, gave himself a $20 or $30 million 
bonus. Every corporation has to give public reports if they are public 
corporations, and these are supposed to be readable. They are supposed 
to be honest. And what did the attorney with Tyco Corporation do, Mark 
Belnick? He is an attorney. He has certain standards he is expected to 
meet to pass the bar, to be allowed to enter the bar of the State in 
which he was working.

  What did he do? He paid himself a $20 or $30 million bonus, of 
course, at the expense of the employees, and by the way, at the expense 
of the retired employees who have now had their pensions wiped out, and 
the shareholders. Not only did he do that, he made sure it was broken 
up in such a way it did not have to show up in the public report. Why 
this person still has a license to practice law is beyond me. I think 
he resides in New York State. Why New York State, their bar in that 
State, has not already called him in front of the bar to yank his 
license, I do not know.
  Those are the things that our society, those are the things that we 
have got to get serious about, and it requires a bipartisan effort. We 
have got to hit this corruption hard and quick. The corruption is not 
widespread. The perception is that the corruption is widespread out 
there, and it will become very widespread if we allow it to continue 
without punishment.
  These chief executive officers, these lawyers, these auditors that 
are not performing to the standards that are expected of them, need to 
be punished very quickly. We cannot allow them to go unscathed. We 
cannot allow the Scott Sullivan in Florida to go ahead and finish his 
$20 million home or Gary Winnick with Global Crossing who now lives in 
a $90 million, can my colleagues imagine a $90 million dollar home? Do 
we think he got that $90 million because he figured out a cure for 
cancer? Do we think he made his $90 million house because he invented a 
new seat belt? Do we think he got $90 million because he came up with a 
drug that would cure the common cold? Do we think he lives in a $90 
million house

[[Page H5077]]

because he came up with a textbook that would help our students in 
elementary school or some type of computer programming that would help 
our young people learn better? No, he did not get it that way. He got 
it because he breached the trust of his corporation. He breached the 
trust of his employees. Gary Winnick paid himself out of Global 
Crossing. I think he walked away with $790 million. Show me anybody in 
our society worth $790 million.
  Or take a look at Kmart Corporation, what those guys did, the 
executives of Kmart Corporation and Charles Conaway.
  Charles Conaway, the chief executive officer, they made themselves 
loans from Kmart. Kmart is not a bank. I do not think I have to tell 
anybody in here Kmart is not a bank, but these chief executive officers 
treated it like their own bank, and Conaway, for example, loaned 
himself from the corporation money and then a week before he took the 
corporation into bankruptcy, he went ahead and had the loan forgiven, 
had the loan forgiven, and we see that incident time and time and time 
again.
  I have a whole packet here of the names of these individuals, and I 
am going to go through a couple of examples, for example, of inside 
knowledge here in a moment. The point is that we have to have auditors 
to do their jobs and we have to have attorneys who are legal counsel, 
that attorney, who know what their role is. Their role is not self-
enrichment in the corporation. Sure, they should be paid for their 
services, but they were not brought into that corporation to make 
themselves millionaires.
  This is exactly what happened in Tyco, for example. Tyco, of course, 
was tied in with Dennis Kozlowski, and my colleagues may remember 
Dennis. He is the guy that is worth three or $400 million and decided 
to cheat the State of New York by not paying sales tax on a few art 
pictures. Not much money relative to how much money he was worth.
  So what happens? I tell my colleagues, whenever we see this kind of 
cancer, whenever we see this in a corporation, it spreads. When we have 
the Dennis right here and the legal counsel in that particular case, 
both of them corrupt, what happens? Take a look. We better look at the 
books of that corporation real carefully.
  Let me go on here for a few moments. The management team. The 
management team. How could a management team at Enron Corporation that 
in any way whatsoever was looking out for the interest of the 
shareholders or living up to its civic responsibilities in the 
community, oh, sure they went out and put their name on the football 
stadium, and, sure, they went out and donated to charities, and, sure, 
they paid their board of directors a lot of money, but the way they did 
that was through fraud. It is very simple. It is not a complicated 
case. Do not let them tell you that this brings up the debate of 
whether or not this fraud should or should not occur.
  The reality is we do not allow somebody like Andy Fastow to go out 
and pay himself $30 million to live in multimillion dollar homes to run 
these corporations that the board of directors now claims they did not 
know anything about. We do not care whether they knew about it or not. 
It was their job to know about it and they are responsible at any one 
of these levels, at the management team, at the CEO, at the board of 
directors, at the auditing, at the legal counsel. That is where the 
buck ought to stop.

