[Congressional Record Volume 148, Number 102 (Wednesday, July 24, 2002)]
[House]
[Pages H5375-H5411]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1900
IN THE MATTER OF REPRESENTATIVE JAMES A. TRAFICANT, JR.
Mr. HEFLEY. Mr. Speaker, I call up the privileged resolution (H. Res.
495) in the matter of James A. Traficant, Jr., and ask for its
immediate consideration.
The Clerk read the resolution, as follows:
H. Res. 495
Resolved, That, pursuant to Article I, Section 5, Clause 2
of the United States Constitution, Representative James A.
Traficant, Jr., be, and he hereby is, expelled from the House
of Representatives.
The SPEAKER. The resolution constitutes a question of the privileges
of the House and may be called up at any time.
Announcement by the Speaker
The SPEAKER. Before our debate begins, the Chair will make a
statement about the decorum expected in the Chamber.
The Chair has often reiterated that Members should refrain from
references in debate to the conduct of other sitting Members where such
conduct is not the question actually pending before the House, either
by way of a report from the Committee on Standards of Official Conduct,
or by way of another question of the privileges of the House.
This principle is documented on pages 174 and 703 of the House Rules
and Manual and reflects the consistent rulings of the Chair.
It is also well established that indecent language either against the
proceedings of the House or cast against its Membership is out of
order.
Disciplinary matters, by their very nature, involve personalities.
The calling up of a resolution reported by the Committee on Standards
of Official Conduct or the offering of a resolution as a similar
question of the privileges of the House embarks the House on
consideration of a proposition that admits references in debate to a
sitting Member's conduct.
This exception to the general rule against engaging in personality,
admitting references to a Member's conduct when that conduct is the
very question under consideration by the House, is closely limited.
This point was well stated by the Chair on July 31, 1979, as follows:
while a wide range of discussion is permitted during debate on a
disciplinary resolution, clause 1 of rule XVII still prohibits the use
of language which is personally abusive.
This was reiterated by the Chair as recently as January 27, 1997. It
also extends to language which is profane, vulgar or obscene and to
comportment which constitutes a breach of decorum.
On the question about to be pending before the House, the resolution
offered by the gentleman from Colorado (Mr. Hefley), as chairman of the
Committee on Standards of Official Conduct, Members should confine
their remarks in debate to the merits of that precise question.
Members should refrain from remarks that constitute personalities
with respect to members of the Committee on Standards of Official
Conduct, with respect to other sitting Members whose conduct is not the
subject of the pending report, or to Members of the other body.
The Chair asks and expects the cooperation of all Members in
maintaining a level of decorum that properly dignifies the proceedings
of this House.
As always, the galleries must refrain from any manifestation of
approval or disapproval of the proceedings.
Pursuant to clause 4 of rule XVII, the Chair intends to take
necessary initiatives to ensure proper decorum.
Motion Offered by Mr. LaTourette
Mr. LaTOURETTE. Mr. Speaker, I offer a motion.
The Clerk read as follows:
Mr. LaTourette moves to postpone further consideration of
House Resolution 495 until September 4, 2002.
The SPEAKER pro tempore (Mr. Hansen). The gentleman from Ohio (Mr.
LaTourette) is recognized for 1 hour.
Mr. LaTOURETTE. Mr. Speaker, as a first matter of business, I ask
unanimous consent to yield 30 minutes of my time to the gentleman from
Colorado (Mr. Hefley), the distinguished chairman of the Committee on
Standards of Official Conduct, and further ask that he be permitted to
yield time from that 30 minutes.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Ohio?
There was no objection.
Mr. LaTOURETTE. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, my motion to postpone would postpone the proceedings
until a date certain, as a matter of fact, the day we would return from
recess.
Mr. Speaker, this is a historic moment in the House of
Representatives. Not since 1861, nearly 120 years ago, has the House
expelled one of its Members. As we consider the resolution of expulsion
today, it seems to me that we should do so with all the care and due
regard for both this institution and the individual involved. This
institution makes the Nation's laws; therefore, we have the obligation
to be more concerned with the rule of law and the observance of law
than any other institution in America.
Mr. Speaker, I wish I could take credit for those words, but I
cannot. Those words were spoken by the Honorable Louis Stokes in 1980,
the only other time that the House of Representatives has taken upon
this course of action since the American Civil War; and on that
particular occasion, which was the expulsion vote of Representative
Myers of Pennsylvania, Congressman Stokes rose and made the same motion
that I am making here this evening.
I would ask Members to pay attention to the similarities between
where we find ourselves today and where the Congress found themselves
in 1980, the only other time that this happened in this Congress's
history, again, since the Civil War. Representative Myers had been
convicted by a jury of a felony, of felonies. Representative Traficant
has been convicted by a jury of felonies. Representative Myers was
pending sentence and had not been sentenced on the date that the
resolution was brought to the floor. Congressman Traficant has not been
sentenced by the judge in Ohio. The House considered the resolution
against Representative Myers on the last day before Congress left town
for a 1-month recess in 1980. Tonight, we are 2 days from a 1-month
recess in 2002. Representative Myers was caught on videotape accepting
$50,000 from an individual who was dressed up as an Arab sheik; he
admitted his conduct before the Committee on Standards of Official
Conduct. Congressman Traficant, in his case, there is no videotape,
there is no audiotape, there are no fingerprints, and he has denied the
allegations.
In this matter, although there were numerous witnesses that testified
in the proceeding in Cleveland, Ohio, in Federal court, I would submit
to Members, in my opinion, it boils down to a case of direct testimony
in conflict. There are, and those of my colleagues that have practiced
law know that there is something that we prosecutors used to do called
``putting lipstick on the pig,'' and you would have one witness that
was seminal to your case, but you would call on other witnesses to say
oh, I went to the bank, or I picked up the newspaper that morning, or I
did this or I did that, seemingly to corroborate the main witness's
testimony.
I would give an example, because since I have traveled the floor
since this matter came about, the one count, although all are serious,
and I will tell my colleagues right now, so that there is no confusion
about where I come from, that if Congressman Traficant committed these
acts, I will vote to expel him, because they are reprehensible.
The most serious example that has been given to me as I have talked
to other Members on the floor deals with kickbacks, the allegation that
a member of his staff was hired and was required to deposit his
congressional paycheck and every month take $2,500 in cash and deliver
it to the Congressman.
Over the course of time, and this fellow's name was Sinclair. Over
the course of time that this was alleged to have occurred, it would
have been $2,500 a month for the months of his employment; it adds up
to $32,500. During the same period of time, the government also
indicated that Congressman Traficant had received $13,000 in cash
bribes from another individual.
[[Page H5376]]
That is count 3, not only on the indictment, but also the charges
before us this evening.
The government introduced witnesses that said that, in fact, Mr.
Sinclair went to his bank, deposited his congressional paycheck and
took out $2,500 in cash. Mr. Sinclair also came forward and indicated
that he brought some burnt envelopes to the FBI, the Federal Bureau of
Investigation and said that Mr. Traficant, after suspicion was cast
upon him, brought him the cash back in the burnt envelopes; and that
was introduced as evidence as well.
The competing evidence, and why it is conflicting and why it is
different than Representative Myers where we have a videotape and
audiotape and other matters is that 1,000 documents were submitted to
the FBI lab, one of the best in the world, if not the best, and no
fingerprints are found on any money, any envelopes, any plastic bags,
nothing.
Further, I would tell my colleagues that they looked at Congressman
Traficant's bank account as well. Over the same time period, over the 2
years, he had deposits of $7,600. If the government's case is to be
believed on that point and, again, we are talking about direct
evidence; I am not asking anybody to subscribe to my view of the
evidence, but about $40,000 is missing. Now, I would note, and I would
ask what we used to ask in the law business, Members of Congress to
take judicial notice, we know that that $40,000 was not spent at Brooks
Brothers.
We have an issue where Mr. Sinclair says, this is what happened.
Congressman Traficant says, it did not. And that creates the backdrop
for why I decided to file this motion, the same motion that was
introduced by Louis Stokes in 1980.
When this matter came before the Committee on Standards of Official
Conduct, and I want to give praise at this moment in time to the
gentleman from Colorado (Mr. Hefley), the chairman of that committee,
who has the toughest job in the House of Representatives, for his work.
And I also want to commend the gentleman from California (Mr. Berman),
the ranking member, not only because he has the second toughest job,
but I just want to, just as a personal, point of personal privilege for
a minute, when I filed this motion, I was originally told that there
may be some who would seek to file a motion to table so we could not
even have this discussion this evening. The gentleman from California
(Mr. Berman) worked very hard to make sure that I had the opportunity
to speak tonight and those who wanted to agree with me, and I thank him
very much.
This sets the backdrop for what I think brings us here this evening,
or at least me here this evening, and it is a fellow by the name of
Richard Detore. Richard Detore is an individual who was indicted in a
superseding indictment to the Congressman. He did not testify at the
trial, because he has fifth amendment concerns. He did come against
those concerns to testify before the Committee on Standards of Official
Conduct in open session.
He testified, and again, we were free to believe or disbelieve, but
that is not the point, and we will get there from here, that he was
asked by the assistant United States Attorney to tell a story, and the
story was that he was in a room here in the Capitol and he overheard a
conversation between a fellow by the name of J.J. Cafaro and another
individual wherein it was discussed that Congressman Traficant was
being bribed in return for favors, and the specific favor had to do
with technology, laser technology for landing airplanes, which most of
you voted for if you voted for AIR 21.
Mr. Detore testified to us, and again he did not appear at trial,
that when he declined, and he said, I will tell you anything that I do
know; he was originally given a grant of immunity: I will tell you
anything that I do know, but that is not true, that did not happen.
First, he was threatened with the Internal Revenue Service. Next, it
was indicated to him that he would be charged with bank fraud. I want
my colleagues to listen to the description of bank fraud because this
is very telling.
When he got the job with U.S. Aerospace Group, he was promised
employment of $240,000 a year. His employer, one of the accusers of the
Congressman, gave him a letter saying, you are going to be the new CEO
of this company and you are going to make $240,000. He took that letter
to the bank to get a mortgage, as I think many of us in this room have
done. When the accuser in another count of the Congressman told the
story, he said, you know, you can get him, because we never signed his
employment agreement. So his using the letter saying we are going to
pay him in the future, he did not have a signed employment agreement;
he has committed bank fraud.
When he did not believe that, and no reasonable human being would, he
said they would indict him. He said, you know what? Indict me. And he
stands indicted today.
Since his testimony, again, not seen by the jury, a juror in
Cleveland, Ohio, has come forward to the newspaper; and, Mr. Speaker, I
will introduce an article for the Record appearing in the Cleveland
Plain Dealer on July 20 written by an excellent journalist by the name
of Sabrina Eaton, and the headline is: ``Traficant juror changes his
mind; now convinced conviction was wrong,'' and I will include the
article in the Record at this time.
Traficant Juror Changes His Mind; Now Convinced Conviction Was Wrong
(By Sabrina Eaton and John Caniglia)
Washington.--A juror who helped convict U.S. Rep. James
Traficant says his vote to find the Youngstown congressman
guilty of 10 felonies in April was a mistake. He says he
changed his mind after watching televised testimony before a
House ethics panel this week.
``I know it's after the fact, but now I believe that
there's no doubt that the government was out to get him, and
if they want you, they'll find enough evidence to make you
believe that the Earth is flat,'' said Leo Glaser of
Independence, who was juror No. 8 at Traficant's nine-week
trial in Cleveland.
Glaser, 54, said he was swayed by the testimony of Richard
Detore, a Virginia executive accused of bribing Traficant.
Detore, who faces trial in October, chose not to testify in
Traficant's trial because he could have hurt his own case.
But he did give his version to a House ethics panel that
later recommended that Traficant be tossed from his job.
Detore told the panel he hadn't tried to bribe Traficant
and that the chief prosecutor in the case against Traficant,
Assistant U.S. Attorney Craig Morford, urged him to fabricate
a story to say he overheard Traficant seeking favors from
Youngstown businessman John J. Cafaro in exchange for
political influence. He said his refusal to lie about
Traficant resulted in his own indictment.
Morford, who was unable to present his side of the story
when Detore testified in Washington, yesterday categorically
denied ``any improper conduct'' and said Traficant brought up
the same allegations last year in legal motions that were
rejected by Judge Lesley Wells. He declined to comment on
Glaser's statements.
Under federal law, Glaser's change of heart won't change
the verdict against Traficant. Although it's unusual for
jurors to change their minds after a trial, Case Western
University law professor and political scientist Jonathan
Entin said Traficant probably won't succeed if he tries to
use Glaser's reversal to appeal the verdict, because Detore
voluntary refused to testify in Cleveland.
Madison Republican Rep. Steve LaTourette, a member of the
ethics panel that recommended Traficant's expulsion on
Thursday, said that Glaser contacted his office several weeks
ago to discuss the case but that ethics committee lawyers
barred him from talking to the juror because of his role in
deciding Traficant's fate.
LaTourette said he'll ask Speaker Dennis Hastert to bring
Glaser's concerns to the attention of the House of
Representatives before it decides whether to eject Traficant
next week.
Another ethics committee member, Cleveland Democrat
Stephanie Tubbs Jones, said she wasn't sure how Glaser's
statements would affect Traficant's case.
``He's certainly not the first juror to reconsider his
decision after a trial,'' Tubbs Jones said.
Glaser, who came to public attention when a Cleveland judge
dismissed a traffic citation he was issued while trying to
feed a homeless man during the 1996 holiday season, said he
would have voted to acquit Traficant of all charges if Detore
had testified at the bribery and racketeering trial.
``It would have give me reasonable doubt,'' said Glaser, a
design technician at the Cleveland Electric Illuminating Co.,
who has twice run for mayor of Independence.
But other jurors said the evidence, with or without
Detore's story, buried Traficant. Traficant's employees said
he made them give kickbacks from their salaries and do unpaid
work on his farm and boat. Local contractors said they gave
Traficant bribes in exchange for assistance. Wells is
scheduled to sentence Traficant on July 30.
``There was just so much evidence in the case and so many
witnesses that the wealth of information against [Traficant]
was overwhelming,'' said Jeri Zimmerman, a juror
[[Page H5377]]
from Mentor. ``I kept saying to myself, `Please, please show
me something, anything, that would make me wonder.' but
[Traficant] never did. And the witnesses he called hurt him
more than helped him.''
Asked about Detore's testimony before the panel, Zimmerman
said: ``That's one person. What about the other 50 people
that we saw? The government's case was overwhelming.''
Mr. Speaker, that article is based upon his observation of the
hearings here in Washington, D.C.
Then, another juror came forward on Monday of this week and, in
pertinent part, his affidavit indicates: ``I did not believe the
testimony of the key government witnesses, and I did not believe that
the government proved that James Traficant committed any offense,'' and
I will include this affidavit for the Record at this time.
Affidavit
lorain county, state of ohio
Affidavit of Scott D. Grodi
Now comes Scott D. Grodi, and being first duly sworn upon
oath, deposes and states the following:
1. I was selected as a juror in the case of United States
of America vs. James Traficant in January 2002. I did not
know anything about James Traficant at that time.
2. I served on the jury for eleven weeks and was excused by
the Judge, without objection from either the government or
the defense so that I could take care of family obligations.
3. I listened to the testimony of all government witnesses,
all defense witnesses, in addition to hearing closing
arguments before being dismissed.
4. When I was dismissed as a juror, I did not believe the
testimony of the key government witnesses and I did not
believe that the government proved that James Traficant
committed any offense.
5. I do not believe today that James Traficant was guilty
of the charges brought against him.
Further affiant sayeth naught.
Scott D. Grodi.
Sworn and subscribed before me on this the 24th day of
July, 2002 by Scott D. Grodi in Lorain County, Ohio.
John P. Kilroy.
{time} 1915
Next week, Mr. Speaker, the judge in Cleveland will consider justice
in the Myers case, whether or not to pronounce sentence and what that
sentence should be, but first will have to dispose of some due process
procedural motions filed by the respondent, Mr. Traficant, including a
motion for a new trial.
And I will say I do not know everybody in this House well, but I have
been here for 8 years, and I would trust that those Members who know me
know I am not a black helicopter guy, I am not a big conspiracy
theorist, but Mr. Traficant's argument was, if we believe him, that the
Government was out to get him because of other things. And I would say
to my friend, and particularly my friends from Massachusetts, I would
ask my colleagues if they could have imagined that Joseph Salvati could
have been a subject of rogue FBI agents and kept in prison by our
Government unlawfully for 35 years.
If my colleagues watched the Today Show and they saw the preview of
Mr. Traficant's hearing here today, the second story was about a man
who had spent 17 years in prison for murder and the prosecuting
attorney was in possession of a confession from another individual, but
suppressed it and the man spent 17 years in prison.
I would just close at this point with another observation from 1980,
and this observation says: ``I too am a former assistant U.S. attorney.
I think I share the feelings of all the Members that have had a chance
to review those videotapes,'' again, those are the Myers videotapes,
``that the conduct of the Member in question certainly was repugnant to
all of the standards that I believe the Nation expects from this
Congress, but I have to agree with the gentleman,'' Mr. Stokes, ``that
we do not have the responsibility to judge each other's character,
unfortunately, and I think until this matter is finally resolved in the
courts that we should really come back and address ourselves to the
issue in a climate that is not as political as the one we find
ourselves in today.'' That was the gentleman from New York (Mr.
Rangel).
Mr. Speaker, I reserve the balance of my time.
Mr. HEFLEY. Mr. Speaker, first of all, I yield 15 minutes of my 30
minutes to the gentleman from California (Mr. Berman), the ranking
member of the Committee on Standards of Official Conduct, for his
control of that 15 minutes.
The SPEAKER pro tempore (Mr. Hansen). Without objection, the
gentleman from California (Mr. Berman) will control 15 minutes.
There was no objection.
Mr. HEFLEY. Mr. Speaker, I yield myself such time as I may consume. I
rise to speak in opposition to the motion by the gentleman from Ohio
(Mr. LaTourette), and I oppose the motion for the following reasons:
The bipartisan membership of the Committee on Standards of Official
Conduct has worked diligently, and I think fairly, over the course of
several months, and this has brought us to the resolution under
consideration today to expel Representative Traficant. The committee
following regular order has placed this matter in the hands of the
leadership to schedule it whenever the leadership deemed appropriate.
In fact, when asked what I wanted in this, I said, ``If you let it
lay over until September, that is fine with me. If you schedule it now,
that is fine with me. Whatever you think is best for the schedule, that
is fine with me.'' They scheduled it for tonight, and so tonight is the
night that we need to do this business.
The committee reached its decision to sustain nine counts of
misconduct against Representative Traficant based on clear and
convincing evidence before it. In an article in the Youngstown, Ohio
Vindicator, dated July 23, yesterday, the juror, I think the same juror
that Mr. LaTourette mentioned: ``Leo Glaser said today that his vote to
convict U.S. Representative James A. Traficant, Jr., stands. Glaser,
juror number 8 in the Federal District Court trial in Cleveland, said
his quotes in a newspaper story over the weekend were somewhat
inaccurate.
``He said he found the headline in the Cleveland Plain Dealer story,
`Traficant juror changes his mind; now convinced conviction was wrong,'
especially inaccurate.'' So while I have sympathy for what Mr.
LaTourette is trying to do, I do not know if this juror thinks he made
the right decision or he did not make the right decision. I cannot tell
from these stories. But, Mr. Speaker, I would urge that Members vote
against this motion.
Mr. Speaker, I reserve the balance of my time.
Mr. BERMAN. Mr. Speaker, I yield myself up to 7 minutes.
I oppose the motion of the gentleman from Ohio (Mr. LaTourette), who
is a very diligent and very valuable member of the committee, who
joined in the unanimous vote to recommend expulsion.
A word about the testimony before the committee of Richard Detore,
for when we hear the gentleman from Ohio's (Mr. LaTourette) argument,
we realize that only one issue has come up since the time that the
committee recommended expulsion that changes the facts before us since
the committee completed its deliberations, and that is the comments of
jurors. I will address those comments in a few moments, but first I
want to talk about the testimony that I think is underlying some of the
concern, that of Richard Detore.
Unlike the jurors in Cleveland, the eight members of our adjudicatory
subcommittee, including myself, heard Mr. Detore's efforts to exculpate
Mr. Traficant.
We nonetheless determined that the allegations against the gentleman
had been proven by clear and convincing evidence, including count 3,
the only count, the single count on which Mr. Detore arguably had
pertinent firsthand information. Despite his limited familiarity with
the full range of charges against Mr. Traficant, Mr. Detore nonetheless
spoke with assurance about matters of which he could not possibly have
had direct knowledge, including events in Youngstown, of which this
Washington area resident could not have been aware and private
conversations which did not include him.
He testified about conversations between Mr. Traficant and J.J.
Cafaro, a business plan for whom Mr. Traficant secured a $1.3 million
appropriation and who engaged in a sham transaction involving $13,000
in cash and $26,000 additionally in repairs and boat slip fees in a
sham transaction pretending to buy Mr. Traficant's boat. Cafaro and the
former USAG chief engineer, Al Lange, Cafaro and Cafaro Company
treasurer Dominic Roselli, and Cafaro and his accountant Patricia
DiRenzo.
[[Page H5378]]
Mr. Detore testified on all of these conversations and there is not a
bit of evidence that he was a party to or a participant in any of these
conversations.
The adjudicatory subcommittee found Mr. Detore either lacking in
credibility or found his testimony outweighed by the overwhelming
evidence against Mr. Traficant.
It has been argued that as an indicted co-defendant, which he is, he
placed himself in great peril by testifying before our committee and
that this bolsters his credibility. I think it can be argued just as
well that this was his Hail Mary pass to discredit the Assistant U.S.
Attorney before his case goes to trial. Mr. Detore clearly demonstrated
that ours is the forum where he intended to try to save his neck.
He has repeatedly failed to show up at pretrial hearings in Cleveland
citing ill health, yet he managed to make a surprise appearance before
our committee last week, testifying for hours late into the night. For
that reason, he is now facing contempt charges in Cleveland, charges
that he and the gentleman from Ohio will doubtless argue is further
evidence by their persecution by the Assistant U.S. Attorney.
Casting further doubt on the voracity of Mr. Detore's allegations of
misconduct by the assistant U.S. attorney, is the fact that he
similarly hurled accusations of misconduct against the staff of the
Committee on Standards of Official Conduct, staff which we know to a
certainty acted appropriately and the allegations are patently false.
Let us look at the recantations by juror Leo Glaser. He has been
cited as saying that he heard at trial the testimony he heard of Mr.
Detore last week. If he had heard that, he might not have voted to
convict. I would point out that the conclusion of the Adjudicatory
Subcommittee and the recommendation that the gentleman be expelled were
based not to the conviction, but on the evidence presented at trial.
Furthermore, Mr. Glaser has gone on to say to the press that he also
did not have the opportunity to hear how the Assistant U.S. Attorney
might have cross-examined Mr. Detore so he cannot be sure how he would
have weighed the Detore testimony. Nor does he know what his fellow
jurors might have argued in their deliberations after Mr. Detore's
testimony in cross-examination.
And finally, Mr. Detore could have testified at trial. Mr. Traficant
did not call him. We do not know whether he would have taken the fifth
amendment at trial. He did not take it in our Committee on Standards of
Official Conduct hearing. If anyone denied Mr. Glaser the opportunity
to hear Mr. Detore during the trial, it was the gentleman from Ohio. It
is intriguing to me that suddenly Mr. Detore is made available to make
a statement to us.
With regard to the second juror, he did not even participate in the
jury deliberations at all. He left the jury to attend a family funeral,
an alternate was selected. He has no idea what the give and take was
inside the jury room during the deliberations.
Let me reiterate that unlike the jurors in Cleveland, we did hear
from Mr. Detore, yet we were not persuaded. We voted for the count with
regard to which he testified, count 3, and for eight other counts,
finding that the evidence established by clear and convincing evidence
that the rules of the House have been violated.
Mr. Speaker, I reserve the balance of my time.
Mr. LaTOURETTE. Mr. Speaker, I yield 2 minutes to the gentleman from
Alabama (Mr. Callahan).
(Mr. CALLAHAN asked and was given permission to revise and extend his
remarks.)
Mr. CALLAHAN. Mr. Speaker, I do not rise tonight in defense of guilt
or innocence of our colleague, the gentleman from Ohio (Mr. Traficant).
