[Congressional Record Volume 148, Number 100 (Monday, July 22, 2002)]
[Senate]
[Pages S7132-S7134]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           CORPORATE AMERICA

  Mr. REID. Mr. President, flying back here last night from Nevada, I 
spoke with two flight attendants. Usually they talk to me about working 
conditions, air marshals, or something dealing with their job. But they 
were concerned about corporate America. They talked to me two separate 
times. In effect, they said: This is a disgrace. I hope, Senator, you 
are doing something about it.
  This morning when I was at the doctor's office, I had another 
conversation about the problems in corporate America. Because of my 
light complexion and having been raised in the desert sun, I on 
occasion have had a dermatologist take little things off my face, and 
today was one of those occasions. While I was waiting for the 
physician, a nurse approached me, and said: Senator, I hope you do 
something about what is going on in America today. These scandals in 
the corporations are outrageous.
  Everyone in America is concerned. I was in Nevada this weekend, and 
five or six different people came to me on different occasions, talking 
not about the things I would normally expect upon returning to Nevada, 
but about corporate America and what is going on.

[[Page S7133]]

  We are debating a bill that directly deals significantly with 
corporate America: Pharmaceutical companies. We have been told in the 
debate the average CEO of a pharmaceutical company in America makes $27 
million a year. Pretty good change.
  This debate deals with generics, it deals with prescription drugs, it 
deals with patents on medicines, but it also deals with corporate 
America.
  In response to the crisis of confidence that has plagued American 
investors, the Senate has responded forcefully. The majority, the 
Democrats, have led the way by drafting important legislation to close 
loopholes and bring about more corporate accountability. The Senate 
unanimously passed an accounting reform bill that protects investors 
and punishes corporate criminals. The Republican leadership in the 
House led an effort to pass a watered-down version that does not go 
nearly far enough. I am encouraged by reports that many in the House 
support the stronger policies the Senate passed, and I hope the 
legislation that comes out of the conference is one that has the 
Senate's mark on it. I am looking for the President to come forward and 
support our position.
  Over the weekend, again, he said, please, give us a bill before the 
August recess. What bill does he want? Does he want the nothing bill 
the House has, or is he willing to come forward and talk about the 
Sarbanes version of the legislation, which is strong legislation, which 
would restore confidence, so that flight attendants and nurses are not 
worried about corporate America?
  Nevadans are significantly impacted by the downturn in the financial 
markets. People in Nevada count on their investments to help meet their 
current daily expenses and plan for the future. That is the way it is 
all over America. Nevada's high quality of life has attracted many 
retirees. But many have seen their life savings evaporate as stock 
prices fall. As accounts have dwindled in the last 4 or 5 days we have 
heard people saying they wished they had never gone into the stock 
market. They are checking out. Nevada workers nearing retirement face 
uncertainty about their ability to stop working because they no longer 
can afford to do so.
  We have seen the cartoons around the country asking why this person 
is working so long, and the cartoons indicate: I invested in the stock 
market, and I have to work until I'm in my nineties.
  College plans for students in Nevada are now in jeopardy because 
family savings have disappeared.
  The collapse of Enron--taking just that one scandal, because there 
are many others--has had a ripple effect that has caused economic 
difficulties and threatened the health of Nevada generally. The State 
public employees retirement pension fund lost almost $23 million 
invested in Enron. That is a lot of money for a small State such as 
Nevada. Thousands of Nevada's dedicated public servants who worked hard 
and saved and invested responsibly have seen their investments erode to 
satisfy the greed of corporate fat cats.

  In addition, look at the trauma center at the University Medical 
Center in Las Vegas. Las Vegas is now a major metropolitan area. About 
1.5 million or 1.6 million people live and work in that area. The one 
trauma center where they took care of the accident cases and took care 
of the indigent patients, basically, in Nevada--it serves a huge number 
of people; it is one of the busiest in the country--has been forced to 
close temporarily and faces a very unsure future.
  Why? Because of corporate America. This is linked to the Enron 
scandal because the Medical Center's insurer, St. Paul, lost $108 
million invested in Enron. That is five times as much as the total cost 
for medical malpractice payouts in Nevada. As a result, St. Paul has 
raised premiums for malpractice insurance to such an extent that many 
doctors have elected simply to leave the State.
  We have one physician who is going into long-haul truck driving. And 
many doctors have elected not to work at the trauma center.
  Going to a little different subject, it is hard to comprehend that 
these insurance companies get away with as much as they do. There is no 
other business in America that can meet--not secretly--and fix prices. 
Because of the McCarran-Fergusson legislation passed during the 
Depression, insurance companies are not bound by the Sherman Antitrust 
Act. They can meet to set prices to run people out of business. It is 
not against the law, civilly or criminally.
  I am deeply concerned about the problems caused by scandals in 
corporate America and their far-reaching effects. I want to make sure 
the President responds appropriately, or tries to. Unfortunately, the 
administration so far has not provided the reassurance the public 
seeks. It fails to demonstrate leadership on this issue.
  Let me be clear, the crisis in investor confidence is in danger of 
spreading. I don't know what is going to happen today, but I saw an 
hour ago the Dow was down 258 points again today. Maybe it will have a 
rally in the next hour or 2 and be fine, but that is what I saw.
  The crisis in investor confidence is in danger of spreading, 
potentially crushing consumer confidence and reducing consumer 
spending, and that is all we have going. If we reduce consumer 
spending, that would be devastating in the country. The climate of 
scandal is linked to the administration in this way. I think how the 
President responds also is important. I do not think he has responded 
appropriately.
  He has given a speech. You could see the stock market dropping as he 
was speaking. That is what the TV stations did. As he is speaking about 
consumer confidence, the stock market is reeling backwards.
  Among the steps the President must take to resolve the crisis in the 
financial markets and to restore confidence is to replace, in my 
opinion, key members of his administrative team who cannot be effective 
in bringing about necessary changes. In Government, we not only have to 
do what is right but what looks right. We have to not only do what is 
right, but what appears to be right.
  The Securities and Exchange Commission is the main regulator of 
America's financial markets. The President chose Harvey Pitt, who 
aggressively defended the big accounting firms and corporate America 
and represented the lobbying group for the big accounting firms, while 
he being confirmed as Chairman of the SEC, the agency that is charged 
with investigating the same accounting firms involved in the scandals 
that rocked the stock market and hurt millions of America's investors. 
It is trite, but it seems to me it is installing the fox to protect the 
hen house.