                              {time}  2215

  The buck stops here. Any one of those you could put that plaque on 
their desk.
  Well, let us talk now about the bottom bracket I have here, the 
employees. In all this corporate fraud that we have heard about and 
these chief executives, like Ken Lay, and Sam Waksal, or Frank Walsh, 
or Charles Conaway, or Bernie Ebbers, or Scott Sullivan, in all of this 
the attention is focused on them. You know where the attention should 
be focused? You know what we should do with that $90 million house of 
Gary Winneck's in Bel Air? We ought to take that house and make it into 
apartments and let the employees at WorldCom live there for free that 
had their retirements wiped out.
  And Enron Corporation. Now, you may say, wait a minute, Enron was not 
that old, or WorldCom was not that old, so how could people lose their 
retirement; how could people have been working for that company for so 
long? Well, what happens is WorldCom bought other companies, smaller 
companies that had employees who had worked there for a long time. They 
merged these companies together. Do you think any of these retired 
employees are living in a house like that right now? Do you think they 
got a square deal?
  This home is Scott Sullivan's home. If you want to see it, you can 
see it down in Florida. Why is it built in Florida? Because he can 
exempt it from the bankruptcy law. I hate to tell Mr. Sullivan this, 
but it is not going to be exempt from criminal indictments. I hope the 
U.S. Attorney and the IRS and the INS, and all the people that have 
jurisdiction over this matter, look at this very carefully. This home 
ought to be given to the retired people of WorldCom who have lost their 
entire retirement. Even if it only gives them back a few cents on the 
dollar, at least there is some equity in that.
  Where is the equity in a home like that for an individual who has run 
a corporation into the ground not because they misjudged the product, 
not because the economy went south on them, but because they committed 
fraud, because they wanted to enrich themselves.
  Take a look at Gary Winneck's home. This is a $20 million home. Gary 
Winneck of Global Crossing has a $90 million home, five times the size 
of that home. That is what we ought to do with these homes, take them 
back. We need to grab those assets that were taken improperly from the 
corporation and return them to the people of the corporation, to the 
shareholders. Most importantly to try to provide some justice to the 
retired employees and the employees that lost their jobs.
  Over the weekend, WorldCom Corporation went into bankruptcy. How many 
people do you think today working for WorldCom, that still have their 
job today, are sitting around relaxed in their front room tonight, 
wondering about their job security? You think they are relaxed about 
that? They are probably sick at their stomachs. Will I have my job 
tomorrow?
  They would have their jobs tomorrow, and I hope they do have their 
jobs tomorrow, if we had had some integrity in the board room, if we 
would have had some integrity in the management. WorldCom is an 
excellent example. Tens of thousands of people, current employees, are 
worried whether they are going to have a job tomorrow. The head of it, 
Bernie Ebbers, made sure before the corporation went into a bankruptcy 
he got a $408 million loan from the board of directors. Now, tell me 
those board of directors are watching with the fiduciary responsibility 
on behalf of the employees by loaning Bernie Ebbers, the chief 
executive officer, $408 million.
  All of these people that are losing their jobs, these are jobs that 
did not need to be lost. These are people they were not engaged in the 
fraud. They were not engaged in self-enrichment. They showed up at work 
every day at 8, went home at 5, 6, 7. A lot of them put their heart and 
soul into the company. And a lot of the retired employees cannot 
rebuild. They are in their 60s. They cannot rebuild. Who is speaking 
for those people?
  That is what we have to keep in mind when we take this legislation 
through. When these individuals are prosecuted, like the Rigas family, 
with Adelphia Cable, the Rigas family bought their own professional 
sports team, they took $3.5 billion out of the corporation. We have to 
make sure that we reach back out and pull that back in, if for no other 
reason than to help the employees and the retired employees of that 
company. They deserve more than they have gotten.
  Well, let me go on. I want to talk jump back up here, because I think 
it is a good time to go over an inside deal. What I am talking about, 
when I talk about an inside deal is, remember that I said earlier an 
inside deal is where you have people inside the corporation, inside the 
house, so to speak, who have information that people outside the house 
do not have. Well, the people outside the house are supposed to get it 
on somewhat of an equal basis so that