I rise tonight in a sense of what I think is fairness. I have a
tremendous respect for this body and an overwhelming respect for the
Committee on Standards of Official Conduct and the difficult job that
they have. I too compliment the gentleman from Colorado (Mr. Hefley)
and the gentleman from California (Mr. Berman), for their tremendous
efforts and integrity that has been so prevailed throughout this trial.
I rise tonight in support of this resolution. I am not blessed with a
law degree, I do not apologize for that, I just do not have one. But I
do know that in court language, when one is going through a trial
process, judges sometimes overrule things because of a clause. They say
that a bell cannot be unrung. And, indeed, if we tonight ring this bell
of guilt against the gentleman from Ohio (Mr. Traficant) during this
appeal process, we are only talking about a 6-week delay, in order to
make this ultimate decision, in my opinion, it is unfair to my
colleague.
I think we ought to give him the benefit of the doubt. It is not
professing that we believe he is innocent by delaying this action until
September. It is just saying that we are going to give him a chance.
Even if someone is convicted of murder in most every State in the
Nation, there is always an escape valve because the governor has the
right to overturn if evidence is presented that convinces the governor
that the defendant is deserving of a new hearing.
What we do tonight is ring the guilt bell upon the gentleman from
Ohio (Mr. Traficant) when it is not necessary at this time. Certainly
if he is charged with what he is charged with by the Committee on
Standards of Official Conduct, and I have no reason to doubt that he
has not been charged correctly, then we should act. Certainly we ought
to give one of our own colleagues the benefit of doubt. Delay this
action for 6 weeks until we get back in September and then vote our
convictions.
Mr. HEFLEY. Mr. Speaker, I yield 3 minutes to the gentlewoman from
Illinois (Mrs. Biggert).
Mrs. BIGGERT. Mr. Speaker, I rise to urge my colleagues to reject the
motion to postpone H.R. 495.
I know how difficult this proceeding is for the gentleman from Ohio
(Mr. LaTourette), himself a former prosecutor and for the other Members
of the Ohio delegation who have served many years with the gentleman
from Ohio (Mr. Traficant) and developed close friendships.
If the subject today were a friend and colleague from the Illinois
delegation, I cannot say for certain that I would not try to do the
same thing. But the subject today is the gentleman from Ohio (Mr.
Traficant) and whether this body is best served by postponing the
consideration of this resolution until after August.
It is said that there may be new developments in the gentleman's
Federal case, and that a month's time might yield a new outcome.
In fact, there was a new development just today in the gentleman from
Ohio's (Mr. Traficant) Federal case when a three-judge panel of the
U.S. Court of Appeals for the Sixth Circuit denied the gentleman from
Ohio's writ of mandamus on a petition relating to jury selection. We
heard a great deal about that petition during our hearing, and there is
no doubt in my mind that there will be other appeals and other
petitions on the gentleman's behalf. But my point is, regardless of
whether these approaches succeed or fail in the Federal courts, they
are, by no means, relevant to the status of his case in the U.S. House
of Representatives.
Why do I say this? For one, our subcommittee did not rely strictly on
the transcript from the Federal case.
{time} 1930
We went well beyond it and heard from the gentleman from Ohio's (Mr.
Traficant) witnesses, including those who were not allowed to testify
on his behalf in Federal court.
Second, our standard of proof is much lower than what a jury faces in
a Federal criminal case. In Federal court, it is beyond a reasonable
doubt that a crime was committed. In the U.S. House, it is clear and
convincing evidence that our code was violated, a very important
distinction.
Last, our mission was not to determine whether the gentleman from
Ohio (Mr. Traficant) is guilty of a felony count or 10 felony counts.
It was to determine whether the gentleman from Ohio (Mr. Traficant)
violated the Code of Official Conduct and the Code of Ethics for
Government Service, again a very important distinction.
We Members of the House are not a Federal court of appeals nor are we
here to second-guess or predict the rulings of juries or judges in the
Federal courts of Ohio. We are here to serve our duty under article I,
section 5, clause 2 of the Constitution.
[[Page H5379]]
As a member of the adjudicatory subcommittee that reviewed the
evidence in this case, I would respectfully urge my colleagues to vote
against the motion to postpone and for the resolution. Neither justice
nor this body will be served by delay.
Mr. BERMAN. Mr. Speaker, I yield myself 1 minute.
I would like to respond to the comments of my very good friend, my
colleague from Alabama, because there is a certain quick appeal in the
argument that this process is still under way, the sentencing occurs
next week, there are appeals, there are writs of habeas corpus
following that process.
The motion to postpone is a motion to postpone till September 4. The
gentleman from Ohio (Mr. Traficant) has made a motion for a new trial,
and that motion has been denied with an extensive opinion by the judge.
No one can argue that this appellate process will be even seriously
under way, little less completed, by September 4.
The logical conclusion of a process which says we wait until all
appeals are exhausted means that the provision of the Constitution
which provides that we expel Members for the most egregious behavior is
rendered a nullity. I do not think that is what our Founding Fathers
intended, and that is not what we should do.
Mr. Speaker, I yield 2\1/2\ minutes to the gentlewoman from Ohio
(Mrs. Jones), a former judge, a former prosecutor, a great member of
our committee.
Mrs. JONES of Ohio. Mr. Speaker, I thank the ranking member, the
chairman, and my colleagues who served on the Committee on Standards of
Official Conduct. What an experience.
Service on the Committee on Standards of Official Conduct is not a
committee assignment for which there is a lot of competition. In fact,
it is not even an enviable position. However one is called into
service, each Member must accept his or her responsibility and
obligation to serve with honor and integrity, consistent with the
tradition of this great House of Representatives which we love and
revere.
I seriously considered not speaking before the full House, in part
because I believe that the misfortunes of one of my colleagues should
not be used for political purpose or grandstanding. However, having
accepted this responsibility of serving on the Committee on Standards
of Official Conduct, I believed it my duty and obligation to speak out
in support of the decision that we made and in opposition to delay.
Let me say at the outset that I have known the gentleman from Ohio
(Mr. Traficant) for many years. As he stated many times in that
hearing, he was a vocal supporter of my candidacy for the Ohio Supreme
Court, and for that I will ever be thankful. Some even questioned my
ability to serve, and I knew that I could be fair and so did the
gentleman from Ohio (Mr. Traficant).
Let me go for a moment to this question about where the money was if
the gentleman from Ohio (Mr. Traficant) got the money. If my colleagues
got the money, would they put it in the bank?
Let us talk a little bit about these jurors. I have tried many cases,
both as a judge and as a prosecutor, and there were many times where
jurors, once they rendered that decision, wanted to back up and say, I
do not know if that was the right decision; judge, can tell us whether
he was guilty or not or whatever it was. Jurors make decisions based on
all the facts and evidence that is before them at that particular time,
and this is what those jurors did.
The burden was beyond a reasonable doubt, the highest burden of proof
in our Nation. Our committee has a job and our committee is, and we are
not governed by the same rules that my great colleague, Mr. Stokes,
whom I have a lot of respect for, was when he made the motion back on
Mr. Myers. Our rules of ethics are different. They are not the same as
they were back when Mr. Myers was presented before this House.
The rules say that this body can make a decision to expel a Member
prior to sentencing and prior to conviction, and that is what this
committee recommended to my colleagues.
We are not a jury. We are not a criminal court. We are in the court
of the House of Representatives and the court of public opinion which
expects us to do our job, unlike the gentleman from Ohio (Mr.
Traficant), but my job is to make a decision right here on the House of
Representatives. Vote against the motion.
Mr. LaTOURETTE. Mr. Speaker, I yield myself 30 seconds to make the
following observation.
Both the distinguished chairman and the distinguished ranking member,
I think, said what I have been trying to say. They repeatedly said that
we do not know, we do not know this, we do not that. That is the point
of laying this over.
Secondly, to my good friend from Illinois, with all due respect, I
could be fair if this respondent was from Idaho, Iowa or Timbuktu.
To the gentlewoman from Ohio (Mrs. Jones), my good friend and former
colleague who was a prosecutor in Ohio, the rules have changed but
justice has not since 1980, I hope.
Mr. Speaker, I yield 4 minutes to the gentleman from Indiana (Mr.
Burton).
Mr. BURTON of Indiana. Mr. Speaker, the prosecutor allegedly
threatened a witness and said if he did not say what he wanted him to
say he would be indicted. He did not say what he wanted him to say and
he was indicted. That could be prosecutorial misconduct. I do not know.
If the court upholds the decision that they have made and they sentence
the gentleman from Ohio (Mr. Traficant) to prison, I certainly will
vote for expulsion, but I do not know whether there was prosecutorial
misconduct.
I do know that two jurors, after watching the ethics hearing, said if
we had known and seen what we saw before the Committee on Standards of
Official Conduct, we would have voted otherwise. That creates a little
bit of doubt in my mind, and I do not know and I do not think any of my
colleagues know tonight if the judge might say, hey, because of the
jurors' reevaluation of this, maybe we should order a new trial. I do
not know if he will do that or not. He may not, but that is his
decision.
I do know that he is going to be making that decision next week and
he is also going to be making a decision on whether or not to send the
gentleman from Ohio (Mr. Traficant) to prison for how long, and for the
life of me, and I say this to both my Democrat and Republican
colleagues, I cannot understand why we cannot wait until we come back
from break to vote on this issue.
That is why I support the motion of my colleague who serves on the
Committee on Government Reform with me, and I am sure that he would
have the same attitude whether the gentleman from Ohio (Mr. Traficant)
was from California, New York or whatever, because that is the kind of
man that the gentleman from Ohio (Mr. LaTourette) is.
Another reason why I feel very strongly about this is we have had
hearings, numerous hearings about what went on in Boston about 30 years
ago where they put an innocent man in jail for over 30 years for a
crime he did not commit, and I believe all the way up to J. Edgar
Hoover, they knew he was innocent, but they were protecting Mafia
informants.
So many times there are miscarriages of justice. I am not saying that
is the Traficant case, but it happens, and for that reason alone I
think we ought to say let us take a deep breath, go on break, come back
in 4 or 5 weeks and then vote on this issue. If he is sentenced, if he
goes to prison, he should be expelled, and I will vote for expelling,
but what in the world is wrong with waiting for 4 or 5 weeks? I simply
do not understand that.
Mr. HEFLEY. Mr. Speaker, I yield myself 1 minute, and then I am going
to yield to the gentleman from Missouri.
There is a lot that we do not know, as the gentleman from Ohio (Mr.
LaTourette) said, about the argument that the gentleman from Ohio (Mr.
Traficant) made about judicial misconduct or prosecutorial misconduct.
There is a lot we do not know about that.
What we do feel we know, however, is that there was clear and
convincing evidence on the charges that he was charged with before the
Committee on Standards of Official Conduct, and in summary, that is
four counts of bribery over a long period of time; that is obstruction
of justice; that is defrauding the government through the use of
[[Page H5380]]
congressional staff for personal service; and there was false
statements on income tax returns. We think we know that by clear and
convincing evidence.
Clear and convincing, those of my colleagues who are attorneys know
better than I do, equals highly probable. Clear and convincing evidence
means it is highly probable that he is guilty of these offenses. It
does not equal absolute certainty, and it does not even equal the
reasonable doubt standard that the judge mentioned over here. It means
it is highly probable. That is what the committee's conclusion was.
Mr. Speaker, I yield 3 minutes to the gentleman from Missouri (Mr.
Hulshof).
Mr. HULSHOF. Mr. Speaker, let me say at the outset that I hold the
gentleman from Ohio (Mr. LaTourette) in highest esteem. Over the course
of the past 10 days, during this very long and arduous process, we have
agreed and we have disagreed. We have passionately advocated different
points of view, and I respectfully disagree with this motion and urge
my colleagues to vote down that motion to continue.
What I would like to do is really just address just the folks who may
be harboring these thoughts or fears of an acquittal or some different
outcome during this appellate process, which I absolutely agree with
the gentleman from California (Mr. Berman) will not be concluded within
6 weeks.
Our task today, Mr. Speaker, is as different from that criminal jury
verdict as the legislative branch is different from the judiciary. Our
task tonight is as dissimilar as article I is different and separate
and apart from article III.
Unlike the matter that was debated on this House floor on October 2,
1980, in Mr. Myers' case, the Committee on Standards of Official
Conduct relied entirely upon the guilty verdicts. Mr. Myers had not
been given a full-blown hearing before the Committee on Standards of
Official Conduct.
As my colleagues know and has been discussed, we had that hearing. In
fact, the gentleman from Ohio (Mr. Traficant) was given great latitude.
He was treated generously by a committee of his colleagues who
respected the gravity of the occasion which brought us face to face.
Would that the gentleman from Ohio (Mr. Traficant) had acted in a
reciprocal manner, but even the antics of last week are irrelevant to
the decision that was reached by our committee.
We reached our decision on 9 of 10 violations of House rules
independent and apart from the jury verdict in Cleveland. So on the
process and procedural grounds the gentleman from Ohio's (Mr.
LaTourette) motion must fail, but on substance, it fails as well.
This witness, Mr. Detore, the committee considered his testimony and
rejected it. As the gentleman from California (Mr. Berman) pointed out,
and let me reiterate, Mr. Detore exonerated himself for the criminal
charge with which he was indicted, and yet he offered no defense to the
gentleman from Ohio's (Mr. Traficant) kickback scheme of accepting
$30,000. Mr. Detore offered no defense on the $30,000 kickback scheme
between the gentleman from Ohio (Mr. Traficant) and a congressional
staffer. Mr. Detore provided no testimony on the illegal gratuities
supplied by constituents to the gentleman from Ohio (Mr. Traficant) at
the gentleman from Ohio's (Mr. Traficant) behest.
Mr. Detore offered nothing on the charge of obstructing justice by
encouraging others to give false testimony to the authorities.
Mr. Speaker, there has been a lot of reference and comparison between
what we are doing today and tonight compared to that same debate that
was within these hallowed halls some 22 years ago. Perhaps one other
comparison, I hope, is appropriate. The House of Representatives in the
Myers case voted down Mr. Stokes' motion 332 to 75. For procedural and
substantive grounds, the motion from the gentleman from Ohio (Mr.
LaTourette) must fail.
Mr. BERMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Texas (Mr. Green), a distinguished member of the committee.
{time} 1945
Mr. GREEN of Texas. Mr. Speaker, I thank my colleague for yielding me
this time.
Mr. Speaker, I am the newest member of the Committee on Standards of
Official Conduct, and like all of my colleagues, I did not want it. In
fact, I had to be asked three times by the leadership on our side
before I would say yes. But I rise tonight to oppose the motion to
postpone until September 4.
This House is more important than any of us individually. We will
come and go. Our voters will make that decision. What my concern is
what this looks like for our House of Representatives for the future.
Sentencing for the gentleman from Ohio (Mr. Traficant) is set for next
Tuesday, July 30. We will be in recess until September 4. We could
actually have our colleague serving with us and also serving in Federal
prison for a month.
I would hope we would not think about us as individuals but think
about us as a House and ask ourselves if we want that for our House of
Representatives, and not really ours, as Members, but the people of
this United States. I do not think it is right, and I do not think it
does this House honor.
I will not repeat what my colleagues have said who heard the
testimony. I listened to Mr. Detore, and I found that he must be a very
nice fellow, but I did not find him to be a credible witness on even
the issues he was trying to talk about. I felt like he was out of the
loop even on those issues, much less that we need to remember that the
jury in Cleveland convicted our colleague of nine other felony counts.
The committee found eight other counts and unanimously voted for
expulsion.
Mr. LaTOURETTE. Mr. Speaker, it is my pleasure to yield 3 minutes to
the gentleman from Texas (Mr. Paul).
(Mr. PAUL asked and was given permission to revise and extend his
remarks.)
Mr. PAUL. Mr. Speaker, I thank the gentleman for yielding me this
time, and I rise in support of the motion by the gentleman from Ohio.
It is not easy to do this, obviously, and it is difficult for all of
us to be here because it seems like, on the surface, there was
unethical, probably illegal, and certainly bizarre behavior, and we
feel offended by this and we feel compelled to do something to prove
that we are keeping our House in order.
I am not an expert on the legal part of this case. I would not
pretend to be, and the Committee on Standards of Official Conduct
deserves the credit for the effort they went through to dig out the
information. But the process disturbs me, and that is why I wanted to
take a minute or two to talk about that.
The point was made earlier that the House's conditions are a lot
different than the legal conditions for guilt and, therefore, they are
not as stringent. But we would not be here if Mr. Traficant had not
been convicted, and so that is key. That is the important issue.
And that trial bothers me. I do not accept it as a good, fair,
legitimate trial. I do not think all the witnesses were heard that
should have been heard, and I think some of the witnesses may well have
been ``bribed'' into doing and saying certain things.
But there is more that bothers me. I would like to see the appeals
process completed. I was here in 1984, on my first tour of duty here in
the House, and the George Hansen case came up and we voted then to
convict. I think he had FEC violations and we voted to censure him. He
lost his election, he lost his job, he lost his money, he went to jail
and served time, and then he was exonerated on everything. He won all
his appeals. I do not see the need to rush to judgment, certainly
tonight.
I am not happy that when the gentleman finally gets an opportunity to
come and defend himself, he gets a total of 30 minutes. Really? And
have my colleagues looked at the record of the case in Ohio? It
contains a stack a foot high. Thirty minutes to defend himself? I do
not think that is really fair.
But there is another thing that bothers me, and that is the change of
venue. I believe that the change of venue has been used historically in
this country to make sure that the most horrible criminal gets a fair
trial and gets his case moved from a area unduly influenced by media
coverage. Have any of my colleagues ever heard of a trial being moved
for the benefit of the State and to the disadvantage of the defendant?
It may have happened, but I
[[Page H5381]]
do not know about it, and I think that in itself is a reason to step
back, take a look at this, and vote for the motion by the gentleman
from Ohio.
Mr. Speaker, many of Congressman Traficant's actions are impossible
to defend. Mr. Traficant has most likely engaged in unethical behavior.
I would hope all my colleagues would join me in condemning any member
who would abuse his office by requiring his staff to pay kick-backs to
him and/or do personal work as a condition of employment. I also
condemn in the strongest terms possible using one's office to obtain
personal favors for constituents, the people we are sent here to
represent. Such behavior should never be tolerated.
However, before expelling a member we must consider more than
eccentric behavior and even ethical standards. Questions of whether the
process of his court conviction and expulsion from Congress respected
Mr. Traficant's constitutional right to a fair trail and the right to
be represented of those who elected him to office, are every bit as
important.
Many Americans believe that Congress daily engages in ethically
questionable and unconstitutional actions which are far more injurious
to the liberty and prosperity of the American people than the actions
of Mr. Traficant. Some question the ability of Congress to judge the
moral behavior of one individual when, to take just one example, we
manage to give ourselves a pay raise without taking a direct vote on
the issue.
Mr. Speaker, after carefully listening to last week's ethics hearing,
I have serious concerns over whether Mr. Traficant received a fair
trial. In particular, I am concerned over whether the change of venue
denied Mr. Traficant a meaningful opportunity to present his care to a
jury of his peers. Usually change of venue is instituted in cases where
the defendant is incapable of receiving a fair trial. I am unaware of
any case where the venue is changed for the benefit of the state.
However, the most disturbing accusations concern the possibility that
Mr. Traficant was denied basic due process by not being allowed to
present all of his witnesses at the trial. This failure raises serious
questions as to whether Mr. Traficant had the opportunity to present an
adequate defense. These questions are especially serious since one of
the jurors from Mr. Traficant's criminal trial has told the Cleveland
Plain Dealer, that had he heard the testimony of Richard Detore at Mr.
Traficant's trial, he would have voted ``not guilty.''
Mr. Speaker, I also question the timing of this resolution and the
process by which this resolution is being brought to the floor. Mr.
Traficant's conviction is currently on appeal. Many Americans would
reasonably wonder whether the case, and the question of Mr. Traficant's
guilt, can be considered settled, until the appeals process is
completed. I fail to see the harm that could be done to this body if we
waited until Mr. Traficant has exhausted his right to appeal.
Prior to voting to expel Mr. Traficant before he has completed his
appeals, my colleagues should consider the case of former
Representative George Hansen. Like Mr. Traficant, Mr. Hansen was
convicted in Federal court, censured by the Congress, and actually
served time in Federal prison. However, Mr. Hansen was acquitted on
appeal--after his life, career and reputation were destroyed.
If my colleagues feel it is important to condemn Mr. Traficant before
the August recess, perhaps we should consider censure. Over the past 20
years, this body has censured, instead of expelled, members who have
committed various ethical and even criminal activities, ranging from
being convicted of bribery to engaging in sexual activity with under-
age subordinates.
I am also troubled that Mr. Traficant is only being granted a half-
hour to plead his case before the house. Spending only an hour to
debate this resolution, as if expelling a member of Congress is of no
more importance than honoring Paul Ecke's contributions to the
Poinsettia industry, does no service to this Congress.
In conclusion Mr. Speaker, because of my concerns over the fairness
of Mr. Traficant's trial I believe it is inappropriate to consider this
matter until Mr. Traficant has exhausted his right to appeal.
Mr. HEFLEY. Mr. Speaker, I reserve the balance of my time.
Mr. BERMAN. Mr. Speaker, I reserve the balance of my time.
Mr. LaTOURETTE. Mr. Speaker, it is now my pleasure to yield 3 minutes
to the gentleman from California (Mr. Issa).
Mr. ISSA. Mr. Speaker, it is not easy for a freshman to get up and
talk about a Member that I do not know very well. Although I was born
in Ohio, I am not here because of some relationship to Ohio. I am a
California representative. I was voted by, in my particular case, over
800,000 people I now represent, until we get reapportioned. All of my
colleagues got here because of over 600,000 or more voters. They put us
here, this body did not. Our governors did not put us here; a court did
not put us here.
We are a unique body. We get here by one and only one reason, and
that is \1/435\th of the country votes to put us here. I do not know
the people of Youngstown all that well, but they put the gentleman from
Ohio (Mr. Traficant) here, and I take it as an extremely important and
extremely solemn duty to decide to take the extraordinary measure of
removing him.
I must tell my colleagues that I am also not a lawyer, but I am going
to have to decide, hopefully in the next month rather than the next
hour, whether or not to, for the second time in modern history, I guess
for the second time in history practically, to remove a Member. I do
not have enough information.
I respect the gentleman from California (Mr. Berman). I respect the
chairman. I believe that they have looked at this long and hard. But I
have not had the opportunity. And as lawyers often say, I must look at
this sua sponte. I am sorry, de novo. See, I am not an attorney. I have
to look at this anew, and I am not prepared to do it now. I would
appreciate the opportunity to see what the court in Cleveland does over
the break. I would appreciate the opportunity to review the records and
have my staff assist me. I will probably, when the times comes, vote as
my colleagues do.
Now, if I can just make one statement to this body, because there was
a reference from one of my colleagues that in fact we had to worry
about the image of this body. We will be gone after tomorrow, more or
less, for a month. There will be no votes. There will be no activity.
Whether the gentleman from Ohio (Mr. Traficant) is a Congressman or an
ex-Congressman, he has a cloud that he is living under that he will
have to deal with. It will make no difference to them. This body will
survive one month of somebody with a conviction not yet sentenced or
sentenced and not yet incarcerated.
I believe that if we give it that time, if all of us go and soul-
search, take the time to understand the case, when we come back,
whatever the vote is, we will feel better for ourselves and for this
body if we have taken the deliberative time, and I ask my colleagues to
please support this motion to give enough time for us to do the job
right. We do not do it that often.
Mr. HEFLEY. Mr. Speaker, I have no further requests for time, and I
yield myself the balance of my time.
I would just sum up with a few statements at this point. This is no
rush to judgment. We have been struggling with this for some time. Most
of my colleagues have not been as intensely involved with it, nor
should you be, because you have other responsibilities and you have
given us this responsibility.
The gentleman from Ohio (Mr. Traficant) is not getting 30 minutes to
defend himself. He is getting 30 minutes here on the House floor. He
had 5 hours before the committee, and it amounted to a great deal more
than that because we gave additional time for him. He had the entire
hearing process to defend himself.
The gentleman that just spoke said he had not had time to really
study it and understand. Well, the trial transcripts have been on the
Internet for at least a week. Monday, the exhibits and the transcripts
were all delivered to Members' offices. We are busy, and I know it is
hard to have time to go through, and it is volumes of material, so I am
not criticizing anybody for that, but my colleagues have heard tonight
from the members of the Committee on Standards of Official Conduct,
members that have been deeply and intensely involved in this over the
last few weeks and months, as a matter of fact. And not one member of
that committee did I sense was out to get Jim Traficant. I sensed no
hint of partisanship in that hearing. And I would suspect that Jim
Traficant would agree to that, that there was not a partisanship angle
to this in the committee. I think this was a very painful decision for
every one of us. Jim Traficant and I have been friends. Jim Traficant
has been a friend to most of you in here.