  Mr. Pitt set the wrong tone from the beginning, suggesting he would 
have the SEC be ``kinder and gentler.'' Kinder and gentler? One of his 
former clients is Arthur Andersen, a firm implicated in so many 
unfolding scandals that major magazines have reported they no longer 
have anyone working there.
  Is Mr. Pitt really the right person to investigate Andersen, 
implement charges, oversee them and enforce regulations? Those flight 
attendants I met last night, and the nurse today, I think would say: He 
wants a kinder, more gentle SEC? I don't think so.
  He has already had to recuse himself from more than two dozen SEC 
investigations, but he did not see anything wrong with meeting 
privately with the incoming chairman of KPMG, another former client, 
when his firm was under investigation for its accounting work with 
Xerox.
  The SEC needs a new leader, somebody free from conflict of interest, 
who recognizes how damaging even the appearance of conflict of interest 
is at this sensitive time for America's financial well-being. Neither 
the American public nor responsible business leaders have confidence in 
Mr. Pitt's ability to serve effectively.
  The Wall Street Journal, among other respected voices in the 
financial community, has expressed the need for a replacement. You 
cannot say the Wall Street Journal is some left-leaning, left-wing 
organization opposed to business. Quite the contrary. But they say he 
should be replaced.
  A growing number of my colleagues in Congress, both Democrats and 
Republicans, have indicated it is time for him to go. So I join with 
them in calling on Mr. Pitt to resign or for President Bush to replace 
him. It would send a strong message to Wall Street, to the people who 
work for the corporations in Wall Street, the people who

[[Page S7134]]

earn a living making that stock as valuable as it is.
  I am also troubled by the Secretary of the Army, Thomas White, who 
testified before the Commerce Committee last week about his role as 
vice chairman of Enron Energy Services. Those who observed his 
testimony can only be disturbed by his performance. Memos written by 
Enron lawyers in the year 2000 suggest that the division of Enron led 
by Secretary White at the time overstated the demand for power so that 
another division could benefit from artificially higher prices. As a 
result, Enron raked in obscene profits while consumers paid billions of 
dollars in excess.
  It was all phony accounting, a manipulation, by an organization led 
by the Secretary of the Army.
  Enron's manipulation of California's energy markets affected the 
entire western United States. It affected Nevada adversely, driving 
Nevada's utilities to the brink of bankruptcy and forcing consumers to 
pay skyrocketing rates.
  Secretary White received approximately $50 million while at Enron--
he, personally--and he made an additional $12 million after he joined 
the Bush administration by selling Enron stock following 77 phone calls 
to his former colleagues at the company.
  During the questioning by Senator Boxer and others he claimed: Well, 
I was just seeing how my friends were doing.
  He made $12 million, made 77 phone calls. It just doesn't look right.
  The New York Times reported that last December the Army, which of 
course reports to Secretary White, granted a sweetheart deal to KBR, a 
division of Vice President Cheney's former employer Halliburton, 
``despite being a reputed bill-padder and the target of a criminal 
investigation.''
  I don't know what Secretary White's total involvement in these 
dealings might be. I hope neither he nor any of the administration 
officials being investigated is guilty of any criminal wrongdoing. But 
it is obvious that he cannot be an effective leader if he doesn't have 
the confidence of the American public, the airline steward or 
stewardess or the nurse. It would be in the best interests of our 
country and the administration if he resigned.
  We in Government not only have to avoid what is wrong but also what 
looks wrong. With the Secretary of Army it looks wrong. With the head 
of the SEC, Harvey Pitt, it just doesn't look right.
  The PRESIDENT pro tempore. The senior Senator from Utah, Mr. Hatch, 
is recognized.


                              The Economy

  Mr. HATCH. Mr. President, I have been listening to the assistant 
majority leader. I was very interested in his remarks. This President 
has been in office less than a year and a half. It does seem to me that 
the problems we have in America are problems for everybody--not one 
party and not one President. They are problems for all of us.
  I have to say I think this President is doing everything he possibly 
can to try to stabilize this economy and get us through these 
difficulties. Certainly the economy is doing well. We have 3-percent 
productivity growth, which is better than the whole time between 1980 
and 1995. There are a number of other things which show that we have a 
strong economy.
  But this underlying illness that afflicts the stock market is hurting 
everybody. I suspect part of that comes from what has gone on over the 
last 10 years or so and not just in the last year and a half. There has 
been a lack of confidence in our business community because of those 
who have been committing these heinous acts of misrepresentation and 
fraud in some of these major corporations in America. There have been 
relatively few. And I see that other corporations are scrupulously 
going over their books to make sure they are toeing the line in meeting 
the needs of the American stock market.
  I suspect we are going to come through this within the next couple of 
weeks, and when people start to realize that our economy is good and 
that we are going to come through this, we will be OK. But I think it 
may be a little unfair to suggest that it is basically all this 
President's fault or that it is all one party's fault. We all have 
things we could have done better. We all have some responsibility.
  I believe our current President is doing an excellent job. As 
everybody knows, I stood up for the prior President when I thought he 
was right.

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