[[Page H5078]]

you have a square deal, so that you have an equal playing field.
  Here is a good example of a corporation that did a lot of inside 
dealing, and I think the facts are going to bear out that it involves 
an awful lot of people, including one well-known individual by the name 
of Martha Stewart. December 4. Let us look at this. Here is the 
company, ImClone Systems, Incorporated. What did ImClone do? ImClone's 
stock went through the roof because ImClone, the President and CEO of 
ImClone came out and said they thought they had a cure for cancer. The 
president was Sam Waksal. The president came out, or the CEO, and led 
people to believe they had a cure for cancer. They thought they did 
when they went to the FDA, the Federal Drug Administration.

  They also buddied up with the stock broker, the analyst that was 
figuring out whether this was a good buy for the buying public. An 
analyst is supposed to be an outside person. In several of these cases, 
including WorldCom, you will find out that the outside analyst, a guy 
named Grubman, and by the way there is an article on the front page of 
the Wall Street Journal about him today, is supposed to be an outside 
consultant, but he was actually attending board meetings, yet he was 
supposed to give some kind of independent analysis.
  Well, what happened here is the stock was hot because they thought 
they had a drug that could cure cancer. Well, around December 4, 2001, 
the Food and Drug Administration officials informed ImClone that the 
drug was not going to get certified; that they did not believe that the 
trial tests indicated that the drug really was effective as a treatment 
against cancer.
  Now, what do you think is going to happen to the value of the stock 
when word gets out on the street that the drug is not going to work. Of 
course the stock is going to good through the floor. But the chief 
executive officer, the CEO and the other top executives of this 
company, they found out 2 or 3 days, in fact, several days, they got 
the hint around December 4 that this drug may not be approved.
  Now look what happens from September 6 to the 11. All of a sudden the 
executive officials, as if they got some kind of hunch that fell out of 
the air, as if they are brilliant strategists, instead of sharing that 
information with the general public, instead of sharing that 
information with their employees who had worked so hard for them, 
instead of following the Securities and Exchange Commission regulations 
of how this information is disseminated out there, they start selling 
their stock.
  From December 6 through December 11, they unload over $5 million in 
stock. Now, they would like you to think it was a coincidence. December 
26, the CEO finds out that, in fact, the FDA is not going to approve 
the drug and they are going to make the announcement on December 27 or 
December 28, 2 days later. He immediately transfers $5 million in stock 
to his daughter. Then what happens? On December 27, he contacts his 
daughter and she starts selling the stock, because they know the 
announcement is coming the next day.
  Then her broker, who is in all of this, happens to also be Martha 
Stewart's broker, and he contacts Martha Stewart. There is a message 
that is left for Martha Stewart, and that message is right here: 
ImClone is going to start trading downward. Now, this broker's name is 
a guy named Peter Bacanovic, B-A-C-A-N-O-V-I-C, and Bacanovic, it 
seems, would be the pronunciation, but Peter, we will call him. Peter 
would like us to think he had this instinct the stock was going to go 
down.
  Now, Peter, by the way, was a very close friend and used to work for 
this corporation and was very tight with the CEO. In other words, every 
angle you look at any large sale of stock during that period of time by 
the chief executive officers or the broker or the Martha Stewart, every 
one of them smacks of inside information. Every one of them.