[[Page H5382]]
This is not a pleasant time or a pleasant task. If I thought that
between now and September 4 the landscape would change substantially,
then I might be with the gentleman from Ohio (Mr. LaTourette) and say
let us put this off until September. But, my colleagues, I must say
that the largest single profession represented in the United States
Congress is lawyers, so you know, and I am not a lawyer, but my
colleagues know that the appeals process can drag on and on and on for
months, sometimes for years.
So if we do not do this tonight, I do not know exactly when we are
going to do it. I just do not think it is going to change between now
and September 4. So I would respectfully ask that Members reject the
motion of the gentleman from Ohio (Mr. LaTourette).
Mr. Speaker, I yield back the balance of my time.
Mr. BERMAN. Mr. Speaker, I yield 2 minutes to the gentlewoman from
California (Ms. Lofgren), the ranking member of the subcommittee that
investigated and prepared the statement of alleged violations. She has
been a member of this committee for 5\1/2\ years. She has performed
wonderfully far more than her share of the burdens of this committee in
this and other matters.
Ms. LOFGREN. Mr. Speaker, as the gentleman from California (Mr.
Berman) has said, I have been a member of the Committee on Standards of
Official Conduct now for 5\1/2\ years, and in those 5\1/2\ years, in
every case, every member of the Committee on Standards of Official
Conduct has tried to discharge their duty fairly and to do the right
thing. That has always been the goal. There has never been a drop of
partisanship in the committee.
As we have worked through this, I think it is important to share what
the Committee on Standards of Official Conduct reviewed before coming
here today.
We have heard about this Mr. Detore, who was not found to be a
credible witness by the adjudicatory subcommittee. But in addition to
that testimony offered to the committee, we reviewed 6,000 pages of
testimony, more than 50 witnesses for the prosecution, and 29 witnesses
called by the gentleman from Ohio (Mr. Traficant).
What we found in the review of the statements of those witnesses that
were subject to cross-examination is, regrettably, a pattern of tens of
thousands of dollars that were delivered to the gentleman from Ohio
(Mr. Traficant) in kickbacks and bribes, the most serious misconduct
that we need to address here.
Now, it has been suggested that we delay these proceedings. If we
delay to September 4, we will know nothing more than we do this
evening. We will not have an appellate decision. We will just know what
we know today.
{time} 2000
Mr. Speaker, I would note that article I, section 5, says it is for
each House to determine with the concurrence of two-thirds whether to
expel a Member. It is not for the House to delegate to the judiciary
the decision on who is fit to serve in each body.
I would urge that we step up to our unpleasant duty this evening,
that we discharge our obligations granted to us under article I,
section 5 of the Constitution, and that we act this evening, unhappy as
that task may be.
Mr. BERMAN. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, I want to talk about the quote ``rush to judgment.''
Quite a long time ago, well over a year and a half ago, the Chair and
the ranking member of the committee and the staff of the committee were
aware of articles talking about indictments, investigations, facts for
which there would have been ample evidence for the committee to proceed
at that time to investigate totally separate from the criminal justice
process.
The committee chairman and the ranking member said no, let us wait;
let the criminal justice system work. Let us not rush and push this. We
know the complications when there is a dual-track investigation, and we
refrained from acting.
There was a trial and there was a conviction, and the only thing this
committee did was to make sure they gathered the information and the
transcripts from the trial as that trial went on. Now the conviction
comes in; and many Members of this body, either proposed or wanted to
propose privileged resolutions essentially saying we have a Member of
our body, a colleague of ours who has been convicted of 10 felony
counts. This is intolerable, we want to expel, and they could have
brought a privileged resolution to this floor. We went to those
colleagues, and we persuaded them to defer to this process. Let us do
it according to the rules, give the subcommittee the adjudicatory
committee and the full committee a chance to look at the evidence,
gather it, and produce it. We did that.
We come forward in regular order. I ask Members to reject the motion,
do not reject the committee's process and the process of restraint and
justice that we have shown and vote ``no'' on the motion to postpone.
Mr. LaTOURETTE. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, again for those colleagues who have been involved in the
criminal justice system, I would tell them, and I do not disagree with
things that have been said by other members of the committee, Mr.
Detore, whom I found to be credible, and with all due respect to the
gentlewoman from California, I would ask Members to ask other members
of the adjudicatory subcommittee whether they found Mr. Detore to be
credible or not, but the difference is this. The committee was left
with a cold hard 6,000-page transcript. We were not able to see the
accusers of the gentleman from Ohio (Mr. Traficant), whether they
sweat, whether they reacted under cross-examination.
Mr. Detore came in, and I just want to read one portion of what I was
able to see him say in response to the questions put to him by the
committee, the gentleman from Ohio (Mr. Traficant), and counsel for the
committee.
He said, ``I have lost faith in my ability to tell my kids to be
honest, to be truthful, to be fair to others, and others will be fair
to you. This is not where I was born. I don't know what is going on
here. This is like having an out-of-body experience in another planet.
The amount of treachery, deceit and lies throughout is unbelievable.
``I got a wife laying home with shingles from stress, she can't even
move, paralyzed. I have two children crying, upset, a nervous wreck. I
have never had situations where I passed out in my entire life. But 2
years of pure hell, and I defy anybody to walk in my shoes. And I could
have simply just taken an easy path and just said, okay, I will say
what you want me to say.''
I had the chance to see him, and so did the other members of the
committee. We were deprived of the opportunity to see any other witness
who accused the gentleman from Ohio (Mr. Traficant) of anything. And so
the committee was in a position of substituting our judgment as to
whether they were more credible than the Congressman, whether they were
more credible than Mr. Detore. We had to accept the judgment of 12
jurors, 350 miles and 6 months away.
I made this example in my conference earlier that, again, being a
prosecutor, I am familiar with death penalty cases. In a death penalty
case if we receive information that something is not right, I think
everybody in this Chamber would pick up the phone and call the Governor
and say, Governor, we have to give it a couple of days until we check
it out because it is irreversible.
What we are being asked to do tonight is the equivalent. It is the
political death penalty. We cannot put the toothpaste back in the tube.
If the gentleman gets a new trial next Tuesday, we cannot unexpel him
next Wednesday. This is final tonight. All we are asking is for Members
to follow what Mr. Stokes and the gentleman from New York (Mr. Rangel)
asked the body to do in 1980.
In closing, I want to thank all of the Members who spoke on behalf of
our motion, but I want to highlight the comments of the gentleman from
California (Mr. Issa) in particular. I mentioned that both of these
motions are occurring days before a month-long recess; and in that
debate in 1980 a Member said, ``I think the conduct engaged in by Mr.
Myers is reprehensible and, if we do proceed to a final vote on the
issue today, I shall vote to expel him. I deeply believe that this is
precisely the wrong time for this House to act. I say that for a very
simple reason . . .
[[Page H5383]]
This is the last week of the session, and almost every Member is doing
what I am doing. We are closeted in meetings with our staffs. We are
trying to clear the deck to get out of here. We are paying attention
not to the Myers case, but we are paying attention to what we have to
put into our briefcases to go home . . . I would submit that this is
not the correct atmosphere in which to take the historic action which
we will be taking today.''
That Member of Congress was the gentleman from Wisconsin (Mr. Obey),
again on October 2, 1980.
Mr. Speaker, I am not asking Members to do anything tricky, anything
that violates their conscience. This is a vote of conscience; and I
want to thank everybody in the debate, the chairman, the ranking member
and all of the members of the committee, and the staff of the committee
was tremendous. I agree with everything that Members said. Not one
person on that committee was out to get the gentleman from Ohio (Mr.
Traficant). Every Member of that committee listened carefully to the
evidence.
But I am telling Members, when we have to compare warm bodies who
come in and we can see in their eyes and their souls as to whether or
not they are credible, and you put that up against a book of 6,000
pages, the book should not win; and the book should not especially win
when all we are asking, we are not asking for the appeals process to go
through habeas corpus and all of the hoops that may take place, we are
leaving on Friday. The first day we come back, if Members want to kick
the gentleman from Ohio (Mr. Traficant) out of Congress, we have not
lost anything. We could still do it. The only thing we have done is
given, and perhaps we will get questions that the ranking member and
the chairman asked, we do not know. Maybe on September 4 we will know.
I ask Members to think about it.
Mr. LaTOURETTE. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Hansen). All time for debate on the
motion has expired.
Without objection, the previous question is ordered on the motion.
There was no objection.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Ohio (Mr. LaTourette).
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Recorded Vote
Mr. BERMAN. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
The vote was taken by electronic device, and there were--ayes 146,
noes 285, not voting 3, as follows:
[Roll No. 345]
AYES--146
Abercrombie
Aderholt
Bachus
Ballenger
Barr
Bartlett
Bilirakis
Boehner
Bonilla
Boswell
Brown (FL)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Cannon
Carson (IN)
Chabot
Chambliss
Clay
Clayton
Clyburn
Coble
Collins
Condit
Cooksey
Costello
Coyne
Crane
Cubin
Cummings
Cunningham
Davis (IL)
Deal
Delahunt
Diaz-Balart
Doolittle
Duncan
Edwards
English
Everett
Foley
Fossella
Gekas
Gibbons
Gillmor
Gilman
Goode
Gordon
Goss
Green (WI)
Grucci
Gutknecht
Hall (TX)
Hart
Hastings (FL)
Hilleary
Hilliard
Hinchey
Hobson
Horn
Hunter
Inslee
Issa
Jackson (IL)
Jackson-Lee (TX)
Jenkins
Johnson (CT)
Johnson, E. B.
Jones (NC)
Kaptur
Kerns
King (NY)
Kingston
Kucinich
LaFalce
Larson (CT)
LaTourette
Lee
Lewis (CA)
Lewis (KY)
Lipinski
Lucas (OK)
McDermott
McGovern
McInnis
McKeon
McKinney
Miller, Gary
Mink
Neal
Ney
Norwood
Oberstar
Osborne
Ose
Otter
Oxley
Paul
Payne
Peterson (MN)
Peterson (PA)
Petri
Pitts
Pombo
Portman
Pryce (OH)
Regula
Riley
Rohrabacher
Rothman
Rush
Ryun (KS)
Sandlin
Scott
Serrano
Sessions
Sherwood
Shuster
Simpson
Skeen
Smith (MI)
Smith (NJ)
Sweeney
Tancredo
Tauzin
Taylor (NC)
Thompson (MS)
Tiahrt
Tiberi
Towns
Traficant
Wamp
Waters
Watkins (OK)
Watt (NC)
Watts (OK)
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Young (AK)
Young (FL)
NOES--285
Ackerman
Akin
Allen
Andrews
Armey
Baca
Baird
Baker
Baldacci
Baldwin
Barcia
Barrett
Barton
Bass
Becerra
Bentsen
Bereuter
Berkley
Berman
Berry
Biggert
Bishop
Blagojevich
Blumenauer
Blunt
Boehlert
Bono
Boozman
Borski
Boucher
Boyd
Brady (PA)
Brady (TX)
Brown (OH)
Brown (SC)
Camp
Cantor
Capito
Capps
Capuano
Cardin
Carson (OK)
Castle
Clement
Combest
Conyers
Cox
Cramer
Crenshaw
Crowley
Culberson
Davis (CA)
Davis (FL)
Davis, Jo Ann
Davis, Tom
DeFazio
DeGette
DeLauro
DeLay
DeMint
Deutsch
Dicks
Dingell
Doggett
Dooley
Doyle
Dreier
Dunn
Ehlers
Ehrlich
Emerson
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Ferguson
Filner
Flake
Fletcher
Forbes
Ford
Frank
Frelinghuysen
Frost
Gallegly
Ganske
Gephardt
Gilchrest
Gonzalez
Goodlatte
Graham
Granger
Graves
Green (TX)
Greenwood
Gutierrez
Hall (OH)
Hansen
Harman
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill
Hinojosa
Hoeffel
Hoekstra
Holden
Holt
Honda
Hooley
Hostettler
Houghton
Hoyer
Hulshof
Hyde
Isakson
Israel
Istook
Jefferson
John
Johnson (IL)
Johnson, Sam
Jones (OH)
Kanjorski
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kildee
Kilpatrick
Kind (WI)
Kirk
Kleczka
Kolbe
LaHood
Lampson
Langevin
Lantos
Larsen (WA)
Latham
Leach
Levin
Lewis (GA)
Linder
LoBiondo
Lofgren
Lowey
Lucas (KY)
Luther
Lynch
Maloney (CT)
Maloney (NY)
Manzullo
Markey
Mascara
Matheson
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McCrery
McHugh
McIntyre
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Mica
Millender-McDonald
Miller, Dan
Miller, George
Miller, Jeff
Mollohan
Moore
Moran (KS)
Moran (VA)
Morella
Murtha
Myrick
Nadler
Napolitano
Nethercutt
Northup
Nussle
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Pelosi
Pence
Phelps
Pickering
Platts
Pomeroy
Price (NC)
Putnam
Quinn
Radanovich
Rahall
Ramstad
Rangel
Rehberg
Reyes
Reynolds
Rivers
Rodriguez
Roemer
Rogers (KY)
Rogers (MI)
Ros-Lehtinen
Ross
Roukema
Roybal-Allard
Royce
Ryan (WI)
Sabo
Sanchez
Sanders
Sawyer
Saxton
Schaffer
Schakowsky
Schiff
Schrock
Sensenbrenner
Shadegg
Shaw
Shays
Sherman
Shimkus
Shows
Simmons
Skelton
Slaughter
Smith (TX)
Smith (WA)
Snyder
Solis
Souder
Spratt
Stark
Stenholm
Strickland
Stump
Stupak
Sullivan
Sununu
Tanner
Tauscher
Taylor (MS)
Terry
Thomas
Thompson (CA)
Thornberry
Thune
Thurman
Tierney
Toomey
Turner
Udall (CO)
Udall (NM)
Upton
Velazquez
Visclosky
Vitter
Walden
Walsh
Watson (CA)
Waxman
Weiner
Wexler
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wu
Wynn
NOT VOTING--3
Bonior
Knollenberg
Stearns
{time} 2026
Mr. WYNN, Mrs. EMERSON and Mr. JOHN changed their vote from ``aye''
to ``no.''
Mr. NEAL of Massachusetts changed his vote from ``no'' to ``aye.''
So the motion to postpone consideration was rejected.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
The SPEAKER pro tempore (Mr. Hansen). The gentleman from Colorado
(Mr. Hefley) is recognized for 1 hour.
Mr. HEFLEY. Mr. Speaker, first of all I would like to yield half of
that time, 30 minutes, to the gentleman from Ohio (Mr. Traficant). That
leaves me with 30 minutes. And I would like to yield for control of the
time, half of that time, 15 minutes, to the gentleman from California
(Mr. Berman) who is the ranking member of the Committee on Standards of
Official Conduct.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Colorado?
There was no objection.
The SPEAKER pro tempore. In both cases, the gentleman yields for
purposes of debate only.
Mr. HEFLEY. For debate only.
The SPEAKER pro tempore. The Chair recognizes the gentleman from
Colorado (Mr. Hefley).
Mr. HEFLEY. Mr. Speaker, I yield myself such time as I may consume.
[[Page H5384]]
Again I renew my call for the privileged resolution, I think it has
been read, so I rise in support of that House Resolution 495 which
calls for the expulsion of Representative James A. Traficant, Jr., from
the House of Representatives.
On July 17, 2002, the Adjudicatory Subcommittee of the Committee on
Standards of Official Conduct held pursuant to the vote requirements of
committee rule X that nine of the 10 counts contained in the statement
of alleged violations adopted by the Investigative Subcommittee in the
matter of James A. Traficant, Jr., had been proved by clear and
convincing evidence. These counts involved findings that Mr. Traficant
engaged in the following acts that did not reflect credibly on the
House of Representatives:
Bribery by trading official acts and influence for things of value;
demanding and accepting salary kickbacks from his congressional
employees; influencing a congressional employee to destroy evidence and
to provide false testimony to a Federal grand jury; receiving personal
labor and the services from his congressional employees while they were
being paid by the taxpayers to perform public service; and filing false
income tax returns.
On July 18, 2002, the full Committee on Standards of Official Conduct
held a public sanction hearing to determine what sanction, if any, the
committee should recommend to the House of Representatives with respect
to the nine counts of the statement of alleged violations proven by
clear and convincing evidence in this matter.
With respect to any proved counts against Mr. Traficant, the
committee may recommend to the House one or more of the following
sanctions: We could recommend a fine, we could recommend a reprimand,
we could recommend censure or we could recommend expulsion from the
House of Representatives, and two other possible recommendations would
be denial or limitation of any right, power, privilege or immunity of
Mr. Traficant if permitted under the U.S. Constitution, or any other
sanction determined by the committee to be appropriate.
With respect to the sanctions that the committee may recommend,
reprimand is appropriate for serious violations, censure is appropriate
for more serious violations, and expulsion is appropriate for the most
serious violations.
{time} 2030
Due to the most serious nature of the conduct in which Representative
Traficant engaged, including repeated and serious breaches of the
public trust, the committee reported this resolution to the House on
July 19, 2002, with its unanimous recommendation that Representative
Traficant be expelled from the House of Representatives.
In its 213-year history, the House has expelled only four of its
Members. Three of those expulsions occurred during the Civil War and
were based on charges of treason. The fourth expulsion was that of
Representative Michael J. Myers in 1980 and was based on Representative
Myers' conviction on Federal bribery and conspiracy charges arising
from the ABSCAM investigation.
It is important to note, however, that the number of actual
expulsions from the House should be considered with regard in light of
the fact that a number of Members who committed violations of the most
serious nature resigned their seats or lost elections before formal
action could be taken.
Mr. Speaker, when each of us was sworn in as a Member of the House of
Representatives, we took an oath to support and defend the Constitution
of the United States. Article I, section 5 of the Constitution states
that each House of Congress may punish its Members for disorderly
behavior and expel a Member with the concurrence of two-thirds of its
Members. One of the last lines of our oath of office states that each
of us will ``well and faithfully discharge the duties of the office on
which I am about to enter.'' To my thinking, it is this section of the
oath that is the focal point of the proceedings tonight.
None of us ever wants to sit in judgment of our peers. There are some
unique occasions, however, when the behavior of an elected official
violates the public trust to such an extent that we are called upon to
uphold this provision of the Constitution that we swore to support and
defend.
It is for this reason, and I have to tell you, friends, with a
genuine sense of sadness, that I bring this resolution to the floor of
the Chamber tonight.
Mr. Speaker, I reserve the balance of my time.
The SPEAKER pro tempore (Mr. Hansen). The Chair recognizes the
gentleman from California (Mr. Berman).
Mr. BERMAN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, like the chairman, I rise in sadness, but in strong
support of the motion to expel. The gravity of the offenses of the
gentleman from Ohio against the rules of the House compel us to impose
the most severe of sanctions, and thereby uphold the honor and
integrity of the people's House.
I say this, and I can say this with certainty, because of the rigor
and the evenhandedness of the process undertaken by the committee,
consistent with House and committee rules, and with the resolve of a
chairman who, in every instance he could, bent over backwards to ensure
fairness and afford the gentleman from Ohio a full and fair opportunity
to present his defense.
We gave the assertions of the gentleman every consideration. We
entertained every motion, admitting into evidence virtually every
document he offered, and, despite having the trial transcript before
us, nonetheless heard from a number of additional witnesses, including
some who had testified for him at trial.
And what was the gentleman's defense? That he paid for the labor and
materials provided to him on his farm; that, in the alternative, the
farm wasn't his; that he paid for the cars provided to him; that the
kickbacks he demanded from the staff were in fact loans voluntarily
tendered to him and repaid by him.
But take a closer look. The gentleman had a very busy winter of 1999-
2000. The Federal investigation of him had started, and suddenly he was
constructing his defense. In December 1999, he transfers the title to
his farm to his wife and daughter. He pays J.J. Cafaro $7,000 for three
cars that had been given to him from 1997 to 1999, and he pays, this is
count two, David Sugar's company $1,100 for work done on the farm 6
months earlier. Not until April of 2000 does Sugar instruct his
secretary to create false invoices for the work.
In January 2000, after learning of the investigation, he gives his
Congressional employee, Alan Sinclair, $18,500 in cash, indicating that
the cash came from Cafaro, telling Sinclair to keep the cash at home to
justify the withdrawals he had made from his paycheck. He gives
Sinclair a note, again after he knows the investigation is going on,
saying, ``They may ask you if you ever gave me money, and you did. You
lent me cash on several occasions and I did pay you back in cash.''
The next month he gives Sinclair another $6,000 and gives Cafaro
$3,000 more for the three cars. These transparent fabrications did not
impress the committee.
Mr. Traficant protests that he is the victim of selective
prosecution, indeed of government misconduct, but in order to believe
his assertions you would have to accept the gentleman's notion of a
vast, unparalleled conspiracy involving not only the self-interested
and disreputable characters from Youngstown, but also involving the
Office of the U.S. Attorney, the IRS, the FBI, a respected U.S.
District Judge, the counsel for the Committee on Standards of Official
Conduct, a conspiracy designed by Janet Reno and implemented by John
Ashcroft.
You would have to believe that thousands of pages of testimony by
prosecution witnesses, including many low-ranking employees accused of
no wrongdoing who testified of being ordered to do work for the
gentleman, and the hard documentary evidence against him, are all a
tissue of lies, the result of evil intent, manipulation, coercion and
intimidation by a treacherous cabal, for which there is simply no
evidence and which is preposterous on its face.
In the end, the committee found that the evidence was overwhelming,
establishing by clear and convincing evidence that the rules of the
House had been violated, flagrantly, I would add.
[[Page H5385]]
Mr. Speaker, we are much preoccupied these days, both as elected
officials and as private citizens, by breaches of public trust. We may
enact legislation before we recess to protect the public from unethical
conduct in the corporate arena. But to state what should be obvious,
each of us in this very body has weighty responsibilities in this vein
as well; not to abuse those who seek government assistance through our
offices and not to abuse those who work for us.
To fail to expel the gentleman from Ohio in the face of the vast
evidence spread out in the record is to say that a Member can behave as
he has and retain membership in this institution. That cannot be our
message today.
I urge my colleagues to take the difficult action, thankfully rare,
but abundantly warranted in this case, of voting for the motion to
expel.
Mr. Speaker, I reserve the balance of my time.
Mr. TRAFICANT. Mr. Speaker, in lieu of the gravity of this matter,
the number of counts, I respectfully request unanimous consent of this
body that an additional 15 minutes be awarded to me.
The SPEAKER pro tempore. Does the gentleman from Colorado yield for
that request?
The gentleman from Colorado has yielded for debate purposes only and
must yield to permit another Member to make a unanimous consent request
to change the procedure.
Mr. HEFLEY. Mr. Speaker, I will yield for that request. That is not
passing judgment on the motion.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Ohio?
There was no objection.
The SPEAKER pro tempore. The gentleman from Ohio (Mr. Traficant) is
recognized for an additional 15 minutes.
Mr. TRAFICANT. Ladies and gentlemen, you heard on the news, the first
national news story that I was involved in, a murder scheme by
contract. It made national headline news. The woman was a friend of
mine. She was so distraught, she called me every name in the book by
phone. I didn't know what she was talking about.
She later called and recanted, after they put her in protective
custody for 8 weeks, paid $800 to keep her dogs in Kentucky, and then
brought her to the grand jury twice. And when she said that Jim
Traficant committed no crimes, then they demeaned her. But through the
process they told her, to ensure her safety, to go public.
Now, if you are a juror and you have heard about a Jim Traficant, if
that isn't poisoning a voir dire, what is?
But then the next one that was in the national news was the $150,000
barn addition. Now, I am an old sheriff. Finally a man with a
conscience, Henry Nimitz, sees me at a restaurant and comes up and
says, ``Jim, I want to apologize. They were going to indict me, take
away my business, ruin my life. My attorney said, why do you have to
spend a half a million dollars? Tell them what they want to hear. I
did, and I feel like a coward.''
But what he failed to recognize, I had a friend with me by the name
of John Innella. I immediately went back to my office and did an
affidavit with John Innella. Then the next day, as an old sheriff, I
called Mr. Nimitz' girlfriend, who admitted that Mr. Nimitz called and
admitted what he said to Jim Traficant. So now the $150,000 barn was
not brought.