  The conflicts are overwhelming in what happened in this particular 
company. And who got cheated here? The people that got cheated here are 
the people that did not know. And under our system of corporate 
governance, we are supposed to have an equal playing field. We are 
supposed to have a square deal. But that is not what happened. That is 
a result of inside information. Inside trading information.
  That is why we here in Congress, on a bipartisan basis, and not 
following the focus of the gentleman from Missouri (Mr. Gephardt), 
whose primary focus is to gain 40 seats from the Republicans, our 
primary focus should be to save these jobs. My primary focus here is to 
stop this inside trading. My primary focus here is to restore corporate 
governance credibility. We have lots of people in this country that are 
shareholders and they are shareholders because they have some faith 
that these kind of deals should not go on, like what went on with 
ImClone.
  And they are not alone. It went on in Global Crossing, it went on in 
Enron, obviously, it went on with Kmart, Xerox, WorldCom, Sunbeam, 
Conseco. These shareholders want to know that there is something to 
clean it up if it goes on and that there is checks and balances, like 
an independent auditor, unlike the demonstration of Arthur Andersen, 
that can go in there and tell you it is not happening; that the 
standards and the credibility of the corporation are intact. That is 
why I am calling upon my colleagues to act swiftly and firmly to stop 
this before it spins out of control.
  As I said earlier in my comments, this is not typical of the average 
business in this country. Remember, most corporations in this country, 
by and large, are small businesses, and these small businesses are mom 
and pop operations and they run good businesses. And the American 
economic machine is dependent on these businesses. So we cannot just 
throw out all business. And it would be wrong for us to say all 
business is bad. It would be like saying all Catholic priests are bad 
because you have to get rid of a few bad apples.
  But the fact is if you have a bad apple in the bushel, you better 
find out where that apple is and you better get rid of it because it 
ruins the other apples in the bushel over time. This is the opportunity 
we are presented with today. Our opportunity today is to take these 
corporations and ensure that we go back to where we are supposed to go. 
We have plenty of examples, and I want to show a few of them.
  Here are a few examples. Commonly known names. These companies have 
bad apples in the bushels. They have bushels of apples that we have to 
go through and get rid of the bad apples. Let us start with Tyco. That 
is where the chief executive officer tried to cheat New York State out 
of sales tax on a few pieces of art and paid himself hundreds of 
millions of dollars from the corporation.
  His lawyer, who was supposed to be kind of a check and balance here, 
his lawyer paid himself $30 million. And this lawyer's name was Mark 
Belnick. Mark paid himself $30 million in this corporation and then he 
structured the payments from that corporation in such a way that it 
would be concealed from the reports that they gave to the public. In 
other words, he kept two sets of books, one set to enrich himself, the 
other set for the public to take a look at.
  Now, WorldCom. We know all about WorldCom.

                              {time}  2230

  It declared bankruptcy this weekend. How many thousands have lost 
their jobs? And what is happening to the chief executive officers 
there?
  Bernie Ebbers made sure before he resigned, he made sure they agreed 
to pay him $1.5 million a year for the rest of his life. That is on top 
of the $408 million loan. The board of directors of that corporation, 
theoretically representing the interests of the shareholders and the 
interests of the employees, gave Bernie Ebbers a $408 million loan. How 
many corporations in the world have ever loaned their chief executive 
officer anything close to that?
  K-Mart's chief executive officer was Charles Conaway before they took 
that company into bankruptcy, and a lot of Members have been in K-Mart. 
There are a lot of hard-working people, and they do not make big wages. 
Those people barely get by on the wages that they make. But at the top, 
that is not the case. Those executives enriched themselves by giving 
themselves loans from the corporation. But these loans were a little 
peculiar. The chief executive officer knew what the definition of