Now, I am going to get right to the point. I want you to imagine
there is a small army of patriots, and they are facing a gigantic army
armed to the teeth. And the captain, trying to show strength, calls his
assistant and says, ``Go to the tent and get my bright red vest.''
He goes and gets the red vest. He puts the red vest on, and he says,
``To show the power and courage of our people, without a sidearm I am
going to carry this sword and I am going to attack the enemy, and, as
they slay me, the blood will not be seen because of my bright red vest
and you will be encouraged to fight for our homeland.'' He gave a
banshee cry. He ran out into battle and was destroyed.
His assistant come up and he called his attendant. He said, ``Go to
the tent and get me those dark brown pants.''
Think about it.
Tonight I have dark pants on. Am I scared to death? No. I will go to
jail before I will resign and admit to something I didn't do.
Now, I want to go case by case. Forget all these witnesses. The
judge's husband is a senior partner in the law firm that represented
one of the key witnesses in my case, and that is part of now legal
action relative to 28 U.S.C. 455. In addition, that person, Cafaro, I
am not going to mention names, admitted giving hundreds of thousands of
dollars to politicians, I might add, mostly Democrats.
He said he gave me a $13,000 bribe. Because we were at a public
meeting, he said he waited until everybody left, and then we walked out
together, we got in his car, and he gave me the money.
One of the attorneys handling my appeal is a bright young black
attorney by the name of Attorney Percy Squire, Chief Clerk to the Chief
Judge of the Northern District of Ohio, and I called him as a character
witness. And he said, ``Jim, what do you want me as a character witness
for? I came late to that event where you were trying to put a quarter
percent sales tax together, so you could leverage funds, and I walked
you out and saw you get in the green truck,'' that another witness said
he picked me up in a green truck, because his had a cap on, and we had
built prefab siding for a hunting hut. We went and got my truck and
went and put the hut up.
And they accepted Cafaro's testimony even though he admitted to lying
in a previous RICO trial. That is one count.
Richard Detore is a patriot. I didn't subpoena Detore because his
attorney said, ``Don't subpoena Richard, subpoena me.'' To tell you the
truth, I was a gentleman, and I did it. I felt sorry for him.
Before I was indicted, before Detore was indicted, I have a tape
where he says everything on that tape that he told the Committee on
Standards of Official Conduct. He said, ``Jim, I think I am living in
Red China. If I didn't have two kids, I would blow my brains out.''
Now, let's look at a few affidavits. Dealing with David Sugar, just
yesterday caught up with him. They said it was a half mile, Jack,
across the State line, and they might now pull me into jail for being
out of my district.
With one of my staffers close by to listen, Sugar admitted that he
told Harry Manganaro that after the second FBI visit, because he had
backdated some invoices, if he did not lie against Jim Traficant he
would not only be indicted, his daughter, his wife and his son would be
indicted. I have a tape of Harry Manganaro. He wasn't allowed to
testify, nor was the tape admitted at trial.
Now, in addition to that, a man by the name of Joe Sable told another
one of my constituents three days ago, ``I feel so bad for Jim.'' David
Sugar told me the same thing. And David Sugar said to me, ``Jim, I
would love to help you.'' Now he is saying in the paper, ``I never said
that to Traficant.''
By the way, Nimitz' attorney, who I taped his girlfriend, his
attorney said he admits to meeting Traficant, but did nothing illegal.
Now, let's talk about Tony Bucci. His fourth plea agreement, his
brother in Cuba, fled the country on a fugitive warrant, they sentenced
him to 6 weeks arrest, and here is what he said. He did $12,000 worth
of work at the Traficant farm, and he owned me. Now, not all of you
know me personally, but if you think someone owned me, you would throw
me the hell out of here.
Witnesses testified that I asked him for jackhammers because we had
an old bank barn. I never owned the farm. But this old bank barn didn't
have enough height for horses, Ralph. I asked him to let me use their
jackhammers. He said, ``It is an insurance problem. I will send some
people out.'' I said, ``I don't want you to do that. You will get too
close to that old bank barn and you will drop it in.''
And that is what happened, folks. And the whole corner of that barn,
Cynthia, fell down. Harry Manganaro came out and helped me prop it up.
It cost my dad $15,000.
Now, guess what? Harry Manganaro came to my office yesterday and said
his building happened to be firebombed last weekend and all his records
are missing, including the bill, $15,000, not counting materials, to my
dad who owned it.
Sinclair. Now, look. You are prosecutors. Mr. Callahan made a hell of
a
[[Page H5386]]
point. Mr. LaTourette, thank you. But now I want a prosecutor to think,
you really want Jim Traficant. They didn't allow a witness to testify,
they wouldn't allow a vendetta defense. She voir dired nine of my
witnesses outside the presence of the jury, didn't allow them to
testify. Allowed none of my tapes. All of my tapes are exculpatory.
Even on those who took the 5th Amendment, she didn't allow them.
Bucci lied through his teeth. His sister-in-law told me that there
were three brothers and a brother that lived across the street from the
farm and he was my friend. And she said he was sick, they took him to
Florida, where he had his leg amputated; brought him back, stole the
money from the family, and her children did not even attend the
funeral. She submitted an affidavit and testified.
God almighty here.
Now, they said the prosecutor said, ``Traficant is touchy-feely.
Traficant is too intelligent to be taped.'' Why did they have Sinclair
tape an attorney, Madovich? Why didn't they fake body injury? I have a
device, Mr. Hefley, that I could tape you right now, your conversation
in the midst of all of this, and you wouldn't know you are being taped.
Now not one wiretap, with the number one target in the United States
of the Department of Justice prosecutors. My phone wasn't tapped. They
didn't want to get an admission. They didn't want to get Traficant
saying listen, go to it, that grand jury, do this.
J.C., everybody that testified against me would have gone to jail and
lost their law license and ruined their life.
Now, a brother-in-law testifies. He said his brother-in-law told him
that he was taped by someone that he had bribed a county engineer,
hundreds of millions of dollars. He told his brother-in-law that he
would go to jail for 10 years and lose $15 million, but all they wanted
was Traficant. So he told his brother he added up all the campaign
contributions, which was $2,300 or $2,400 and said he bribed Traficant.
You know what is amazing about this one? She didn't even allow the
brother-in-law, who was subject to jeopardy, being sentenced in another
case, to testify.
And guess what I did? I used the government's own picture because he
said I did this, Ellen, in a barn. So I held up the picture and said,
``What barn was it?'' Couldn't identify the barn.
I said, ``What was I doing in a barn?''
He said, ``You were cleaning a horse's hoof.''
``Which one?''
He said, ``The back one.''
I said, ``Was he tied, or was he being held?''
He said, ``Someone was holding him.''
``Anybody else in the barn?''
``Oh, all kinds of people.''
``What was the floor like?''
``Can't remember. Too much manure.''
The jury even threw that one out.
I have an affidavit or a tape on every one of these counts.
Now, Sandy Ferrante testified that she personally saw me repay over a
period of years money to staffers that I borrowed from them. When the
IRS nailed me, they took me to civil court, and I made $2,400 a month.
And that just run out, and now they are going to put me in jail for 12
years, take everything that my wife and I owned, and I never owned that
farm.
I will go to jail, but I will be damned if I will be pressured by a
government that pressured these witnesses to death to get a conviction
on a target, the number one target in the country.
Jim Kirsham, who was an FBI-paid special agent, she would not let him
testify, said, ``If you get us anything on Traficant, we will build a
monument to you.''
I got an affidavit from a guy just sent to me from Canada that I
helped in a case where 11 Chinese were arrested, and he said, ``I want
to thank Jim Traficant publicly,'' and they said, ``Stay away from
Traficant. Don't mention his name. We are going to get him.''
I had an FBI agent that compromised one of my constituents under
mental instability, desperately trying to save custody of her child,
compromised her into sex. She said, ``Jim, he didn't throw me to the
ground. I don't want my 87-year-old mother to know about it.''
FBI agent Anthony Speranza. I will be damned if someone is going to
rape one of my constituents.
Announcement by the Speaker Pro Tempore.
The SPEAKER pro tempore. The gentleman will suspend.
The gentleman will avoid profanity or indecent language.
Mr. TRAFICANT. How much time do I have left?
The SPEAKER pro tempore. The gentleman has 30\1/2\ minutes remaining.
Mr. TRAFICANT. I read an affidavit of a Scott Grodi. He sat through
the whole trial. I would like your attention. I got this affidavit
today, about an hour before I came here. He was released two days
before the trial, his aunt died. He said he wanted to finish. I thought
we had it resolved for the U.S. Marshals to take him so he would be a
pallbearer. When he came back, he was dismissed.
He didn't put in his affidavit, Cynthia, but you can write and talk
to him, John Grodi, Scott Grodi. He said he knew the prosecutor wanted
him out. He said, ``I knew Jim Traficant was innocent.'' He said, ``I
could see how he impeached their witnesses and how they were lying.''
Now, Mr. Berman said that there was a recant by Mr. Glaser. This is
today's newspaper just faxed to me. Mr. Glaser said he did not recant,
and, on the evidence, he couldn't see himself convicting Jim Traficant
now.
Mr. Grodi said the woman next to him also felt I was innocent. I
tried to get an affidavit from her. Her attorney informed us that she
was afraid to get involved. Now, folks, if she had something good to
say about the government, would she be afraid?
Look here, that Cafaro Company and that Laser, I saved them with a $4
million appropriation. Thank you, Bill Young. But most air flights miss
on their airports, and that technology is already used on our
submarines and our naval aircraft carriers. And the only deal I have
with Cafaro is bring those jobs, Ellen, and bring those headquarters
from Manassas, and screw Frank Wolf.
I have helped everybody in my district and every one of these people,
yeah. I did not even like some of them. But when they had 150 employees
and got a contract for a highway that hired another 200, I had a 22
percent unemployment rate. Did I go to bat for them? Yes. Did I write
letters to the Secretary of State? Yes. Did I write letters to the
Secretary of Commerce? Yes. Secretary of Labor? Yes. Department of
Transportation? Yes.
But here is where I am at tonight. I have been pressured for 20
years. Now, in 1996, read this. ``Dear Sheriff, after watching your
deal in Washington and listening to the courageous admission of Mr.
Detore concerning Morford pressuring him, I decided to come forward.
Mr. Morford pressured me to lie about you in front of a grand jury in
1996. I would not lie. I am proud now that I did not lie after hearing
Mr. Detore. Enclosed is my truthful affidavit. You can see it any way
you wish.''
Here is what they wanted Mr. Detore to say, he was outside the door
and heard me and Cafaro make a bribery deal. What Mr. Berman didn't
mention is I paid $10,000 for cars that didn't run, and Mr. Cafaro sold
these cars made in Youngstown, the whole company, for $1. They are
considered worthless. He owed me money, never gave me the titles.
Flying Members of Congress around, getting Senators' girlfriends'
gifts.
But you get out of jail free by getting the man right here.
Here is the problem in America, and you must take America back. And I
am running as an independent, and don't be surprised if I don't win
behind bars.
The American people are afraid of their government. Why are we afraid
of our government? Now, I want you to listen to this. Bob, they didn't
bring one FBI or IRS investigator who investigated me to the stand so I
could cross-examine them. They brought a 30-year veteran from
Philadelphia, Mr. Callahan, he had seven trips, spent 40 days, a
quarter of a million dollars, and all he did was add up the numbers the
prosecutor gave him. And said he did no investigation. When he left, he
was so confused he walked into the edge of the jury edge, right in the
sore spot.
The other one was an FBI rookie. Now, listen carefully. When it come
to fingerprints, the judge smiled like a fox. She dismissed the jury.
The prosecutor says, ``Your Honor, we have no
[[Page H5387]]
fingerprints of the defendant.'' One thousand documents. And listen to
this. He said the one time I gave him an envelope of four, five,
whatever thousand, and he took it immediately to the FBI guy who sent
it to the lab.
Now, I am an old sheriff. I want to get Traficant? I steam that thing
open, I fix a few bills, say, ``Look, you tell Traficant you don't want
to go any further. You are not going to hurt him. When you come out of
that restaurant, just have that damn money on him.''
What I am trying to tell you, there is no physical evidence. And when
they talk about this Sinclair, $2,500, they fail to mention that he had
five accounts. And every time he took 2,500 out of one, 2,500 went into
another one. And after he left my employment for 22 months, $2,500
didn't go into the other account. And while he was in my employ, he
said he earned $50,000 from me and $50,000 from the government.
{time} 2100
He bought a $300,000 house, a brand new Buick van, rented a new car
for $300 month and spent $60,000 on advertising. They went back 15
years on a horse transaction I had in Uhrichsville, Ohio, George
Hooker. They could not find one citizen to say Jim Traficant bought a
pencil for cash. Now look, if you drink five gallons of Gatorade, you
are going to expend five gallons of Gatorade somewhere in one of these
restrooms. You know what you have before you? We are getting to the
point where a RICO case is going to be brought against a group of
housewives for conspiring to buy Kellogg's cereal.
I am prepared to lose everything. I am prepared to go to jail. You go
ahead and expel me, but I am going to tell you what, Mr. LaTourette was
right about Salvati, but do you know what was mentioned of Mr. Detore?
Do you know what Jim Traficant said about Janet Reno? The
administration wants him out. Now, I said this on radio and I am on the
House floor. I am going to say it to you right now. I called Janet Reno
a traitor and I believe in my heart she is.
I believe Monica and Henry Cisneros were not that important, but I
think that Red Army Chinese general giving money to the Democrat
National Committee was an affront to our intelligence, and now I am
going to tell it like it is. The Republicans want a permanent trade
status with China. You let it slide. Democrats did not want Clinton and
the party hurt. You let it slide. And what you let slide was the
freedom of the United States of America. And I called her a traitor.
And Janet Reno, if I do not go to jail, I will be in Orlando August
15 and you are not going to be elected to any damn thing. Nobody should
fear our Government.
announcement by the speaker pro tempore
The SPEAKER pro tempore (Mr. Hansen). The Chair would caution the
gentleman to please avoid the use of profanity or indecent language,
and the gentleman should address the Chair and not other Members by
their first names. The gentleman may proceed.
Mr. TRAFICANT. I apologize. As a fashion leader, it is tough for me
at times to comport with some rules.
It was brought up and said, Jim, why don't you go to Speaker Hastert?
Hastert owes you. I didn't go to the Speaker. I didn't vote for the
Speaker to get something from the Speaker. Now, you go ahead and expel
me, but you ran this place for 50 years, Democrats, and you made the
IRS and the FBI and the Justice Department so strong, our people are
afraid to death of them.
I want to thank Bill Archer and the Republican Party, and that is why
I voted for you, Speaker. For 12 years I tried to change the burden of
proof in the civil tax case and protect the American people's homes
from being seized, and now, I want to give those statistics because
they are relevant to my case and the IRS hates me for it.
The law was passed in 1998, the Traficant language wasn't in, Clinton
threatened to veto it. Ninety-five percent of the American public
wanted the Traficant bill. The Republican Chairman, Bill Archer, called
me and said he talked to the Speaker and leaders and said, Jim, we are
going to put your burden of proof in and we are going to put your
language on seizure in the conference, and wrote me a letter giving me
the credit.
Now, let me give you the statistics that I am proud of and I want to
share, because this may be the last time on the floor, and I expect it.
The year before compared to the year after the law, wage attachments
dropped from $3.1 million to $540,000. Thank you, Mr. Archer. Thank
you, Rob Portman. Property liens dropped from $688,000 to $161,000, but
now let us think of our communities. Seizures of individual family-
owned homes dropped from 10,067 to 57 in 50 States when they had to
prove it, and you guys did it. Congratulations.
I want to fight these people. I want to fight them like a junkyard
dog. They tied my hands behind my back and that first vote was 7-5. I
am not going to get into some of the personal dynamics, but there were
some people that Mr. Grodi told me that were predisposed to vote
against me before that case started, and that upset him. By the way,
one of the jurors said, it is unfortunate he got caught, but most of
those Members of Congress are crooks anyway. I don't think you are
crooks. I never ripped off Mr. Skelton.
I have a lot of Hispanics mad at me, and I think Ms. Sanchez is a
great member, but yes, I voted for Mr. Dornan because I thought we set
an illegal precedent by allowing possible illegal immigrants to vote in
a Federal election, and I voted with Mr. Dornan. And I am sorry, but
that's the way it is. Now, since then I think you have an been an
excellent Member. If you have been offended by this, I am sorry.
I also want to say this. I urge you to put our troops on our border.
I think anybody who jumps the fence shouldn't be made a citizen, they
should be thrown out. And you are going to be dealing with homeland
security, and I am saddened in my heart I can't vote on it.
Now, I don't know how much time I have left, but show me one piece of
physical evidence.
Mr. Detore, by the way, spent $600,000 and is now without an
attorney. His last attorney he paid $239,000 who went to the judge
without him knowing and asked to be withdrawn from the case, because
Richard Detore would not give him $100,000. He had already given him
$239,000, and all he did was submit 3 motions for him. And one thing
rang true: Every one of the witnesses that testified; significant, they
had some witnesses scared to death. The key witnesses all would have
gone to jail, lost their license, wives should have been indicted, and
you know what? Back to my valley. I don't blame any one of you.
I think if they had something on Mr. Detore, who knows what to God he
would do, but I am going to say this. Someone who impugns the character
of Mr. Detore is, in my opinion, violating the sanctity of this House.
Because he said, I checkered my wife and I will not lie. And if they
indict me, go ahead and indict me.
They talked about a Corvette that cost $1,000. It was supposed to be
$1,000, but ended up being $6,000 that I paid for it. They said, why
did you pay so much for the Corvette? I rented a Corvette because I
wanted to get a car to drive to visit Mr. Cooksey to go hunting and to
speak at one of his events. But he got tied up 3 weeks later, and I had
the car for 3 weeks, and when I drove back, the license plate expired
in 30 days, got picked up on 395.
I ended up paying $6,000 for a car. I paid for it and got the
records. Everything I paid was by check or a credit card. No cash in 20
years. My God, if you don't give me a right to appeal a judge whose
husband was taking his law firm fees from the Cafaro company, who is
the predicate act of the RICO, then who is our last bastion of appeal
if it is not the people's House?
Mr. Speaker, I voted for you; I thought you were better for the
country, period. I thought the Republicans' program was better. Mr.
Gephardt, if you're here, I apologize for my comments; it was in the
heat of battle. If you had been there, I probably would have hit you
too. But I apologize for those words.
With that, with that, I retain the balance of my time, or however you
word it. How much time do I have?
The SPEAKER pro tempore (Mr. Hansen). The gentleman from Ohio (Mr.
Traficant) has 14\1/2\ minutes remaining.
parliamentary inquiry
Mr. TRAFICANT. Do I go last, Mr. Chairman? Parliamentary inquiry.
[[Page H5388]]
The SPEAKER pro tempore. Would the gentleman state his inquiry?
Mr. TRAFICANT. Mr. Speaker, do I go last, since I am the subject of
the demise?
The SPEAKER pro tempore. The gentleman from Colorado (Mr. Hefley) has
the right to close.
Mr. TRAFICANT. Mr. Speaker, I ask the gentleman from Colorado (Mr.
Hefley) as a gentleman to relinquish his right to close, surrender to
me and give me his time.
Mr. HEFLEY. Mr. Speaker, I will hold that decision in abeyance until
we get down to that time. I will take it into consideration.
Mr. TRAFICANT. Mr. Speaker, if the gentleman has any time left.
The SPEAKER pro tempore. The Chair recognizes the gentleman from
Colorado (Mr. Hefley).
Mr. HEFLEY. Mr. Speaker, I yield 5 minutes to the gentleman from
Washington (Mr. Hastings), who is the chairman of the Investigative
Subcommittee in this matter.
Mr. HASTINGS of Washington. Mr. Speaker, I thank the gentleman for
yielding me this time.
Mr. Speaker, this is a day that each of us hoped would never come,
and we pray that it will not come again. Simply put, there is
absolutely no satisfaction in judging one of our own. But the
Constitution makes clear that we are the only ones who can judge a
fellow Member of Congress in cases such as Mr. Traficant.
It is certainly difficult for me, as I am sure it is difficult for my
fellow members of the Committee on Standards of Official Conduct, to
recommend the expulsion of a colleague. Our recommendation in this
matter is based solely on the facts as we know and understand them.
This recommendation is one that I know the entire committee took very
seriously.
My only responsibilities in this matter were twofold. First, I served
as chairman of the Investigative Subcommittee. Along with 3 of my
colleagues, our responsibility was to examine the evidence from Mr.
Traficant's trial in Cleveland, Ohio, and to determine whether there
was ``substantial reason to believe'' that violations of the House
rules occurred. At this point, Mr. Speaker, I would like to thank each
of my colleagues on the subcommittee for their service and their
support during this long and painstaking investigation.
My cochair, the gentlewoman from California (Ms. Lofgren), the
gentleman from Mississippi (Mr. Wicker), and the gentleman from Georgia
(Mr. Lewis) should all be commended for the fair and even-handed way
that they carried out this difficult assignment that none of them
sought.
Mr. Speaker, on the Investigative Subcommittee, our role was similar
to that of a grand jury in that our threshold of substantial reason to
believe is lower than the clear and convincing evidence threshold used
by Chairman Hefley's Adjudicatory Subcommittee.
We were charged to review the evidence presented at trial and then
make our determination regarding any possibility of violation of the
Rules of the House. I should emphasize that we were not simply to
accept the verdict of Mr. Traficant's trial at face value, nor were we
to base our recommendations on that verdict.
By a unanimous, bipartisan decision, the vote on the subcommittee
concluded that in fact, it had ``substantial reason to believe'' that
the Rules of the House were violated, and this the next phase, the
adjudicatory phase, should move forward.
Now, my second responsibility was not as the whole committee had or
the adjudicatory committee; my second responsibility was to determine
the appropriate sanction in the event that the adjudicatory phase was
so warranted. This part, I must say, was very, very difficult,
difficult because measuring Mr. Traficant's transgressions against past
transgressions by other Members, then determining the appropriate
sanction is, by far, far from a black and white exercise. But, the
Constitution assigns us this responsibility, and to us alone, and so we
proceed.
After considering all of the evidence, I concluded that Mr.
Traficant's offenses were so serious and so purposeful that expulsion
from the House is the only appropriate sanction.
{time} 2115
So with a heavy heart that is how I will vote at the conclusion of
this debate, but not only for the sake of this great institution, but
out of respect for the rule of law.
Mr. Speaker, if any greater good is to come from these proceedings,
let us hope that by facing our responsibilities squarely we have begun
to rebuild public confidence in the integrity of the people's House.
Whether we like it or not, in recent years too many Americans have come
to believe that holding high office means a person gets to play by
different rules than everyone else. That perception has helped fuel
growing public cynicism about the honesty and integrity of Congress
itself. Nothing could be more dangerous to our democracy, and we simply
cannot allow that perception to grow unchecked.
Here in the House of Representatives, we all know there are rules
governing Members and the conduct of their official duties, and we also
know that those rules must be enforced fairly, without fear or favor.
Mr. Speaker, this is a day each of us hoped would never come. Mr.
Speaker, this is a very difficult time for all of us, and I know it is
difficult for all of my colleagues sitting here tonight, but I think
that we must vote aye on this resolution.
Sadly, when the Rules of the House are violated so willfully and
flagrantly, we have little choice but to punish those who break them.
For, by their actions, Members who violate the rules undermine not only
our own internal order here in this great institution, but the very
foundation of public trust and confidence on which the people's House
must always rest.
Today, it's up to us to repair that foundation.
Mr. BERMAN. Mr. Speaker, I yield 2\1/4\ minutes to the gentlewoman
from California (Ms. Lofgren).
Ms. LOFGREN. Mr. Speaker, I was the ranking member on the
investigative subcommittee serving with the gentleman from Washington
(Mr. Hastings), examining the testimony and evidence presented during
the trial.
The subcommittee unanimously concluded that the evidence showed that
the gentleman from Ohio (Mr. Traficant) engaged in official misconduct
of the most serious nature. He traded his official office and powers
repeatedly for money, free labor, equipment at his farm and other
things. He did so repeatedly and with several different people and
companies.
He demanded and received tens of thousands of dollars, with salary
kickbacks from his congressional employees. He filed two false income
tax returns that failed to report more than $75,000 in income from
gratuities. As I mentioned earlier, the trial lasted more than 30 days
with over 6,000 pages of transcript, more than 50 witnesses called for
the prosecution and 29 by the gentleman from Ohio (Mr. Traficant).
We took this testimony and reviewed it, but we made an independent
review of the sworn testimony and other evidence during the trial, and
we unanimously decided that the gentleman from Ohio (Mr. Traficant)
should be charged with violation of House rules based on the evidence,
not criminal charges.
There was testimony, evidence by the businessman who gave the
gentleman from Ohio (Mr. Traficant) gratuities, and that was supported
by testimony of public servants who were pressured by the gentleman
from Ohio (Mr. Traficant). Eight witnesses testified relative to the
kickbacks the gentleman from Ohio (Mr. Traficant) received, and that
testimony was also substantiated. Five employees of the gentleman from
Ohio (Mr. Traficant) testified as to the work they were directed by the
gentleman from Ohio (Mr. Traficant) to perform on his farm or boat. One
employee testified that he had been there between 100 and 300 different
times.
The gentleman from Ohio (Mr. Traficant) repeatedly asserts there is
no physical evidence of his crimes, but, in fact, there is abundant
evidence, including check, bank records, memos, faxes, letters and
other documents.
I would finally just say that when the gentleman from Washington (Mr.
Hastings) and I rejoined the remainder of the committee for the penalty
phase, we joined eight others with the unanimous recommendation, with
great sadness, that the expulsion remedy is one that we must do. I feel
very sad this evening to listen to this testimony, but I know what our
duty calls us to do, and I hope that the House is up to it.
[[Page H5389]]
Mr. TRAFICANT. Mr. Speaker, how much time remains with all parties?
The SPEAKER pro tempore (Mr. Hansen). The gentleman from Ohio (Mr.
Traficant) has 14\1/2\ minutes remaining. The gentleman from Colorado
(Mr. Hefley) has 6 minutes remaining. The gentleman from California
(Mr. Berman) has 7\1/4\ minutes remaining.
We would close in this order unless someone elects different: The
gentleman from California (Mr. Berman), the gentleman from Ohio (Mr.
Traficant), the gentleman from Colorado (Mr. Hefley), in that order.
Mr. TRAFICANT. Mr. Speaker, I yield myself such time as I may
consume.
Number one, the businessman my colleague is talking about that
corroborated Mr. Cafaro's testimony was Al Lang, and I did not find out
until after the trial that there was a demand note from Mr. Cafaro to
Al Lang to repay the money for the boat he was to buy.
Number two, that also Mr. Cafaro paid for Mr. Lang's attorney. So it
was really Mr. Lang and attorney or Mr. Lang was represented by Mr.
Cafaro's attorney? My God.
Second of all, the Committee on Standards of Official Conduct allowed
me to subpoena one witness. I asked for 11 subpoenaed and 20 that did
not need subpoenas. They finally come back and retracted. The one
witness testified she personally made the loans when I could not make
it to the farm. One fellow saw me make loans to the other fellow.
My colleagues had a hearsay transcript. Now I want to ask the
committee, and I wish the committee would hear me. I want to know what
witness the committee called to refute my witnesses or the hearsay in
that transcript. Why was I willing to bring 31? Why did the judge tie
my hands behind my back?
The point I am making to my colleagues is I am not unique. I know why
I was targeted. I do not need American history to beat them, and I was
an embarrassment, and then I brought home John Demjanjuk, the infamous
Ivan the Terrible. I was labeled an anti-Semite. No one would look into
his case. The headlines in my paper said Nazi sympathizer. What they
did not say when the family came in, they came to me last because no
one would listen to him because they said ``the case was too
sensitive.''
I said come on in and what they also did not print, I said, if your
dad has been convicted and I will go over and pull the switch, but
whether he was Ukrainian or Jew made no difference to me. I literally,
through my investigation, discovered the evidence that proved that Ivan
the Terrible was 9 years older, taller, black hair, long scar on neck
and his name was Ivan Marchenko and then presented a picture to Israeli
Supreme Court, and for all of the people calling me anti-Semite, let me
tell my colleagues something. I never voted for a foreign aid bill
until we had a surplus, and then I voted for aid, and I support Israel,
a democratic State, surrounded by a cluster of monarchs and dictators
who have held us hostage for oil, but he was not Ivan, and the Israeli
Supreme Court taught me something that I think Congress should know.
They literally delivered him to me on an El Al flight to take home.
Congress would not even hold a hearing in light of my compelling
evidence that the Israeli Supreme Court freed him, because it was too
sensitive.
What has happened to us, Congress? Am I different? Yeah. Have I
changed my pants? No. Deep down my colleagues know they want to wear
wider bottoms; they are just not secure enough to do it. I do wear
skinny ties. Yeah, wide ties make me look heavier than I am and I am
heavy enough. Do I do my hair with a weed whacker? I admit.
Take into consideration what my colleagues are doing. The Democrats,
and I agree with the gentleman from Wisconsin (Mr. Obey), and I have
had my run-ins with him, probably no one brighter in this whole place.
Mike Myers, an FBI undercover agent posing as an Arab sheik gave him
$250,000, captured by videotape, and my colleagues let him go till
after the break. The two Members who violated a 17-year-old page boy
and a 17-year-old page girl, which is rape in every State, were not
expelled.
If my colleagues know law enforcement and they have got a target,
they want a confession, and when they cannot get that confession, they
want an admission, and I am telling my colleagues this right now. They
have more tapes on me than NBC. I did nothing wrong. That is why go
ahead and expel me, and I believe this judge is so afraid of what is
resonating throughout America, who believes that they should not have
to fear their government and that Congress is the last hope to take it
back, and I am saying to the Speaker, take it back.
No American should fear their government and this guy does not. I am
ready to go. Expel me. It will make it easier for them to really jack
me good.
But do my colleagues know what they will have done? They will have
taken the standards of a RICO case down to less than a DUI where a
person needs a .10 to get a conviction.
Let me tell my colleagues what happened to me early Saturday morning.
I was up in Portage County, a new part of the district of the gentleman
from Ohio (Mr. Strickland), and I did not run against the gentleman
because I thought I would beat him easily, and I wanted to give him a
break.
I left my car, and at 2:30 in the morning I pulled out, and I got
pulled over by a township police car and a county sheriff. The window
does not work on the car, so I opened up the door. They could not see
me but said, ``Mr. Traficant, can we see your registration and
license.'' It had dealer tags on it. I did. He asked me to get out of
the car.
They asked me to walk around the back of the car. They asked me to do
my ABCs. They asked me to do this with all four fingers on both hands,
and they asked me to stand and put my foot in front of my right, take
nine steps, stop, turn and return. Then they asked me to lift my right
knee, with my left foot on the ground and count to 30. Try that. Then
they said reverse, put your right foot on the ground, pick your left
knee up, count to 30, and I did that, and they said would you mind a
breathalyzer. I said knock yourself out. I was .001.
Here is what I asked them: Did the FBI tell you that was my car and
ask you to see if you can get a DUI on me? They looked at each other
real funny, and I cannot tell my colleagues exactly what I told them
because of House decorum, but I told them if I find out it is an FBI
agent that did it, I will tear his throat out, and if they lied to me,
I would come back to them and tear their throats out.
They are not going to frighten me. I am ready to go to jail. I will
go the jail before I admit to a crime I did not commit, and there was
never any intent to commit a crime, and when they start bringing
letters that my colleagues send to Cabinet members trying to help their
people, there is a dangerous precedent set in U.S. v. Traficant.
Mr. Speaker, I reserve the balance of my time.
Mr. HEFLEY. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Illinois (Mrs. Biggert), a member of the committee.
(Mrs. BIGGERT asked and was given permission to revise and extend her
remarks.)
Mrs. BIGGERT. Mr. Speaker, it is with sadness and regret that I rise
today to express my support for H. Res. 495 in the matter of James A.
Traficant, Jr. Let me make this very clear. No Member of Congress ever
wishes to sit in judgment of a colleague, least of all a colleague as
colorful and as indomitable as the gentleman from Ohio (Mr. Traficant).
Yet at the same time no Member ever wishes to see the rules of this
institution broken or the standards of its Members brought low. Many
Americans who have read or heard of the gentleman from Ohio's (Mr.
Traficant) conviction in Federal court wonder why we in the House have
bothered with our own investigation and hearings.
{time} 2130
They ask, ``Why go through all of that? A jury found him guilty on 10
felony counts.'' They find it hard to find to understand why expulsion
from the House would not be automatic once a jury finds a Member guilty
of felony offenses in a court of law. The answer, quite simply, is
found in the Constitution. Our Founding Fathers left it not to the
Judiciary nor to the executive branch to determine when, how, or if
expulsion of a Member is warranted.
[[Page H5390]]
They left it to us, the Members of this body.
It falls to us today to look at three things: One, the statement of
violations of our own code of official conduct, drawn by our own
investigative subcommittee; two, the evidence presented at our own
adjudicatory hearing by our own subcommittee counsel and the gentleman
from Ohio (Mr. Traficant); and, three, the findings and sanctions
recommended by our own full Committee on Standards of Official Conduct.
If my colleagues will look at these three things, they will conclude
that there is clear and convincing evidence that the violations
occurred and that the resolution should be approved by this body today.
Mr. Speaker, I would like to thank our chairman, the gentleman from
Colorado (Mr. Hefley), and our ranking member, the gentleman from
California (Mr. Berman) for their outstanding work on this resolution.
Throughout the long weeks and days leading up to and including the
hearings, they showed the greatest integrity, patience, and fairness,
often going out of their way to give the gentleman from Ohio (Mr.
Traficant) every opportunity to counter the clear and convincing
evidence presented against him.
I salute my colleague, the gentleman from Ohio (Mr. LaTourette), for
his outstanding work.
Mr. BERMAN. Mr. Speaker, I yield 3 minutes to the gentlewoman from
Ohio (Mrs. Jones).
Mrs. JONES of Ohio. Mr. Speaker, I rise today in support of the
motion to expel our colleague, the gentleman from Ohio (Mr. Traficant).
I know, too, that many of my colleagues are questioning the propriety
of expelling the gentleman from Ohio, something that has not happened
in this House in some 40 years. And Members are questioning it
notwithstanding the fact that a jury was convinced beyond a reasonable
doubt of his guilt, the highest burden of proof required in our legal
system, and notwithstanding the fact that the Committee on Standards of
Official Conduct, who was vested and duty bound by this body to review
the conduct of our colleagues, has reviewed the facts and determined
that his conduct was of such nature that it violated the House rules of
conduct, and that it was of such character and so serious that it
merited the highest sanction from the House of Representatives.
Let me assure my colleagues that when we try cases in criminal
justice courtrooms, we often talk about a subject called a red herring.
Now, today, we have had an opportunity to hear from our colleague, the
gentleman from Ohio. In fact, the wonderful thing about our justice
system and the hearings that we have had here in the House are that
they were public. We had an opportunity to hear the presentation or the
defense presented by the defendant.
I will not go through all the red herrings, but we talked about: ``I
paid for the car, I never owned the farm; everybody would have gone to
jail or lost his license; I repaid the money to my staffers; do not be
surprised if I win, I will win behind bars; 1,000 items; no
fingerprints; hearsay transcripts; when the play is cast in hell, none
of the witnesses in the trial will be angels; you cannot believe that
the credibility of some of these witnesses could be better if they were
someone else.
Forget the witnesses for a moment. Forget that the judge's husband
was a member of the firm, and forget that his clerk was the chief clerk
for a chief justice of the Supreme Court or other trial court. We have
a duty. We have an obligation. The public is watching us, and they are
saying, ``House of Representatives, you have a duty. You have an
obligation as elected Members of Congress to take into consideration
what has been presented to you by this Committee on Standards of
Official Conduct.''
It is not easy. When I was a judge, I was required to sentence
somebody to death. And people used to say, oh, he should get the death
penalty. But it was not that easy to stand up there and say I sentence
him to death. And it is not easy today, my colleagues, but it is our
job. It is our duty. Uphold the integrity of this House of
Representatives and vote to expel the gentleman from Ohio (Mr.
Traficant).
Mr. TRAFICANT. Mr. Speaker, I yield myself such time as I may
consume.
Number one, to the gentlewoman from Illinois (Mrs. Biggert), I say
that I am sadder than you are.
To my colleague from Ohio, after the public hearings, 80 to 90
percent of the viewing public supports my position. Number three, all
the witnesses that testified against me at trial were either felons or
would-be felons, with no physical evidence.
The gentlewoman is a very astute legal criminal mind. I just want her
to think before she votes.
In the case of staff, they said one afternoon I invited them down to
the boat, they did some sanding, it was a bonding thing, and they drank
beer. The ones that came to the farm, came for the weekend,
voluntarily; wanted to use it as a health spa.
One guy that said he was there 300 times, I had it before the trial,
but I heard he took $2,500 to bribe a judge in a DUI case. I thought
they had no evidence, and I did not even question him on it. I have a
tape from one of his fellow trustees that I will submit to the
committee. His name is Jim Price, Weathersville Township, relative to
the testimony of that staffer that I will not mention.
Look, show me the beef. Come up with a transcript. They could not
even bring an FBI or IRS investigator to the stand, they are so afraid
of me. And I am going to tell my colleagues something, and they are not
going to believe it. My hands tied behind my back, I believe in my
heart I won that trial, and that trial was manipulated. I would not
rush in haste.
Now, if my colleagues do not expel me tonight, I am convinced this
judge is going to put me in jail. She cannot stand my guts. And she is
deathly afraid of me getting on national TV, because it is beginning to
resonate around the country about how people do fear our government.
And why do we?
I expect my colleagues to expel me. It is going to hurt me when some
of you do.
Mr. Speaker, I reserve the balance of my time.
The SPEAKER pro tempore (Mr. Hansen). Does the gentleman from
Colorado have any other speakers?
Mr. HEFLEY. Just this gentleman, and then myself to close.
The SPEAKER pro tempore. Does the gentleman from California have
additional speakers?
Mr. BERMAN. One additional member of the committee and myself.
The SPEAKER pro tempore. The gentleman from Colorado (Mr. Hefley) may
proceed.
Mr. HEFLEY. Mr. Speaker, I yield 2 minutes and 45 seconds to the
gentleman from Missouri (Mr. Hulshof), who is a member of the
committee.
Mr. HULSHOF. My colleagues, let me first thank you all for your
attention and presence here. The gentleman from Minnesota (Mr. Obey)
pointed out to me during the vote that back in 1980, as this matter was
being discussed, only a handful of Members were here for that debate
over the expulsion of Mr. Myers. And so your continued presence here is
a testament to this institution.
The gentleman from Ohio has referenced the lack of evidence and the
quality of evidence. Is there anybody in this Chamber who believes that
the gentleman from Ohio (Mr. Traficant) could be captured incriminating
himself on tape? Should we, in this case or any other case, reward a
wrongdoer because he has the wherewithal to avoid being captured in the
act? Shall a clever criminal who has enriched himself at taxpayer
expense be further enriched because he almost avoided detection?
I paraphrased comments made by a member of the Committee on Standards
of Official Conduct back in 1980 in that matter. The gentleman from
Ohio (Mr. Traficant) has violated the House rules not only as an
individual who happened to be a public servant, but as a public servant
who traded upon that very elected office.
There is no one who disputes that the gentleman has fought
aggressively for his constituents in the 17th Congressional District of
Ohio. I daresay that 435 Members who come here every week do the same
for constituents back home across this land, and yet we come here in
the public good, not to enrich ourselves for private profit.
[[Page H5391]]
To my colleagues who were sworn in in this Chamber on January 7,
1997, in the 105th Congress, what an interesting tenure we have had.
Our first vote for Speaker of the House, who had an ethics cloud
hanging over his head; our last vote as freshmen members on the
impeachment matter of a sitting president; and here we are again
tonight with the lens of history trained upon us.
There are some who have been fretting about this vote and that we are
debating it in prime time, of all things. Well, my colleagues, I
believe that tonight is going to be one of this institution's finest
hours.
To the gentleman from California (Mr. Issa), I absolutely agree with
his statements on the previous motion. It should take extraordinary
wrongdoing to override the wishes of a voter in a Congressional
district. I believe that. And I believe this is one such case.
Sometimes when we walk in darkness, we are overcome with the
brilliant light of truth. A little over 300 days ago, we assembled as a
body on the darkest day of our Nation's history, and we sent a glimmer
of light to the people we represent that you can extinguish thousands
of American lives, but you will not extinguish the American spirit. And
yet when you destroy that fragile bond of trust between the elected and
the electorate, expulsion is the only appropriate remedy, regrettably,
and I ask for that vote.
Mr. HEFLEY. Mr. Speaker, I do have some additional comments I will
give at the appropriate time, but I would like the gentleman from Ohio
(Mr. Traficant) to know at this time that I am going to waive my right
to close in this serious matter and give him the right to close.
The SPEAKER pro tempore. The gentleman is allowing the gentleman from
Ohio (Mr. Traficant) the right to close?
Mr. HEFLEY. Yes, Mr. Speaker. So that when the gentleman from
California (Mr. Berman) is through, I will make a few comments.
Mr. TRAFICANT. Mr. Speaker, would the gentleman from Colorado yield
me the balance of the time he does not use?
Mr. HEFLEY. I will be happy to yield the balance, if I do have some
left, but I do not believe I will.
Mr. BERMAN. Mr. Speaker, how much time do I have remaining?
The SPEAKER pro tempore. The gentleman from California has 4\3/4\
minutes remaining.
Mr. BERMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Texas (Mr. Green).
Mr. GREEN of Texas. Mr. Speaker, I have never spoken to my colleagues
from this mike, that I can remember.
Mr. Speaker, we do not enjoy what we are doing today, but I am proud
to follow my colleague, the gentleman from Missouri (Mr. Hulshof). When
we have to discipline ourselves, it is a task we try to avoid. We avoid
it to give due process to the accused, but in all reality, we really do
not want to air our dirty linen in public. We really do not. Nobody
does. Because we are a family, and families do not do that.
With that said, I could not be more proud in my four of five terms
here. I did not want the Committee on Standards of Official Conduct,
but I am proud to serve on it with the gentleman from Colorado (Mr.
Hefley) as the Chair and the gentleman from California (Mr. Berman) as
our ranking member. This is not something that any of us wanted. In
fact, we would resign tomorrow, except it is our duty.
This is the people's House and we have to do our job. If we cannot
remove a Member of Congress who has been convicted of 10 felonies,
including using his office for personal gain, we risk losing the faith
and trust of the American people that we have.
As a duly elected Member from the 17th district of Ohio, I do not
fault the gentleman from Ohio (Mr. Traficant) for doing everything he
can to bring economic assistance to his constituents. As my colleague
from Missouri said, we do that every day; 434 of us try to do that, and
we work hard for our constituents, for jobs and economic development.
The line of legality is crossed when we help ourselves for our benefit
instead of helping our constituents for their benefit.
The gentleman from Ohio crossed that line when he worked for a
company to get road contracts for his district, and then that company
did improvements on his own private property. That is not lawful. And
when he helped a family move an imprisoned loved one closer to home and
then provided a list of improvements to be made to his properties, that
was illegal. When he created a system of kickbacks by his congressional
employees, that was outrageous and unlawful. When he helped a company
receive Federal tax dollars that we vote for for worthwhile projects,
and then they accept benefits to use personally, that was illegal.
{time} 2145
Mr. Speaker, I know I am out of time, but we need to do our job, and
we need to make sure that we remember we are only here temporarily, and
this is the people's House.
These examples of violations of House Rules and U.S. Statutes by
Congressman Traficant clearly demonstrates a continuing abuse of his
congressional office. That is why the Committee on Standards of
Official Conduct voted unanimously to expel him. Congressman Traficant
is our colleague, and I do not like having to list his past mistakes,
but I value the honor of this body above all else. Our colleague has
brought disrespect on his House by his violations of law and for that
reason, he must be expelled.
Mr. Speaker, Congressman Traficant has been judged guilty by a jury
of his peers in Ohio and a Committee of his peers in the House of
Representatives. I urge my colleagues to show the American people that
this body believes in the ``rule of law'' and vote to expel Congressman
James Traficant.
We should all be appalled by this activity--we should not continue
the image that elected officials are crooks who get special treatment.
We need to act on this immediately--well after conviction but before
sentencing next week.
The SPEAKER pro tempore (Mr. Hansen). The gentleman from California
(Mr. Berman) has 2\3/4\ minutes remaining.
Mr. BERMAN. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, the gentleman from Ohio (Mr. Traficant) is our
colleague. We are involved in what is in a certain way a profoundly
anti-democratic decision, one contemplated by our Founding Fathers, but
anti-democratic because we are talking about expelling a Member who was
elected for a term of office before that term is completed.
He is a friend to many. He has an irrepressible nature that all of us
coming from a lot of different backgrounds have known about for a long
time. In many ways he has been an effective colleague for the causes
and issues that the gentleman believes in. But this body in its wisdom
created a committee. The leadership of both sides appointed Members who
have spent an incredibly large amount of time sifting through the
evidence relating to four counts of conspiracy to commit bribery, each
of them involving totally separate transactions with totally different
witnesses; illegal gratuities under our bribery statute, filing false
tax information, two separate counts; obstruction of justice.
Our committee, involving an equal number of Democrats and
Republicans, covering an incredible range of philosophies and
ideologies, going from people who barely new the respondent to a
gentleman who has termed himself publicly as his closest friend in this
House, have applied our rules to the facts as we see them and
unanimously recommended expulsion. No one did it easily. For some, it
was an incredibly difficult conclusion to reach.
Mr. Speaker, I think in the context of this process and our
obligation to the American people, we are compelled to vote ``aye'' on
the resolution to expel.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The gentleman from Colorado (Mr. Hefley) has
1\1/4\ minutes remaining.
Mr. HEFLEY. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, the gentleman from Ohio (Mr. Traficant) is a Member with
whom many of us have served for years and years. Many of us are very
fond of the gentleman from Ohio (Mr. Traficant); but at times like
these we are required to set aside those personal feelings, those
feelings of friendship, and fulfill this weighty responsibility.
As chairman of the Committee on Standards of Official Conduct, it is
my duty to ask the House of Representatives to expel the gentleman from
Ohio (Mr. Traficant).
[[Page H5392]]
I want to thank the members of the committee that I have served with
through this. They serve us well. I want to thank our outstanding
staff. They serve us well. And I particularly want to thank Members for
being here for almost 3 hours. It is seldom that I have seen almost
every Member of the House of Representatives on the floor for 3 hours.
What that tells me is that Members take this as seriously as I do and
as the rest of the committee does, and thank you for that. It is
important that we do not take something like this lightly. We do not
take it lightly.
Mr. Speaker, if I have any time remaining, I yield it to the
gentleman from Ohio (Mr. Traficant).
The SPEAKER pro tempore. The gentleman's time has expired.
The gentleman from Colorado (Mr. Hefley) has relinquished to the
gentleman from Ohio (Mr. Traficant) the right to close. The gentleman
from Ohio has 3 minutes remaining.
Mr. TRAFICANT. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, 20 years and not one tape. Mr. Prosecutor from Missouri,
am I that good? Come on.
$1.3 billion in that budget that I brought back, much of it from the
help of the Republicans, the gentleman from Pennsylvania (Mr. Murtha),
the gentleman from Florida (Mr. Young), thanks. Twenty-two percent
unemployment, been under 7, and we are still hurting. I am proud of
that.
He said that I took money from companies that did me favors. Look at
the testimony of Susan Bucci. She said that they owed me money. I
bushhogged 40 acres of their fields every year because her husband,
Dan, was sick; and baled 25 acres of his hay every year for 5 years
using my equipment and never charged him. She came to me when the
brothers ripped her off.
You know, there is something unusual here. You did not elect me. Yes,
you have the right to throw me out. My people do not want me out. There
is something that was not allowed to be brought, and I give the
gentleman from Colorado (Mr. Hefley) and the committee great respect;
but ladies and gentlemen, you passed a 1967 Jury Service and Selection
Plan in the Northern District of Ohio before Traficant was indicted,
passed a jury selection plan that was not ratified until after my
indictment. They excluded people from my area that knew me and these
witnesses from the jury pool.
This is not going to help me with the judge, but I think we have an
aristocratic judiciary that looks at Congress like an advisory board. I
think you better take that back.
Not one person who knew me or these witnesses was on the jury, and
you did not subpoena one witness to validate that hearsay transcript.