[[Page H5079]]

a loan was, and that is what you pay it. But they wanted to keep the 
money. So right before they took K-Mart into bankruptcy, they passed a 
board proclamation forgiving the loans.
  Xerox Corporation, they overstate their earnings. They cook the 
books.
  Arthur Andersen, these are supposed to be the CPAs. That is supposed 
to be the check and balance in the system. They end up cozying up to 
the chief executive officer and getting a share of the deal, and it 
compromises them. It compromises them to the point that things that 
should have been caught and avoided a long time ago by the auditors 
were not.
  We always deal with greed. It is human nature. I do not care what 
country, what religion it is, you always deal with greed as a fact of 
human nature. As a check and balance we know that, we know that. That 
is why we have auditors. I can tell Members, we are going to get people 
like the Andy Fastows or the Scott Sullivans of WorldCom, but we expect 
the auditors to catch that.
  As I look back at these corporate problems, which as I said earlier 
are limited in nature, but it can spread very, very quickly. If I were 
to look at one place, the first fire call that came in, the first fire 
truck that should have picked up the problem, I keep looking at the 
auditors. I am severely and deeply disappointed by the auditing 
industry in general, by the accounting industry in general. Remember, 
Arthur Andersen is not the lone one. In Enron, Waste Management, 
WorldCom, Sunbeam, Adelphia, Conseco, every one had different auditing 
firms.
  The auditing and the accounting industry has got to clean house, and 
they have to do it themselves and do it quickly. I do not think that 
auditors should be consultants. I do not think consultants should be 
the auditors. We have to have that separation. But the fact that the 
first people that should have picked this up were the auditors and it 
did not happen, that is an important check and balance. That is Arthur 
Andersen.
  Enron is pretty self-explanatory: self-enrichment. A board of 
directors that has conflicts as far as the eye can see. We have 
private, secret companies that are paying $30 million to people like 
Andrew Fastow over a 6-month period, and his buddies made 5 to $10 
million a month in little side deals he feeds them. Where does that 
money come from? Not because Enron figured out a better way to deliver 
electricity or natural resources for minerals or developed a better 
product or mouse trap, as the old saying goes, because Enron allowed 
this fraud to go on; and they were abetted in the fraud by legal 
counsel and Arthur Andersen.
  What happens to these people? This is how we solve that problem. They 
go to jail and when they go past go, they do not collect their money. 
That is the only way we are going to get this message across. There are 
other solutions, and I have mentioned a couple.
  One, the auditors should not be allowed to consult and the 
consultants should not be allowed to be doing the auditing. But there 
are some others. We have to look at the board of directors and what 
kind of conflicts of interest the board has with the company. Enron is 
a good example, or WorldCom.
  We have a director at WorldCom who uses a corporate jet. Let me tell 
Members about a corporate jet. If it is a jet of medium size, let us 
say it seats 8 to 10 passengers, that jet probably costs $15 million to 
$20 million, probably costs the corporation, even if it is just 
sitting, the expenses probably run $100,000 a month; so on a 15 to $20 
million jet, it is probably around a million dollars a year.
  WorldCom on its board of directors makes a deal with one of the board 
members. We will rent this jet to you, and we have to be fair because 
that jet does not belong to me, Bernie Ebbers; it belongs to the 
corporation and that jet is used to move people around. So we cannot 
just let you use the jet. We are going to lease you the jet. The board 
of director, just to make it convenient, we will park the jet on a 
full-time basis at an airport closest to where you live. It costs about 
$100,000 a month to have this jet; we will lease it to you for $1 a 
year. That is what happened at WorldCom.
  Mr. Speaker, we have to have some different standards for our board 
of directors. Board of directors should not have things that the common 
sense, the prudent man, the reasonable-man standard would say look, 
that smells. That is not ethical. Common sense would say it is just not 
right.
  I would assume that today in corporate boards throughout America, 
probably throughout the free world, as well as the executive officers, 
are probably taking a pretty harsh look at how they handle these 
issues.
  I can tell Members there was an interesting editorial the other day 
in the Denver Business Journal. They wrote about me saying a staunch 
Republican standing up on business discussing WorldCom and the comments 
I make.
  Mr. Speaker, I used to be a police officer, and there used to be a 
saying out in the police business. The worst thing for good cops is a 
bad cop, and it is the same thing here. The worst thing for good 
business is a corrupt business person, somebody who cheats. That is the 
worst thing we can get. The worse thing for a sport is somebody who 
cheats. In the short run, your favorite team wins because somebody 
cheated; but over the long run it hurts the sport and the people 
participating in it and the people who have participated in it like the 
retired employees.