Here is what I am saying to you. It is not a matter of liking me. A
lot of Members do not like me because to get that $1.3 billion, I
raided a lot of appropriations bills. But I want your vote. I want 145
votes and I want to be able to go up and I want to fight the Department
of Justice and the IRS.
If they put me in jail, you have a very easy vote, and I predict you
will. I think as a Member of Congress, I want you to think of this.
There may come a time when you might get targeted.
You know what I was told? Watch what you say. You are too outspoken.
Watch what you say. Shut up about the Reno case.
I am not going to shut up. I want your vote because I think my vote
is your vote, and my people elected me and I do not think you should
take their representative away. With that, thank you for giving me
additional time, at least listening to me, and vote your conscience,
nothing personal; and I hope I am back and get another $1.3 billion.
Mr. UDALL of New Mexico. Mr. Speaker, I had the honor to serve New
Mexico as Attorney General. As Attorney General, I had the unfortunate
task to prosecute elected officials for their violation of the law and
the public's trust. Although, I accepted this duty, this was not an
easy task to perform but one that had to be done. The Committee on
Standards of Official Conduct has been asked to take on a difficult
charge to examine whether Representative Traficant violated the Code of
Official Conduct while serving as a Member of Congress. And if so,
whether those violations warrant his expulsion from the U.S. House of
Representatives. I thank them for their service on this difficult
matter.
This great body has expelled only four Members (three Members and one
Member-elect) in its history--Three of whom were expelled during the
Civil War period in 1861 for disloyalty to the Union and the fourth
occurred in 1980 following a bribery conviction. There have been other
Members who were subject to expulsion for offenses such as bribery,
illegal gratuities and obstruction of justice--but rather than force
the hand of the House to expel them, they took the noble way out and
resigned their office. I had hoped that Representative Traficant would
have done the same thing, and resign his office rather than force the
House to remove him. However, the current situation is before us, and
we must act.
On April 11, 2002 the Committee on Standards of Official Conduct gave
notice that the federal jury returned a guilty verdict in the criminal
trial of Representative Traficant. Six days later the Committee voted
to establish an Investigative Subcommittee to conduct a formal inquiry
regarding Representative Traficant. On June 27, 2002 the Investigative
Subcommittee transmitted to the full Committee on Standards of Official
Conduct a 10 count Statement of Alleged Violations and set the stage
for a public adjudicatory hearing to determine whether any counts in
the Statement of Alleged Violations have been proven by clear and
convincing evidence. I would like to read from the statement issued by
the Committee:
``The Statement of Alleged Violations charge that Representative
Traficant violated the Code of Official Conduct of the House of
Representatives and the Code of Ethics for Government Service through a
number of means, including: Agreeing to perform, and performing,
official acts on behalf of individuals and/or businesses for which
those individuals and/or businesses agreed to and did provide
Representative Traficant with things of value; Agreeing to employ a
member of his congressional district staff in exchange for $2,500 per
month in salary kickbacks from the employee; Endeavoring to persuade
this same employee to destroy evidence and to give false testimony to a
federal grand jury; Defrauding the United States of money and property
by a variety of means; Filing false income tax returns; Engaging in a
continuing pattern and practice of official misconduct through which he
misused his office for personal gain''.
From July 15 through July 18 the adjudicatory House subcommittee
heard from Representative Traficant where he argued that he broke no
laws and contended that the government was out to get him--the same
argument he made during his criminal trial. He argued against each of
the points that the Subcommittee Counsel raised and was unable to make
a clear argument against the evidence raised. The Subcommittee
eventually determined that he was guilty of several ethics violations
and that nine of the ten counts were proven by clear and convincing
evidence.
Representative Traficant misused his office for personnel gain; he
misused the public trust; he misused the public's money, through his
conduct in receiving congressional salary kickbacks from employees and
receiving personal labor and services from congressional staff while
they were on congressional work time; and he misused his powerful
position to persuade individuals to destroy evidence and provide false
testimony to a federal jury to conceal his abuse of office.
Mr. Speaker prior to entering office we each made the following
declaration:
I solemnly swear (or affirm) that I will support and defend the
Constitution of the United States against all enemies, foreign and
domestic; that I will bear true faith and allegiance to the same; that
I take his obligation freely, without any mental reservation or purpose
of evasion; and that I will well and faithfully discharge the duties of
the office on which I am about to enter. So help me God.
While the power of removal is a strong measure and one that should
never be taken lightly, it is one tool afforded to us by the
Constitution to use on those who have violated their public trust as
Members of Congress. Besides violating the public trust Representative
Traficant broke his solemn oath of office. He did not faithfully
discharge the duties of the office, which he now serves, and because of
this and the clear evidence before us he should be expelled from the
House of Representatives.
Mr. HEFLEY. Mr. Speaker, I move the previous question on the
resolution.
The previous question was ordered.
The SPEAKER pro tempore. The question is on the resolution.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Recorded Vote
Mr. HEFLEY. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
[[Page H5393]]
The vote was taken by electronic device, and there were--ayes 420,
noes 1, answered ``present'' 9, not voting 4, as follows:
[Roll No. 346]
AYES--420
Abercrombie
Ackerman
Aderholt
Akin
Allen
Andrews
Armey
Baca
Bachus
Baird
Baker
Baldacci
Baldwin
Ballenger
Barcia
Barr
Barrett
Barton
Bass
Becerra
Bentsen
Bereuter
Berkley
Berman
Berry
Biggert
Bishop
Blagojevich
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bono
Boozman
Borski
Boswell
Boucher
Boyd
Brady (PA)
Brady (TX)
Brown (FL)
Brown (OH)
Brown (SC)
Bryant
Burr
Burton
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Capps
Capuano
Cardin
Carson (IN)
Carson (OK)
Castle
Chabot
Chambliss
Clay
Clayton
Clement
Clyburn
Coble
Collins
Combest
Conyers
Cooksey
Costello
Cox
Coyne
Cramer
Crane
Crenshaw
Crowley
Cubin
Culberson
Cummings
Cunningham
Davis (CA)
Davis (FL)
Davis (IL)
Davis, Jo Ann
Davis, Tom
Deal
DeFazio
DeGette
Delahunt
DeLauro
DeLay
DeMint
Deutsch
Diaz-Balart
Dicks
Dingell
Doggett
Dooley
Doolittle
Doyle
Dreier
Duncan
Dunn
Edwards
Ehlers
Ehrlich
Emerson
Engel
English
Eshoo
Etheridge
Evans
Everett
Farr
Fattah
Ferguson
Filner
Flake
Fletcher
Foley
Forbes
Fossella
Frank
Frelinghuysen
Frost
Gallegly
Ganske
Gekas
Gephardt
Gibbons
Gilchrest
Gillmor
Gilman
Gonzalez
Goode
Goodlatte
Gordon
Goss
Graham
Granger
Graves
Green (TX)
Green (WI)
Greenwood
Grucci
Gutierrez
Gutknecht
Hall (OH)
Hall (TX)
Hansen
Harman
Hart
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill
Hilleary
Hilliard
Hinchey
Hinojosa
Hobson
Hoeffel
Hoekstra
Holden
Holt
Honda
Hooley
Horn
Houghton
Hoyer
Hulshof
Hunter
Hyde
Inslee
Isakson
Israel
Issa
Istook
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Jenkins
John
Johnson (CT)
Johnson (IL)
Johnson, E. B.
Johnson, Sam
Jones (NC)
Jones (OH)
Kanjorski
Kaptur
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kerns
Kildee
Kilpatrick
Kind (WI)
King (NY)
Kingston
Kirk
Kleczka
Kolbe
Kucinich
LaFalce
LaHood
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Latham
LaTourette
Leach
Lee
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lofgren
Lowey
Lucas (KY)
Lucas (OK)
Luther
Lynch
Maloney (CT)
Maloney (NY)
Manzullo
Markey
Mascara
Matheson
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McCrery
McDermott
McGovern
McHugh
McInnis
McIntyre
McKeon
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Mica
Millender-McDonald
Miller, Dan
Miller, Gary
Miller, George
Miller, Jeff
Mink
Mollohan
Moore
Moran (KS)
Moran (VA)
Morella
Murtha
Myrick
Nadler
Napolitano
Neal
Nethercutt
Ney
Northup
Norwood
Nussle
Oberstar
Obey
Olver
Ortiz
Osborne
Ose
Owens
Oxley
Pallone
Pascrell
Pastor
Payne
Pelosi
Pence
Peterson (MN)
Peterson (PA)
Petri
Phelps
Pickering
Pitts
Platts
Pombo
Pomeroy
Portman
Price (NC)
Pryce (OH)
Putnam
Quinn
Radanovich
Rahall
Ramstad
Rangel
Regula
Rehberg
Reyes
Reynolds
Riley
Rivers
Rodriguez
Roemer
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Ross
Rothman
Roukema
Roybal-Allard
Royce
Rush
Ryan (WI)
Ryun (KS)
Sabo
Sanchez
Sanders
Sandlin
Sawyer
Saxton
Schaffer
Schakowsky
Schiff
Schrock
Scott
Sensenbrenner
Serrano
Sessions
Shadegg
Shaw
Shays
Sherman
Sherwood
Shimkus
Shows
Shuster
Simmons
Skeen
Skelton
Slaughter
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Solis
Souder
Spratt
Stark
Stenholm
Strickland
Stump
Stupak
Sullivan
Sununu
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thompson (MS)
Thornberry
Thune
Thurman
Tiahrt
Tiberi
Tierney
Toomey
Towns
Turner
Udall (CO)
Udall (NM)
Upton
Velazquez
Visclosky
Vitter
Walden
Walsh
Wamp
Waters
Watkins (OK)
Watson (CA)
Watt (NC)
Watts (OK)
Waxman
Weiner
Weldon (FL)
Weldon (PA)
Weller
Wexler
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wu
Wynn
Young (FL)
NOES--1
Condit
ANSWERED ``PRESENT''--9
Bartlett
Bilirakis
Callahan
Ford
Hostettler
Otter
Paul
Simpson
Young (AK)
NOT VOTING--4
Bonior
Knollenberg
Stearns
Traficant
CONFERENCE REPORT ON H.R. 3763, SARBANES-OXLEY ACT OF 2002
Mr. OXLEY submitted the following conference report and
statement on the bill (H.R. 3763) to protect investors by
improving the accuracy and reliability of corporate
disclosures made pursuant to the securities laws, and for
other purposes:
Conference Report (H. Rept. 107-610)
The committee of conference on the disagreeing votes of the
two Houses on the amendment of the Senate to the bill (H.R.
3763), to protect investors by improving the accuracy and
reliability of corporate disclosures made pursuant to the
securities laws, and for other purposes, having met, after
full and free conference, have agreed to recommend and do
recommend to their respective Houses as follows:
That the House recede from its disagreement to the
amendment of the Senate and agree to the same with an
amendment as follows:
In lieu of the matter proposed to be inserted by the Senate
amendment, insert the following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Sarbanes-
Oxley Act of 2002''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Commission rules and enforcement.
TITLE I--PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD
Sec. 101. Establishment; administrative provisions.
Sec. 102. Registration with the Board.
Sec. 103. Auditing, quality control, and independence standards and
rules.
Sec. 104. Inspections of registered public accounting firms.
Sec. 105. Investigations and disciplinary proceedings.
Sec. 106. Foreign public accounting firms.
Sec. 107. Commission oversight of the Board.
Sec. 108. Accounting standards.
Sec. 109. Funding.
TITLE II--AUDITOR INDEPENDENCE
Sec. 201. Services outside the scope of practice of auditors.
Sec. 202. Preapproval requirements.
Sec. 203. Audit partner rotation.
Sec. 204. Auditor reports to audit committees.
Sec. 205. Conforming amendments.
Sec. 206. Conflicts of interest.
Sec. 207. Study of mandatory rotation of registered public accounting
firms.
Sec. 208. Commission authority.
Sec. 209. Considerations by appropriate State regulatory authorities.
TITLE III--CORPORATE RESPONSIBILITY
Sec. 301. Public company audit committees.
Sec. 302. Corporate responsibility for financial reports.
Sec. 303. Improper influence on conduct of audits.
Sec. 304. Forfeiture of certain bonuses and profits.
Sec. 305. Officer and director bars and penalties.
Sec. 306. Insider trades during pension fund blackout periods.
Sec. 307. Rules of professional responsibility for attorneys.
Sec. 308. Fair funds for investors.
TITLE IV--ENHANCED FINANCIAL DISCLOSURES
Sec. 401. Disclosures in periodic reports.
Sec. 402. Enhanced conflict of interest provisions.
[[Page H5394]]
Sec. 403. Disclosures of transactions involving management and
principal stockholders.
Sec. 404. Management assessment of internal controls.
Sec. 405. Exemption.
Sec. 406. Code of ethics for senior financial officers.
Sec. 407. Disclosure of audit committee financial expert.
Sec. 408. Enhanced review of periodic disclosures by issuers.
Sec. 409. Real time issuer disclosures.
TITLE V--ANALYST CONFLICTS OF INTEREST
Sec. 501. Treatment of securities analysts by registered securities
associations and national securities exchanges.
TITLE VI--COMMISSION RESOURCES AND AUTHORITY
Sec. 601. Authorization of appropriations.
Sec. 602. Appearance and practice before the Commission.
Sec. 603. Federal court authority to impose penny stock bars.
Sec. 604. Qualifications of associated persons of brokers and dealers.
TITLE VII--STUDIES AND REPORTS
Sec. 701. GAO study and report regarding consolidation of public
accounting firms.
Sec. 702. Commission study and report regarding credit rating agencies.
Sec. 703. Study and report on violators and violations
Sec. 704. Study of enforcement actions.
Sec. 705. Study of investment banks.
TITLE VIII--CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY
Sec. 801. Short title.
Sec. 802. Criminal penalties for altering documents.
Sec. 803. Debts nondischargeable if incurred in violation of securities
fraud laws.
Sec. 804. Statute of limitations for securities fraud.
Sec. 805. Review of Federal Sentencing Guidelines for obstruction of
justice and extensive criminal fraud.
Sec. 806. Protection for employees of publicly traded companies who
provide evidence of fraud.
Sec. 807. Criminal penalties for defrauding shareholders of publicly
traded companies.
TITLE IX--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS
Sec. 901. Short title.
Sec. 902. Attempts and conspiracies to commit criminal fraud offenses.
Sec. 903. Criminal penalties for mail and wire fraud.
Sec. 904. Criminal penalties for violations of the Employee Retirement
Income Security Act of 1974.
Sec. 905. Amendment to sentencing guidelines relating to certain white-
collar offenses.
Sec. 906. Corporate responsibility for financial reports.
TITLE X--CORPORATE TAX RETURNS
Sec. 1001. Sense of the Senate regarding the signing of corporate tax
returns by chief executive officers.
TITLE XI--CORPORATE FRAUD AND ACCOUNTABILITY
Sec. 1101. Short title.
Sec. 1102. Tampering with a record or otherwise impeding an official
proceeding.
Sec. 1103. Temporary freeze authority for the Securities and Exchange
Commission.
Sec. 1104. Amendment to the Federal Sentencing Guidelines.
Sec. 1105. Authority of the Commission to prohibit persons from serving
as officers or directors.
Sec. 1106. Increased criminal penalties under Securities Exchange Act
of 1934.
Sec. 1107. Retaliation against informants.
SEC. 2. DEFINITIONS.
(a) In General.--In this Act, the following definitions
shall apply:
(1) Appropriate state regulatory authority.--The term
``appropriate State regulatory authority'' means the State
agency or other authority responsible for the licensure or
other regulation of the practice of accounting in the State
or States having jurisdiction over a registered public
accounting firm or associated person thereof, with respect to
the matter in question.
(2) Audit.--The term ``audit'' means an examination of the
financial statements of any issuer by an independent public
accounting firm in accordance with the rules of the Board or
the Commission (or, for the period preceding the adoption of
applicable rules of the Board under section 103, in
accordance with then-applicable generally accepted auditing
and related standards for such purposes), for the purpose of
expressing an opinion on such statements.
(3) Audit committee.--The term ``audit committee'' means--
(A) a committee (or equivalent body) established by and
amongst the board of directors of an issuer for the purpose
of overseeing the accounting and financial reporting
processes of the issuer and audits of the financial
statements of the issuer; and
(B) if no such committee exists with respect to an issuer,
the entire board of directors of the issuer.
(4) Audit report.--The term ``audit report'' means a
document or other record--
(A) prepared following an audit performed for purposes of
compliance by an issuer with the requirements of the
securities laws; and
(B) in which a public accounting firm either--
(i) sets forth the opinion of that firm regarding a
financial statement, report, or other document; or
(ii) asserts that no such opinion can be expressed.
(5) Board.--The term ``Board'' means the Public Company
Accounting Oversight Board established under section 101.
(6) Commission.--The term ``Commission'' means the
Securities and Exchange Commission.
(7) Issuer.--The term ``issuer'' means an issuer (as
defined in section 3 of the Securities Exchange Act of 1934
(15 U.S.C. 78c)), the securities of which are
registered under section 12 of that Act (15 U.S.C. 78l),
or that is required to file reports under section 15(d)
(15 U.S.C. 78o(d)), or that files or has filed a
registration statement that has not yet become effective
under the Securities Act of 1933 (15 U.S.C. 77a et seq.),
and that it has not withdrawn.
(8) Non-audit services.--The term ``non-audit services''
means any professional services provided to an issuer by a
registered public accounting firm, other than those provided
to an issuer in connection with an audit or a review of the
financial statements of an issuer.
(9) Person associated with a public accounting firm.--
(A) In general.--The terms ``person associated with a
public accounting firm'' (or with a ``registered public
accounting firm'') and ``associated person of a public
accounting firm'' (or of a ``registered public accounting
firm'') mean any individual proprietor, partner, shareholder,
principal, accountant, or other professional employee of a
public accounting firm, or any other independent contractor
or entity that, in connection with the preparation or
issuance of any audit report--
(i) shares in the profits of, or receives compensation in
any other form from, that firm; or
(ii) participates as agent or otherwise on behalf of such
accounting firm in any activity of that firm.
(B) Exemption authority.--The Board may, by rule, exempt
persons engaged only in ministerial tasks from the definition
in subparagraph (A), to the extent that the Board determines
that any such exemption is consistent with the purposes of
this Act, the public interest, or the protection of
investors.
(10) Professional standards.--The term ``professional
standards'' means--
(A) accounting principles that are--
(i) established by the standard setting body described in
section 19(b) of the Securities Act of 1933, as amended by
this Act, or prescribed by the Commission under section 19(a)
of that Act (15 U.S.C. 17a(s)) or section 13(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78a(m)); and
(ii) relevant to audit reports for particular issuers, or
dealt with in the quality control system of a particular
registered public accounting firm; and
(B) auditing standards, standards for attestation
engagements, quality control policies and procedures, ethical
and competency standards, and independence standards
(including rules implementing title II) that the Board or the
Commission determines--
(i) relate to the preparation or issuance of audit reports
for issuers; and
(ii) are established or adopted by the Board under section
103(a), or are promulgated as rules of the Commission.
(11) Public accounting firm.--The term ``public accounting
firm'' means--
(A) a proprietorship, partnership, incorporated
association, corporation, limited liability company, limited
liability partnership, or other legal entity that is engaged
in the practice of public accounting or preparing or issuing
audit reports; and
(B) to the extent so designated by the rules of the Board,
any associated person of any entity described in subparagraph
(A).
(12) Registered public accounting firm.--The term
``registered public accounting firm'' means a public
accounting firm registered with the Board in accordance with
this Act.
(13) Rules of the board.--The term ``rules of the Board''
means the bylaws and rules of the Board (as submitted to, and
approved, modified, or amended by the Commission, in
accordance with section 107), and those stated policies,
practices, and interpretations of the Board that the
Commission, by rule, may deem to be rules of the Board, as
necessary or appropriate in the public interest or for the
protection of investors.
(14) Security.--The term ``security'' has the same meaning
as in section 3(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)).
(15) Securities laws.--The term ``securities laws'' means
the provisions of law referred to in section 3(a)(47) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), as
amended by this Act, and includes the rules, regulations, and
orders issued by the Commission thereunder.
(16) State.--The term ``State'' means any State of the
United States, the District of Columbia, Puerto Rico, the
Virgin Islands, or any other territory or possession of the
United States.
(b) Conforming Amendment.--Section 3(a)(47) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) is
amended by inserting ``the Sarbanes-Oxley Act of 2002,''
before ``the Public''.
SEC. 3. COMMISSION RULES AND ENFORCEMENT.
(a) Regulatory Action.--The Commission shall promulgate
such rules and regulations, as may be necessary or
appropriate in the public interest or for the protection of
investors, and in furtherance of this Act.
(b) Enforcement.--
(1) In general.--A violation by any person of this Act, any
rule or regulation of the Commission issued under this Act,
or any rule of the Board shall be treated for all purposes in
the
[[Page H5395]]
same manner as a violation of the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.) or the rules and regulations
issued thereunder, consistent with the provisions of this
Act, and any such person shall be subject to the same
penalties, and to the same extent, as for a violation of that
Act or such rules or regulations.
(2) Investigations, injunctions, and prosecution of
offenses.--Section 21 of the Securities Exchange Act of 1934
(15 U.S.C. 78u) is amended--
(A) in subsection (a)(1), by inserting ``the rules of the
Public Company Accounting Oversight Board, of which such
person is a registered public accounting firm or a person
associated with such a firm,'' after ``is a participant,'';
(B) in subsection (d)(1), by inserting ``the rules of the
Public Company Accounting Oversight Board, of which such
person is a registered public accounting firm or a person
associated with such a firm,'' after ``is a participant,'';
(C) in subsection (e), by inserting ``the rules of the
Public Company Accounting Oversight Board, of which such
person is a registered public accounting firm or a person
associated with such a firm,'' after ``is a participant,'';
and
(D) in subsection (f), by inserting ``or the Public Company
Accounting Oversight Board'' after ``self-regulatory
organization'' each place that term appears.
(3) Cease-and-desist proceedings.--Section 21C(c)(2) of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) is
amended by inserting ``registered public accounting firm (as
defined in section 2 of the Sarbanes-Oxley Act of 2002),''
after ``government securities dealer,''.
(4) Enforcement by federal banking agencies.--Section 12(i)
of the Securities Exchange Act of 1934 (15 U.S.C. 78l(i)) is
amended by--
(A) striking ``sections 12,'' each place it appears and
inserting ``sections 10A(m), 12,''; and
(B) striking ``and 16,'' each place it appears and
inserting ``and 16 of this Act, and sections 302, 303, 304,
306, 401(b), 404, 406, and 407 of the Sarbanes-Oxley Act of
2002,''.
(c) Effect on Commission Authority.--Nothing in this Act or
the rules of the Board shall be construed to impair or
limit--
(1) the authority of the Commission to regulate the
accounting profession, accounting firms, or persons
associated with such firms for purposes of enforcement of the
securities laws;
(2) the authority of the Commission to set standards for
accounting or auditing practices or auditor independence,
derived from other provisions of the securities laws or the
rules or regulations thereunder, for purposes of the
preparation and issuance of any audit report, or otherwise
under applicable law; or
(3) the ability of the Commission to take, on the
initiative of the Commission, legal, administrative, or
disciplinary action against any registered public accounting
firm or any associated person thereof.
TITLE I--PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD
SEC. 101. ESTABLISHMENT; ADMINISTRATIVE PROVISIONS.
(a) Establishment of Board.--There is established the
Public Company Accounting Oversight Board, to oversee the
audit of public companies that are subject to the securities
laws, and related matters, in order to protect the interests
of investors and further the public interest in the
preparation of informative, accurate, and independent audit
reports for companies the securities of which are sold to,
and held by and for, public investors. The Board shall be a
body corporate, operate as a nonprofit corporation, and have
succession until dissolved by an Act of Congress.
(b) Status.--The Board shall not be an agency or
establishment of the United States Government, and, except as
otherwise provided in this Act, shall be subject to, and have
all the powers conferred upon a nonprofit corporation by, the
District of Columbia Nonprofit Corporation Act. No member or
person employed by, or agent for, the Board shall be deemed
to be an officer or employee of or agent for the Federal
Government by reason of such service.
(c) Duties of the Board.--The Board shall, subject to
action by the Commission under section 107, and once a
determination is made by the Commission under subsection (d)
of this section--
(1) register public accounting firms that prepare audit
reports for issuers, in accordance with section 102;
(2) establish or adopt, or both, by rule, auditing, quality
control, ethics, independence, and other standards relating
to the preparation of audit reports for issuers, in
accordance with section 103;
(3) conduct inspections of registered public accounting
firms, in accordance with section 104 and the rules of the
Board;
(4) conduct investigations and disciplinary proceedings
concerning, and impose appropriate sanctions where justified
upon, registered public accounting firms and associated
persons of such firms, in accordance with section 105;
(5) perform such other duties or functions as the Board (or
the Commission, by rule or order) determines are necessary or
appropriate to promote high professional standards among, and
improve the quality of audit services offered by, registered
public accounting firms and associated persons thereof, or
otherwise to carry out this Act, in order to protect
investors, or to further the public interest;
(6) enforce compliance with this Act, the rules of the
Board, professional standards, and the securities laws
relating to the preparation and issuance of audit reports and
the obligations and liabilities of accountants with respect
thereto, by registered public accounting firms and associated
persons thereof; and
(7) set the budget and manage the operations of the Board
and the staff of the Board.
(d) Commission Determination.--The members of the Board
shall take such action (including hiring of staff, proposal
of rules, and adoption of initial and transitional auditing
and other professional standards) as may be necessary or
appropriate to enable the Commission to determine, not later
than 270 days after the date of enactment of this Act, that
the Board is so organized and has the capacity to carry out
the requirements of this title, and to enforce compliance
with this title by registered public accounting firms and
associated persons thereof. The Commission shall be
responsible, prior to the appointment of the Board, for the
planning for the establishment and administrative transition
to the Board's operation.
(e) Board Membership.--
(1) Composition.--The Board shall have 5 members, appointed
from among prominent individuals of integrity and reputation
who have a demonstrated commitment to the interests of
investors and the public, and an understanding of the
responsibilities for and nature of the financial disclosures
required of issuers under the securities laws and the
obligations of accountants with respect to the preparation
and issuance of audit reports with respect to such
disclosures.
(2) Limitation.--Two members, and only 2 members, of the
Board shall be or have been certified public accountants
pursuant to the laws of 1 or more States, provided that, if 1
of those 2 members is the chairperson, he or she may not have
been a practicing certified public accountant for at least 5
years prior to his or her appointment to the Board.
(3) Full-time independent service.--Each member of the
Board shall serve on a full-time basis, and may not,
concurrent with service on the Board, be employed by any
other person or engage in any other professional or business
activity. No member of the Board may share in any of the
profits of, or receive payments from, a public accounting
firm (or any other person, as determined by rule of the
Commission), other than fixed continuing payments, subject to
such conditions as the Commission may impose, under standard
arrangements for the retirement of members of public
accounting firms.
(4) Appointment of board members.--
(A) Initial board.--Not later than 90 days after the date
of enactment of this Act, the Commission, after consultation
with the Chairman of the Board of Governors of the Federal
Reserve System and the Secretary of the Treasury, shall
appoint the chairperson and other initial members of the
Board, and shall designate a term of service for each.
(B) Vacancies.--A vacancy on the Board shall not affect the
powers of the Board, but shall be filled in the same manner
as provided for appointments under this section.
(5) Term of service.--
(A) In general.--The term of service of each Board member
shall be 5 years, and until a successor is appointed, except
that--
(i) the terms of office of the initial Board members (other
than the chairperson) shall expire in annual increments, 1 on
each of the first 4 anniversaries of the initial date of
appointment; and
(ii) any Board member appointed to fill a vacancy occurring
before the expiration of the term for which the predecessor
was appointed shall be appointed only for the remainder of
that term.
(B) Term limitation.--No person may serve as a member of
the Board, or as chairperson of the Board, for more than 2
terms, whether or not such terms of service are consecutive.
(6) Removal from office.--A member of the Board may be
removed by the Commission from office, in accordance with
section 107(d)(3), for good cause shown before the expiration
of the term of that member.
(f) Powers of the Board.--In addition to any authority
granted to the Board otherwise in this Act, the Board shall
have the power, subject to section 107--
(1) to sue and be sued, complain and defend, in its
corporate name and through its own counsel, with the approval
of the Commission, in any Federal, State, or other court;
(2) to conduct its operations and maintain offices, and to
exercise all other rights and powers authorized by this Act,
in any State, without regard to any qualification, licensing,
or other provision of law in effect in such State (or a
political subdivision thereof);
(3) to lease, purchase, accept gifts or donations of or
otherwise acquire, improve, use, sell, exchange, or convey,
all of or an interest in any property, wherever situated;
(4) to appoint such employees, accountants, attorneys, and
other agents as may be necessary or appropriate, and to
determine their qualifications, define their duties, and fix
their salaries or other compensation (at a level that is
comparable to private sector self-regulatory, accounting,
technical, supervisory, or other staff or management
positions);
(5) to allocate, assess, and collect accounting support
fees established pursuant to section 109, for the Board, and
other fees and charges imposed under this title; and
(6) to enter into contracts, execute instruments, incur
liabilities, and do any and all other acts and things
necessary, appropriate, or incidental to the conduct of its
operations and the exercise of its obligations, rights, and
powers imposed or granted by this title.
(g) Rules of the Board.--The rules of the Board shall,
subject to the approval of the Commission--
(1) provide for the operation and administration of the
Board, the exercise of its authority, and the performance of
its responsibilities under this Act;
(2) permit, as the Board determines necessary or
appropriate, delegation by the Board of any of its functions
to an individual member or employee of the Board, or to a
division of the
[[Page H5396]]
Board, including functions with respect to hearing,
determining, ordering, certifying, reporting, or otherwise
acting as to any matter, except that--
(A) the Board shall retain a discretionary right to review
any action pursuant to any such delegated function, upon its
own motion;
(B) a person shall be entitled to a review by the Board
with respect to any matter so delegated, and the decision of
the Board upon such review shall be deemed to be the action
of the Board for all purposes (including appeal or review
thereof); and
(C) if the right to exercise a review described in
subparagraph (A) is declined, or if no such review is sought
within the time stated in the rules of the Board, then the
action taken by the holder of such delegation shall for all
purposes, including appeal or review thereof, be deemed to be
the action of the Board;
(3) establish ethics rules and standards of conduct for
Board members and staff, including a bar on practice before
the Board (and the Commission, with respect to Board-related
matters) of 1 year for former members of the Board, and
appropriate periods (not to exceed 1 year) for former staff
of the Board; and
(4) provide as otherwise required by this Act.
(h) Annual Report to the Commission.--The Board shall
submit an annual report (including its audited financial
statements) to the Commission, and the Commission shall
transmit a copy of that report to the Committee on Banking,
Housing, and Urban Affairs of the Senate, and the Committee
on Financial Services of the House of Representatives, not
later than 30 days after the date of receipt of that report
by the Commission.
SEC. 102. REGISTRATION WITH THE BOARD.
(a) Mandatory Registration.--Beginning 180 days after the
date of the determination of the Commission under section
101(d), it shall be unlawful for any person that is not a
registered public accounting firm to prepare or issue, or to
participate in the preparation or issuance of, any audit
report with respect to any issuer.
(b) Applications for Registration.--
(1) Form of application.--A public accounting firm shall
use such form as the Board may prescribe, by rule, to apply
for registration under this section.
(2) Contents of applications.--Each public accounting firm
shall submit, as part of its application for registration, in
such detail as the Board shall specify--
(A) the names of all issuers for which the firm prepared or
issued audit reports during the immediately preceding
calendar year, and for which the firm expects to prepare or
issue audit reports during the current calendar year;
(B) the annual fees received by the firm from each such
issuer for audit services, other accounting services, and
non-audit services, respectively;
(C) such other current financial information for the most
recently completed fiscal year of the firm as the Board may
reasonably request;
(D) a statement of the quality control policies of the firm
for its accounting and auditing practices;
(E) a list of all accountants associated with the firm who
participate in or contribute to the preparation of audit
reports, stating the license or certification number of each
such person, as well as the State license numbers of the firm
itself;
(F) information relating to criminal, civil, or
administrative actions or disciplinary proceedings pending
against the firm or any associated person of the firm in
connection with any audit report;
(G) copies of any periodic or annual disclosure filed by an
issuer with the Commission during the immediately preceding
calendar year which discloses accounting disagreements
between such issuer and the firm in connection with an audit
report furnished or prepared by the firm for such issuer; and
(H) such other information as the rules of the Board or the
Commission shall specify as necessary or appropriate in the
public interest or for the protection of investors.
(3) Consents.--Each application for registration under this
subsection shall include--
(A) a consent executed by the public accounting firm to
cooperation in and compliance with any request for testimony
or the production of documents made by the Board in the
furtherance of its authority and responsibilities under this
title (and an agreement to secure and enforce similar
consents from each of the associated persons of the public
accounting firm as a condition of their continued employment
by or other association with such firm); and
(B) a statement that such firm understands and agrees that
cooperation and compliance, as described in the consent
required by subparagraph (A), and the securing and
enforcement of such consents from its associated persons, in
accordance with the rules of the Board, shall be a condition
to the continuing effectiveness of the registration of the
firm with the Board.
(c) Action on Applications.--
(1) Timing.--The Board shall approve a completed
application for registration not later than 45 days after the
date of receipt of the application, in accordance with the
rules of the Board, unless the Board, prior to such date,
issues a written notice of disapproval to, or requests more
information from, the prospective registrant.
(2) Treatment.--A written notice of disapproval of a
completed application under paragraph (1) for registration
shall be treated as a disciplinary sanction for purposes of
sections 105(d) and 107(c).
(d) Periodic Reports.--Each registered public accounting
firm shall submit an annual report to the Board, and may be
required to report more frequently, as necessary to update
the information contained in its application for registration
under this section, and to provide to the Board such
additional information as the Board or the Commission may
specify, in accordance with subsection (b)(2).
(e) Public Availability.--Registration applications and
annual reports required by this subsection, or such portions
of such applications or reports as may be designated under
rules of the Board, shall be made available for public
inspection, subject to rules of the Board or the
Commission, and to applicable laws relating to the
confidentiality of proprietary, personal, or other
information contained in such applications or reports,
provided that, in all events, the Board shall protect from
public disclosure information reasonably identified by the
subject accounting firm as proprietary information.
(f) Registration and Annual Fees.--The Board shall assess
and collect a registration fee and an annual fee from each
registered public accounting firm, in amounts that are
sufficient to recover the costs of processing and reviewing
applications and annual reports.
SEC. 103. AUDITING, QUALITY CONTROL, AND INDEPENDENCE
STANDARDS AND RULES.
(a) Auditing, Quality Control, and Ethics Standards.--
(1) In general.--The Board shall, by rule, establish,
including, to the extent it determines appropriate, through
adoption of standards proposed by 1 or more professional
groups of accountants designated pursuant to paragraph (3)(A)
or advisory groups convened pursuant to paragraph (4), and
amend or otherwise modify or alter, such auditing and related
attestation standards, such quality control standards, and
such ethics standards to be used by registered public
accounting firms in the preparation and issuance of audit
reports, as required by this Act or the rules of the
Commission, or as may be necessary or appropriate in the
public interest or for the protection of investors.
(2) Rule requirements.--In carrying out paragraph (1), the
Board--
(A) shall include in the auditing standards that it adopts,
requirements that each registered public accounting firm
shall--
(i) prepare, and maintain for a period of not less than 7
years, audit work papers, and other information related to
any audit report, in sufficient detail to support the
conclusions reached in such report;
(ii) provide a concurring or second partner review and
approval of such audit report (and other related
information), and concurring approval in its issuance, by a
qualified person (as prescribed by the Board) associated with
the public accounting firm, other than the person in charge
of the audit, or by an independent reviewer (as prescribed by
the Board); and
(iii) describe in each audit report the scope of the
auditor's testing of the internal control structure and
procedures of the issuer, required by section 404(b), and
present (in such report or in a separate report)--
(I) the findings of the auditor from such testing;
(II) an evaluation of whether such internal control
structure and procedures--
(aa) include maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and
dispositions of the assets of the issuer;
(bb) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the issuer
are being made only in accordance with authorizations of
management and directors of the issuer; and
(III) a description, at a minimum, of material weaknesses
in such internal controls, and of any material noncompliance
found on the basis of such testing.
(B) shall include, in the quality control standards that it
adopts with respect to the issuance of audit reports,
requirements for every registered public accounting firm
relating to--
(i) monitoring of professional ethics and independence from
issuers on behalf of which the firm issues audit reports;
(ii) consultation within such firm on accounting and
auditing questions;
(iii) supervision of audit work;
(iv) hiring, professional development, and advancement of
personnel;
(v) the acceptance and continuation of engagements;
(vi) internal inspection; and
(vii) such other requirements as the Board may prescribe,
subject to subsection (a)(1).
(3) Authority to adopt other standards.--
(A) In general.--In carrying out this subsection, the
Board--
(i) may adopt as its rules, subject to the terms of section
107, any portion of any statement of auditing standards or
other professional standards that the Board determines
satisfy the requirements of paragraph (1), and that were
proposed by 1 or more professional groups of accountants that
shall be designated or recognized by the Board, by rule, for
such purpose, pursuant to this paragraph or 1 or more
advisory groups convened pursuant to paragraph (4); and
(ii) notwithstanding clause (i), shall retain full
authority to modify, supplement, revise, or subsequently
amend, modify, or repeal, in whole or in part, any portion of
any statement described in clause (i).
(B) Initial and transitional standards.--The Board shall
adopt standards described in subparagraph (A)(i) as initial
or transitional standards, to the extent the Board determines
necessary, prior to a determination of the Commission under
section 101(d), and such standards shall be separately
approved by the Commission at the time of that determination,
without regard to the procedures required by section 107 that
otherwise would apply to the approval of rules of the Board.
[[Page H5397]]
(4) Advisory groups.--The Board shall convene, or authorize
its staff to convene, such expert advisory groups as may be
appropriate, which may include practicing accountants and
other experts, as well as representatives of other interested
groups, subject to such rules as the Board may prescribe to
prevent conflicts of interest, to make recommendations
concerning the content (including proposed drafts) of
auditing, quality control, ethics, independence, or other
standards required to be established under this section.
(b) Independence Standards and Rules.--The Board shall
establish such rules as may be necessary or appropriate in
the public interest or for the protection of investors, to
implement, or as authorized under, title II of this Act.
(c) Cooperation With Designated Professional Groups of
Accountants and Advisory Groups.--
(1) In general.--The Board shall cooperate on an ongoing
basis with professional groups of accountants designated
under subsection (a)(3)(A) and advisory groups convened under
subsection (a)(4) in the examination of the need for changes
in any standards subject to its authority under subsection
(a), recommend issues for inclusion on the agendas of such
designated professional groups of accountants or advisory
groups, and take such other steps as it deems appropriate to
increase the effectiveness of the standard setting process.
(2) Board responses.--The Board shall respond in a timely
fashion to requests from designated professional groups of
accountants and advisory groups referred to in paragraph (1)
for any changes in standards over which the Board has
authority.
(d) Evaluation of Standard Setting Process.--The Board
shall include in the annual report required by section 101(h)
the results of its standard setting responsibilities during
the period to which the report relates, including a
discussion of the work of the Board with any designated
professional groups of accountants and advisory groups
described in paragraphs (3)(A) and (4) of subsection (a), and
its pending issues agenda for future standard setting
projects.
SEC. 104. INSPECTIONS OF REGISTERED PUBLIC ACCOUNTING FIRMS.
(a) In General.--The Board shall conduct a continuing
program of inspections to assess the degree of compliance of
each registered public accounting firm and associated persons
of that firm with this Act, the rules of the Board, the rules
of the Commission, or professional standards, in connection
with its performance of audits, issuance of audit reports,
and related matters involving issuers.
(b) Inspection Frequency.--
(1) In general.--Subject to paragraph (2), inspections
required by this section shall be conducted--
(A) annually with respect to each registered public
accounting firm that regularly provides audit reports for
more than 100 issuers; and
(B) not less frequently than once every 3 years with
respect to each registered public accounting firm that
regularly provides audit reports for 100 or fewer issuers.
(2) Adjustments to schedules.--The Board may, by rule,
adjust the inspection schedules set under paragraph (1) if
the Board finds that different inspection schedules are
consistent with the purposes of this Act, the public
interest, and the protection of investors. The Board may
conduct special inspections at the request of the Commission
or upon its own motion.
(c) Procedures.--The Board shall, in each inspection under
this section, and in accordance with its rules for such
inspections--
(1) identify any act or practice or omission to act by the
registered public accounting firm, or by any associated
person thereof, revealed by such inspection that may be in
violation of this Act, the rules of the Board, the rules of
the Commission, the firm's own quality control policies, or
professional standards;
(2) report any such act, practice, or omission, if
appropriate, to the Commission and each appropriate State
regulatory authority; and
(3) begin a formal investigation or take disciplinary
action, if appropriate, with respect to any such violation,
in accordance with this Act and the rules of the Board.
(d) Conduct of Inspections.--In conducting an inspection of
a registered public accounting firm under this section, the
Board shall--
(1) inspect and review selected audit and review
engagements of the firm (which may include audit engagements
that are the subject of ongoing litigation or other
controversy between the firm and 1 or more third parties),
performed at various offices and by various associated
persons of the firm, as selected by the Board;
(2) evaluate the sufficiency of the quality control system
of the firm, and the manner of the documentation and
communication of that system by the firm; and
(3) perform such other testing of the audit, supervisory,
and quality control procedures of the firm as are necessary
or appropriate in light of the purpose of the inspection and
the responsibilities of the Board.
(e) Record Retention.--The rules of the Board may require
the retention by registered public accounting firms for
inspection purposes of records whose retention is not
otherwise required by section 103 or the rules issued
thereunder.
(f) Procedures for Review.--The rules of the Board shall
provide a procedure for the review of and response to a draft
inspection report by the registered public accounting firm
under inspection. The Board shall take such action with
respect to such response as it considers appropriate
(including revising the draft report or continuing or
supplementing its inspection activities before issuing a
final report), but the text of any such response,
appropriately redacted to protect information reasonably
identified by the accounting firm as confidential, shall be
attached to and made part of the inspection report.
(g) Report.--A written report of the findings of the Board
for each inspection under this section, subject to subsection
(h), shall be--
(1) transmitted, in appropriate detail, to the Commission
and each appropriate State regulatory authority, accompanied
by any letter or comments by the Board or the inspector, and
any letter of response from the registered public accounting
firm; and
(2) made available in appropriate detail to the public
(subject to section 105(b)(5)(A), and to the protection of
such confidential and proprietary information as the Board
may determine to be appropriate, or as may be required by
law), except that no portions of the inspection report that
deal with criticisms of or potential defects in the quality
control systems of the firm under inspection shall be made
public if those criticisms or defects are addressed by the
firm, to the satisfaction of the Board, not later than 12
months after the date of the inspection report.
(h) Interim Commission Review.--
(1) Reviewable matters.--A registered public accounting
firm may seek review by the Commission, pursuant to such
rules as the Commission shall promulgate, if the firm--
(A) has provided the Board with a response, pursuant to
rules issued by the Board under subsection (f), to the
substance of particular items in a draft inspection report,
and disagrees with the assessments contained in any final
report prepared by the Board following such response; or
(B) disagrees with the determination of the Board that
criticisms or defects identified in an inspection report have
not been addressed to the satisfaction of the Board within 12
months of the date of the inspection report, for purposes of
subsection (g)(2).
(2) Treatment of review.--Any decision of the Commission
with respect to a review under paragraph (1) shall not be
reviewable under section 25 of the Securities Exchange Act of
1934 (15 U.S.C. 78y), or deemed to be ``final agency action''
for purposes of section 704 of title 5, United States Code.
(3) Timing.--Review under paragraph (1) may be sought
during the 30-day period following the date of the event
giving rise to the review under subparagraph (A) or (B) of
paragraph (1).
SEC. 105. INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS.
(a) In General.--The Board shall establish, by rule,
subject to the requirements of this section, fair procedures
for the investigation and disciplining of registered public
accounting firms and associated persons of such firms.
(b) Investigations.--
(1) Authority.--In accordance with the rules of the Board,
the Board may conduct an investigation of any act or
practice, or omission to act, by a registered public
accounting firm, any associated person of such firm, or both,
that may violate any provision of this Act, the rules of the
Board, the provisions of the securities laws relating to the
preparation and issuance of audit reports and the obligations
and liabilities of accountants with respect thereto,
including the rules of the Commission issued under this Act,
or professional standards, regardless of how the act,
practice, or omission is brought to the attention of the
Board.
(2) Testimony and document production.--In addition to such
other actions as the Board determines to be necessary or
appropriate, the rules of the Board may--
(A) require the testimony of the firm or of any person
associated with a registered public accounting firm, with
respect to any matter that the Board considers relevant or
material to an investigation;
(B) require the production of audit work papers and any
other document or information in the possession of a
registered public accounting firm or any associated person
thereof, wherever domiciled, that the Board considers
relevant or material to the investigation, and may inspect
the books and records of such firm or associated person to
verify the accuracy of any documents or information supplied;
(C) request the testimony of, and production of any
document in the possession of, any other person, including
any client of a registered public accounting firm that the
Board considers relevant or material to an investigation
under this section, with appropriate notice, subject to the
needs of the investigation, as permitted under the rules of
the Board; and
(D) provide for procedures to seek issuance by the
Commission, in a manner established by the Commission, of a
subpoena to require the testimony of, and production of any
document in the possession of, any person, including any
client of a registered public accounting firm, that the Board
considers relevant or material to an investigation under this
section.
(3) Noncooperation with investigations.--
(A) In general.--If a registered public accounting firm or
any associated person thereof refuses to testify, produce
documents, or otherwise cooperate with the Board in
connection with an investigation under this section, the
Board may--
(i) suspend or bar such person from being associated with a
registered public accounting firm, or require the registered
public accounting firm to end such association;
(ii) suspend or revoke the registration of the public
accounting firm; and
(iii) invoke such other lesser sanctions as the Board
considers appropriate, and as specified by rule of the Board.
(B) Procedure.--Any action taken by the Board under this
paragraph shall be subject to the terms of section 107(c).
(4) Coordination and referral of investigations.--
(A) Coordination.--The Board shall notify the Commission of
any pending Board investigation involving a potential
violation of the securities laws, and thereafter coordinate
its work
[[Page H5398]]
with the work of the Commission's Division of Enforcement, as
necessary to protect an ongoing Commission investigation.
(B) Referral.--The Board may refer an investigation under
this section--
(i) to the Commission;
(ii) to any other Federal functional regulator (as defined
in section 509 of the Gramm-Leach-Bliley Act (15 U.S.C.
6809)), in the case of an investigation that concerns an
audit report for an institution that is subject to the
jurisdiction of such regulator; and
(iii) at the direction of the Commission, to--
(I) the Attorney General of the United States;
(II) the attorney general of 1 or more States; and
(III) the appropriate State regulatory authority.
(5) Use of documents.--
(A) Confidentiality.--Except as provided in subparagraph
(B), all documents and information prepared or received by or
specifically for the Board, and deliberations of the Board
and its employees and agents, in connection with an
inspection under section 104 or with an investigation under
this section, shall be confidential and privileged as an
evidentiary matter (and shall not be subject to civil
discovery or other legal process) in any proceeding in any
Federal or State court or administrative agency, and shall be
exempt from disclosure, in the hands of an agency or
establishment of the Federal Government, under the Freedom of
Information Act (5 U.S.C. 552a), or otherwise, unless and
until presented in connection with a public proceeding or
released in accordance with subsection (c).
(B) Availability to government agencies.--Without the loss
of its status as confidential and privileged in the hands of
the Board, all information referred to in subparagraph (A)
may--
(i) be made available to the Commission; and
(ii) in the discretion of the Board, when determined by the
Board to be necessary to accomplish the purposes of this Act
or to protect investors, be made available to--
(I) the Attorney General of the United States;
(II) the appropriate Federal functional regulator (as
defined in section 509 of the Gramm-Leach-Bliley Act (15
U.S.C. 6809)), other than the Commission, with respect to an
audit report for an institution subject to the jurisdiction
of such regulator;
(III) State attorneys general in connection with any
criminal investigation; and
(IV) any appropriate State regulatory authority,
each of which shall maintain such information as confidential
and privileged.
(6) Immunity.--Any employee of the Board engaged in
carrying out an investigation under this Act shall be immune
from any civil liability arising out of such investigation in
the same manner and to the same extent as an employee of the
Federal Government in similar circumstances.