  What else can we do. Clearly, our board meetings should not be open 
to the stock analysts. The stock analysts, and we can take a look at 
the stock analysts with WorldCom. We can look at Grubman that is on the 
front page of today's Wall Street Journal, or the stock analysts which 
worked with ImClone, that is the one that Martha Stewart is involved 
with, those people were like they were brothers and sisters with the 
corporate board. They were like they were hatched in the CEO's office. 
Those people are supposed to be independent.
  We heard about some of them. They stand in front of the TV and say, 
What a wonderful stock. I will give you a little advice, buying public. 
If you want to ensure your retirement and retire early, buy this stock 
on its way up. Off the TV camera, they have them sending e-mails, this 
stock is a sucker. Boy, does this stock stink. Corporations across the 
country have to move quickly to put a stop to that kind of thing.
  Does more regulation help? Generally, I am not too sold on more 
regulation, but I think this has taught us in the government some 
lessons. We have to tighten up some areas. We should require that 
options are expensed. Right now, stock options are not. We should 
require, I think, for example, that auditing and consulting should not 
be done by the auditing firm. There should be a separation.
  But the regulation, the loopholes we can close, and we will close a 
number of them this week thanks to the leadership, and help from both 
Democrats and Republicans and President Bush, we are going to close 
some of those loopholes this week. But that is only part of the 
formula. The other two things for this to work is the industry itself. 
Business itself, whether it is a mom and pop or a Xerox, they have got 
to have a self-cleansing. They have to get that bad apple out of the 
bushel, and they have to do it now.
  The third thing we have to do, and I will conclude with this, but the 
third thing that we have got to do is we have got to punish those who 
have enriched themselves at the expense of others. We cannot allow, for 
example, Gary Winnick to live in his $90 million home after he took 
$790 million out of the company. We should not allow Scott Sullivan to 
bathe in his private pool at his $20 million home he is right now 
building at the expense of WorldCom employees, at the expense of 
WorldCom investors and mutual funds across the country.
  We should take the ill-gotten gains, and that is the buzz word. We 
must act. Our U.S. Attorney's office should act. The IRS should act. 
The Security and Exchange Commission should act, and I am confident 
that they all are; but they must act with haste. They must move 
quickly, firmly, and constitutionally. I am not saying that we infringe 
on legal rights.
  But look at ImClone. There is so much evidence that we need to punish 
the people. We cannot have a repeat sequence of this. We have to let 
people know if you are going to lie to the employees and cheat them out 
of their retirements and cook the books, if you are going to misuse 
corporate assets and self-enrich yourself, it is not tolerable. We need 
to go after that kind of behavior.

[[Page H5080]]

  Mr. Speaker, I know that some of my comments appear repetitive, but I 
am worried about this. There is no reason that our stock market should 
be dropping like it is. The fundamentals are pretty solid. Our recovery 
will not be a big boom economy because the recession was not that deep 
of a recession. The techie stuff, the telecom, that bubble burst; but 
we are still on the way to a recovery. This market is overselling right 
now, and one of the factors why it is overselling is because we have to 
figure out the integrity on corporate governance. It is not the kind of 
thing that is going to be solved by the gentleman from Missouri (Mr. 
Gephardt) claiming that he is going to take 40 seats from the 
Republicans, and that is why they love this issue and why they are 
going to focus on it.
  It is going to be solved by a bipartisan effort from both sides of 
the aisle along with the Senate and the President by saying here are 
the regulatory things that need to take place; business, here is what 
we expect you to do in order to restore credibility to the market. That 
is what will help stabilize our stock market. In the end, an honest 
business person is a winner for everybody. We have to remember that 
because the backbone of our economy is small business and most of what 
we deal with is small business, not the ones that I just talked about. 
Let us get rid of the big bad apples in the bushel so the rest of the 
apples are as good as we know they can be.

                          ____________________