(c) Disciplinary Procedures.--
(1) Notification; recordkeeping.--The rules of the Board
shall provide that in any proceeding by the Board to
determine whether a registered public accounting firm, or an
associated person thereof, should be disciplined, the Board
shall--
(A) bring specific charges with respect to the firm or
associated person;
(B) notify such firm or associated person of, and provide
to the firm or associated person an opportunity to defend
against, such charges; and
(C) keep a record of the proceedings.
(2) Public hearings.--Hearings under this section shall not
be public, unless otherwise ordered by the Board for good
cause shown, with the consent of the parties to such hearing.
(3) Supporting statement.--A determination by the Board to
impose a sanction under this subsection shall be supported by
a statement setting forth--
(A) each act or practice in which the registered public
accounting firm, or associated person, has engaged (or
omitted to engage), or that forms a basis for all or a part
of such sanction;
(B) the specific provision of this Act, the securities
laws, the rules of the Board, or professional standards which
the Board determines has been violated; and
(C) the sanction imposed, including a justification for
that sanction.
(4) Sanctions.--If the Board finds, based on all of the
facts and circumstances, that a registered public accounting
firm or associated person thereof has engaged in any act or
practice, or omitted to act, in violation of this Act, the
rules of the Board, the provisions of the securities laws
relating to the preparation and issuance of audit reports and
the obligations and liabilities of accountants with respect
thereto, including the rules of the Commission issued under
this Act, or professional standards, the Board may impose
such disciplinary or remedial sanctions as it determines
appropriate, subject to applicable limitations under
paragraph (5), including--
(A) temporary suspension or permanent revocation of
registration under this title;
(B) temporary or permanent suspension or bar of a person
from further association with any registered public
accounting firm;
(C) temporary or permanent limitation on the activities,
functions, or operations of such firm or person (other than
in connection with required additional professional education
or training);
(D) a civil money penalty for each such violation, in an
amount equal to--
(i) not more than $100,000 for a natural person or
$2,000,000 for any other person; and
(ii) in any case to which paragraph (5) applies, not more
than $750,000 for a natural person or $15,000,000 for any
other person;
(E) censure;
(F) required additional professional education or training;
or
(G) any other appropriate sanction provided for in the
rules of the Board.
(5) Intentional or other knowing conduct.--The sanctions
and penalties described in subparagraphs (A) through (C) and
(D)(ii) of paragraph (4) shall only apply to--
(A) intentional or knowing conduct, including reckless
conduct, that results in violation of the applicable
statutory, regulatory, or professional standard; or
(B) repeated instances of negligent conduct, each resulting
in a violation of the applicable statutory, regulatory, or
professional standard.
(6) Failure to supervise.--
(A) In general.--The Board may impose sanctions under this
section on a registered accounting firm or upon the
supervisory personnel of such firm, if the Board finds that--
(i) the firm has failed reasonably to supervise an
associated person, either as required by the rules of the
Board relating to auditing or quality control standards, or
otherwise, with a view to preventing violations of this Act,
the rules of the Board, the provisions of the securities laws
relating to the preparation and issuance of audit reports and
the obligations and liabilities of accountants with respect
thereto, including the rules of the Commission under this
Act, or professional standards; and
(ii) such associated person commits a violation of this
Act, or any of such rules, laws, or standards.
(B) Rule of construction.--No associated person of a
registered public accounting firm shall be deemed to have
failed reasonably to supervise any other person for purposes
of subparagraph (A), if--
(i) there have been established in and for that firm
procedures, and a system for applying such procedures, that
comply with applicable rules of the Board and that would
reasonably be expected to prevent and detect any such
violation by such associated person; and
(ii) such person has reasonably discharged the duties and
obligations incumbent upon that person by reason of such
procedures and system, and had no reasonable cause to believe
that such procedures and system were not being complied with.
(7) Effect of suspension.--
(A) Association with a public accounting firm.--It shall be
unlawful for any person that is suspended or barred from
being associated with a registered public accounting firm
under this subsection willfully to become or remain
associated with any registered public accounting firm, or for
any registered public accounting firm that knew, or, in the
exercise of reasonable care should have known, of the
suspension or bar, to permit such an association, without the
consent of the Board or the Commission.
(B) Association with an issuer.--It shall be unlawful for
any person that is suspended or barred from being associated
with an issuer under this subsection willfully to become or
remain associated with any issuer in an accountancy or a
financial management capacity, and for any issuer that knew,
or in the exercise of reasonable care should have known, of
such suspension or bar, to permit such an association,
without the consent of the Board or the Commission.
(d) Reporting of Sanctions.--
(1) Recipients.--If the Board imposes a disciplinary
sanction, in accordance with this section, the Board shall
report the sanction to--
(A) the Commission;
(B) any appropriate State regulatory authority or any
foreign accountancy licensing board with which such firm or
person is licensed or certified; and
(C) the public (once any stay on the imposition of such
sanction has been lifted).
(2) Contents.--The information reported under paragraph (1)
shall include--
(A) the name of the sanctioned person;
(B) a description of the sanction and the basis for its
imposition; and
(C) such other information as the Board deems appropriate.
(e) Stay of Sanctions.--
(1) In general.--Application to the Commission for review,
or the institution by the Commission of review, of any
disciplinary action of the Board shall operate as a stay of
any such disciplinary action, unless and until the Commission
orders (summarily or after notice and opportunity for hearing
on the question of a stay, which hearing may consist solely
of the submission of affidavits or presentation of oral
arguments) that no such stay shall continue to operate.
(2) Expedited procedures.--The Commission shall establish
for appropriate cases an expedited procedure for
consideration and determination of the question of the
duration of a stay pending review of any disciplinary action
of the Board under this subsection.
SEC. 106. FOREIGN PUBLIC ACCOUNTING FIRMS.
(a) Applicability to Certain Foreign Firms.--
(1) In general.--Any foreign public accounting firm that
prepares or furnishes an audit report with respect to any
issuer, shall be subject to this Act and the rules of the
Board and the Commission issued under this Act, in the same
manner and to the same extent as a public accounting firm
that is organized and operates under the laws of the United
States or any State, except that registration pursuant to
section 102 shall not by itself provide a basis for
subjecting such a foreign public accounting firm to the
jurisdiction of the Federal or State courts, other than with
respect to controversies between such firms and the Board.
(2) Board authority.--The Board may, by rule, determine
that a foreign public accounting firm (or a class of such
firms) that does not issue audit reports nonetheless plays
such a substantial role in the preparation and furnishing of
[[Page H5399]]
such reports for particular issuers, that it is necessary or
appropriate, in light of the purposes of this Act and in the
public interest or for the protection of investors, that such
firm (or class of firms) should be treated as a public
accounting firm (or firms) for purposes of registration
under, and oversight by the Board in accordance with, this
title.
(b) Production of Audit Workpapers.--
(1) Consent by foreign firms.--If a foreign public
accounting firm issues an opinion or otherwise performs
material services upon which a registered public accounting
firm relies in issuing all or part of any audit report or any
opinion contained in an audit report, that foreign public
accounting firm shall be deemed to have consented--
(A) to produce its audit workpapers for the Board or the
Commission in connection with any investigation by either
body with respect to that audit report; and
(B) to be subject to the jurisdiction of the courts of the
United States for purposes of enforcement of any request for
production of such workpapers.
(2) Consent by domestic firms.--A registered public
accounting firm that relies upon the opinion of a foreign
public accounting firm, as described in paragraph (1), shall
be deemed--
(A) to have consented to supplying the audit workpapers of
that foreign public accounting firm in response to a request
for production by the Board or the Commission; and
(B) to have secured the agreement of that foreign public
accounting firm to such production, as a condition of its
reliance on the opinion of that foreign public accounting
firm.
(c) Exemption Authority.--The Commission, and the Board,
subject to the approval of the Commission, may, by rule,
regulation, or order, and as the Commission (or Board)
determines necessary or appropriate in the public interest or
for the protection of investors, either unconditionally or
upon specified terms and conditions exempt any foreign public
accounting firm, or any class of such firms, from any
provision of this Act or the rules of the Board or the
Commission issued under this Act.
(d) Definition.--In this section, the term ``foreign public
accounting firm'' means a public accounting firm that is
organized and operates under the laws of a foreign government
or political subdivision thereof.
SEC. 107. COMMISSION OVERSIGHT OF THE BOARD.
(a) General Oversight Responsibility.--The Commission shall
have oversight and enforcement authority over the Board, as
provided in this Act. The provisions of section 17(a)(1) of
the Securities Exchange Act of 1934 (15 U.S.C. 78q(a)(1)),
and of section 17(b)(1) of the Securities Exchange Act of
1934 (15 U.S.C. 78q(b)(1)) shall apply to the Board as fully
as if the Board were a ``registered securities association''
for purposes of those sections 17(a)(1) and 17(b)(1).
(b) Rules of the Board.--
(1) Definition.--In this section, the term ``proposed
rule'' means any proposed rule of the Board, and any
modification of any such rule.
(2) Prior approval required.--No rule of the Board shall
become effective without prior approval of the Commission in
accordance with this section, other than as provided in
section 103(a)(3)(B) with respect to initial or transitional
standards.
(3) Approval criteria.--The Commission shall approve a
proposed rule, if it finds that the rule is consistent with
the requirements of this Act and the securities laws, or is
necessary or appropriate in the public interest or for the
protection of investors.
(4) Proposed rule procedures.--The provisions of paragraphs
(1) through (3) of section 19(b) of the Securities Exchange
Act of 1934 (15 U.S.C. 78s(b)) shall govern the proposed
rules of the Board, as fully as if the Board were a
``registered securities association'' for purposes of that
section 19(b), except that, for purposes of this paragraph--
(A) the phrase ``consistent with the requirements of this
title and the rules and regulations thereunder applicable to
such organization'' in section 19(b)(2) of that Act shall be
deemed to read ``consistent with the requirements of title I
of the Sarbanes-Oxley Act of 2002, and the rules and
regulations issued thereunder applicable to such
organization, or as necessary or appropriate in the public
interest or for the protection of investors''; and
(B) the phrase ``otherwise in furtherance of the purposes
of this title'' in section 19(b)(3)(C) of that Act shall be
deemed to read ``otherwise in furtherance of the purposes of
title I of the Sarbanes-Oxley Act of 2002''.
(5) Commission authority to amend rules of the board.--The
provisions of section 19(c) of the Securities Exchange Act of
1934 (15 U.S.C. 78s(c)) shall govern the abrogation,
deletion, or addition to portions of the rules of the Board
by the Commission as fully as if the Board were a
``registered securities association'' for purposes of that
section 19(c), except that the phrase ``to conform its rules
to the requirements of this title and the rules and
regulations thereunder applicable to such organization, or
otherwise in furtherance of the purposes of this title'' in
section 19(c) of that Act shall, for purposes of this
paragraph, be deemed to read ``to assure the fair
administration of the Public Company Accounting Oversight
Board, conform the rules promulgated by that Board to the
requirements of title I of the Sarbanes-Oxley Act of 2002, or
otherwise further the purposes of that Act, the securities
laws, and the rules and regulations thereunder applicable to
that Board''.
(c) Commission Review of Disciplinary Action Taken by the
Board.--
(1) Notice of sanction.--The Board shall promptly file
notice with the Commission of any final sanction on any
registered public accounting firm or on any associated person
thereof, in such form and containing such information as the
Commission, by rule, may prescribe.
(2) Review of sanctions.--The provisions of sections
19(d)(2) and 19(e)(1) of the Securities Exchange Act of 1934
(15 U.S.C. 78s (d)(2) and (e)(1)) shall govern the review by
the Commission of final disciplinary sanctions imposed by the
Board (including sanctions imposed under section 105(b)(3) of
this Act for noncooperation in an investigation of the
Board), as fully as if the Board were a self-regulatory
organization and the Commission were the appropriate
regulatory agency for such organization for purposes of those
sections 19(d)(2) and 19(e)(1), except that, for purposes of
this paragraph--
(A) section 105(e) of this Act (rather than that section
19(d)(2)) shall govern the extent to which application for,
or institution by the Commission on its own motion of, review
of any disciplinary action of the Board operates as a stay of
such action;
(B) references in that section 19(e)(1) to ``members'' of
such an organization shall be deemed to be references to
registered public accounting firms;
(C) the phrase ``consistent with the purposes of this
title'' in that section 19(e)(1) shall be deemed to read
``consistent with the purposes of this title and title I of
the Sarbanes-Oxley Act of 2002'';
(D) references to rules of the Municipal Securities
Rulemaking Board in that section 19(e)(1) shall not apply;
and
(E) the reference to section 19(e)(2) of the Securities
Exchange Act of 1934 shall refer instead to section 107(c)(3)
of this Act.
(3) Commission modification authority.--The Commission may
enhance, modify, cancel, reduce, or require the remission of
a sanction imposed by the Board upon a registered public
accounting firm or associated person thereof, if the
Commission, having due regard for the public interest and the
protection of investors, finds, after a proceeding in
accordance with this subsection, that the sanction--
(A) is not necessary or appropriate in furtherance of this
Act or the securities laws; or
(B) is excessive, oppressive, inadequate, or otherwise not
appropriate to the finding or the basis on which the sanction
was imposed.
(d) Censure of the Board; Other Sanctions.--
(1) Rescission of board authority.--The Commission, by
rule, consistent with the public interest, the protection of
investors, and the other purposes of this Act and the
securities laws, may relieve the Board of any responsibility
to enforce compliance with any provision of this Act, the
securities laws, the rules of the Board, or professional
standards.
(2) Censure of the board; limitations.--The Commission may,
by order, as it determines necessary or appropriate in the
public interest, for the protection of investors, or
otherwise in furtherance of the purposes of this Act or the
securities laws, censure or impose limitations upon the
activities, functions, and operations of the Board, if the
Commission finds, on the record, after notice and opportunity
for a hearing, that the Board--
(A) has violated or is unable to comply with any provision
of this Act, the rules of the Board, or the securities laws;
or
(B) without reasonable justification or excuse, has failed
to enforce compliance with any such provision or rule, or any
professional standard by a registered public accounting firm
or an associated person thereof.
(3) Censure of board members; removal from office.--The
Commission may, as necessary or appropriate in the public
interest, for the protection of investors, or otherwise in
furtherance of the purposes of this Act or the securities
laws, remove from office or censure any member of the Board,
if the Commission finds, on the record, after notice and
opportunity for a hearing, that such member--
(A) has willfully violated any provision of this Act, the
rules of the Board, or the securities laws;
(B) has willfully abused the authority of that member; or
(C) without reasonable justification or excuse, has failed
to enforce compliance with any such provision or rule, or any
professional standard by any registered public accounting
firm or any associated person thereof.
SEC. 108. ACCOUNTING STANDARDS.
(a) Amendment to Securities Act of 1933.--Section 19 of the
Securities Act of 1933 (15 U.S.C. 77s) is amended--
(1) by redesignating subsections (b) and (c) as subsections
(c) and (d), respectively; and
(2) by inserting after subsection (a) the following:
``(b) Recognition of Accounting Standards.--
``(1) In general.--In carrying out its authority under
subsection (a) and under section 13(b) of the Securities
Exchange Act of 1934, the Commission may recognize, as
`generally accepted' for purposes of the securities laws, any
accounting principles established by a standard setting
body--
``(A) that--
``(i) is organized as a private entity;
``(ii) has, for administrative and operational purposes, a
board of trustees (or equivalent body) serving in the public
interest, the majority of whom are not, concurrent with their
service on such board, and have not been during the 2-year
period preceding such service, associated persons of any
registered public accounting firm;
``(iii) is funded as provided in section 109 of the
Sarbanes-Oxley Act of 2002;
``(iv) has adopted procedures to ensure prompt
consideration, by majority vote of its members, of changes to
accounting principles necessary to reflect emerging
accounting issues and changing business practices; and
``(v) considers, in adopting accounting principles, the
need to keep standards current in order to reflect changes in
the business environment, the extent to which international
convergence on high quality accounting standards is
[[Page H5400]]
necessary or appropriate in the public interest and for the
protection of investors; and
``(B) that the Commission determines has the capacity to
assist the Commission in fulfilling the requirements of
subsection (a) and section 13(b) of the Securities Exchange
Act of 1934, because, at a minimum, the standard setting body
is capable of improving the accuracy and effectiveness of
financial reporting and the protection of investors under the
securities laws.
``(2) Annual report.--A standard setting body described in
paragraph (1) shall submit an annual report to the Commission
and the public, containing audited financial statements of
that standard setting body.''.
(b) Commission Authority.--The Commission shall promulgate
such rules and regulations to carry out section 19(b) of the
Securities Act of 1933, as added by this section, as it deems
necessary or appropriate in the public interest or for the
protection of investors.
(c) No Effect on Commission Powers.--Nothing in this Act,
including this section and the amendment made by this
section, shall be construed to impair or limit the authority
of the Commission to establish accounting principles or
standards for purposes of enforcement of the securities laws.
(d) Study and Report on Adopting Principles-Based
Accounting.--
(1) Study.--
(A) In general.--The Commission shall conduct a study on
the adoption by the United States financial reporting system
of a principles-based accounting system.
(B) Study topics.--The study required by subparagraph (A)
shall include an examination of--
(i) the extent to which principles-based accounting and
financial reporting exists in the United States;
(ii) the length of time required for change from a rules-
based to a principles-based financial reporting system;
(iii) the feasibility of and proposed methods by which a
principles-based system may be implemented; and
(iv) a thorough economic analysis of the implementation of
a principles-based system.
(2) Report.--Not later than 1 year after the date of
enactment of this Act, the Commission shall submit a report
on the results of the study required by paragraph (1) to the
Committee on Banking, Housing, and Urban Affairs of the
Senate and the Committee on Financial Services of the House
of Representatives.
SEC. 109. FUNDING.
(a) In General.--The Board, and the standard setting body
designated pursuant to section 19(b) of the Securities Act of
1933, as amended by section 108, shall be funded as provided
in this section.
(b) Annual Budgets.--The Board and the standard setting
body referred to in subsection (a) shall each establish a
budget for each fiscal year, which shall be reviewed and
approved according to their respective internal procedures
not less than 1 month prior to the commencement of the fiscal
year to which the budget pertains (or at the beginning of the
Board's first fiscal year, which may be a short fiscal year).
The budget of the Board shall be subject to approval by the
Commission. The budget for the first fiscal year of the Board
shall be prepared and approved promptly following the
appointment of the initial five Board members, to permit
action by the Board of the organizational tasks contemplated
by section 101(d).
(c) Sources and Uses of Funds.--
(1) Recoverable budget expenses.--The budget of the Board
(reduced by any registration or annual fees received under
section 102(e) for the year preceding the year for which the
budget is being computed), and all of the budget of the
standard setting body referred to in subsection (a), for each
fiscal year of each of those 2 entities, shall be payable
from annual accounting support fees, in accordance with
subsections (d) and (e). Accounting support fees and other
receipts of the Board and of such standard-setting body shall
not be considered public monies of the United States.
(2) Funds generated from the collection of monetary
penalties.--Subject to the availability in advance in an
appropriations Act, and notwithstanding subsection (i), all
funds collected by the Board as a result of the assessment of
monetary penalties shall be used to fund a merit scholarship
program for undergraduate and graduate students enrolled in
accredited accounting degree programs, which program is to be
administered by the Board or by an entity or agent identified
by the Board.
(d) Annual Accounting Support Fee for the Board.--
(1) Establishment of fee.--The Board shall establish, with
the approval of the Commission, a reasonable annual
accounting support fee (or a formula for the computation
thereof), as may be necessary or appropriate to establish and
maintain the Board. Such fee may also cover costs incurred in
the Board's first fiscal year (which may be a short fiscal
year), or may be levied separately with respect to such short
fiscal year.
(2) Assessments.--The rules of the Board under paragraph
(1) shall provide for the equitable allocation, assessment,
and collection by the Board (or an agent appointed by the
Board) of the fee established under paragraph (1), among
issuers, in accordance with subsection (g), allowing for
differentiation among classes of issuers, as appropriate.
(e) Annual Accounting Support Fee for Standard Setting
Body.--The annual accounting support fee for the standard
setting body referred to in subsection (a)--
(1) shall be allocated in accordance with subsection (g),
and assessed and collected against each issuer, on behalf of
the standard setting body, by 1 or more appropriate
designated collection agents, as may be necessary or
appropriate to pay for the budget and provide for the
expenses of that standard setting body, and to provide for an
independent, stable source of funding for such body, subject
to review by the Commission; and
(2) may differentiate among different classes of issuers.
(f) Limitation on Fee.--The amount of fees collected under
this section for a fiscal year on behalf of the Board or the
standards setting body, as the case may be, shall not exceed
the recoverable budget expenses of the Board or body,
respectively (which may include operating, capital, and
accrued items), referred to in subsection (c)(1).
(g) Allocation of Accounting Support Fees Among Issuers.--
Any amount due from issuers (or a particular class of
issuers) under this section to fund the budget of the Board
or the standard setting body referred to in subsection (a)
shall be allocated among and payable by each issuer (or each
issuer in a particular class, as applicable) in an amount
equal to the total of such amount, multiplied by a fraction--
(1) the numerator of which is the average monthly equity
market capitalization of the issuer for the 12-month period
immediately preceding the beginning of the fiscal year to
which such budget relates; and
(2) the denominator of which is the average monthly equity
market capitalization of all such issuers for such 12-month
period.
(h) Conforming Amendments.--Section 13(b)(2) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m(b)(2)) is
amended--
(1) in subparagraph (A), by striking ``and'' at the end;
and
(2) in subparagraph (B), by striking the period at the end
and inserting the following: ``; and
``(C) notwithstanding any other provision of law, pay the
allocable share of such issuer of a reasonable annual
accounting support fee or fees, determined in accordance with
section 109 of the Sarbanes-Oxley Act of 2002.''.
(i) Rule of Construction.--Nothing in this section shall be
construed to render either the Board, the standard setting
body referred to in subsection (a), or both, subject to
procedures in Congress to authorize or appropriate public
funds, or to prevent such organization from utilizing
additional sources of revenue for its activities, such as
earnings from publication sales, provided that each
additional source of revenue shall not jeopardize, in the
judgment of the Commission, the actual and perceived
independence of such organization.
(j) Start-Up Expenses of the Board.--From the unexpended
balances of the appropriations to the Commission for fiscal
year 2003, the Secretary of the Treasury is authorized to
advance to the Board not to exceed the amount necessary to
cover the expenses of the Board during its first fiscal year
(which may be a short fiscal year).
TITLE II--AUDITOR INDEPENDENCE
SEC. 201. SERVICES OUTSIDE THE SCOPE OF PRACTICE OF AUDITORS.
(a) Prohibited Activities.--Section 10A of the Securities
Exchange Act of 1934 (15 U.S.C. 78j-1) is amended by adding
at the end the following:
``(g) Prohibited Activities.--Except as provided in
subsection (h), it shall be unlawful for a registered public
accounting firm (and any associated person of that firm, to
the extent determined appropriate by the Commission) that
performs for any issuer any audit required by this title or
the rules of the Commission under this title or, beginning
180 days after the date of commencement of the operations of
the Public Company Accounting Oversight Board established
under section 101 of the Sarbanes-Oxley Act of 2002 (in this
section referred to as the `Board'), the rules of the Board,
to provide to that issuer, contemporaneously with the audit,
any non-audit service, including--
``(1) bookkeeping or other services related to the
accounting records or financial statements of the audit
client;
``(2) financial information systems design and
implementation;
``(3) appraisal or valuation services, fairness opinions,
or contribution-in-kind reports;
``(4) actuarial services;
``(5) internal audit outsourcing services;
``(6) management functions or human resources;
``(7) broker or dealer, investment adviser, or investment
banking services;
``(8) legal services and expert services unrelated to the
audit; and
``(9) any other service that the Board determines, by
regulation, is impermissible.
``(h) Preapproval Required for Non-Audit Services.--A
registered public accounting firm may engage in any non-audit
service, including tax services, that is not described in any
of paragraphs (1) through (9) of subsection (g) for an audit
client, only if the activity is approved in advance by the
audit committee of the issuer, in accordance with subsection
(i).''.
(b) Exemption Authority.--The Board may, on a case by case
basis, exempt any person, issuer, public accounting firm, or
transaction from the prohibition on the provision of services
under section 10A(g) of the Securities Exchange Act of 1934
(as added by this section), to the extent that such exemption
is necessary or appropriate in the public interest and is
consistent with the protection of investors, and subject to
review by the Commission in the same manner as for rules of
the Board under section 107.
SEC. 202. PREAPPROVAL REQUIREMENTS.
Section 10A of the Securities Exchange Act of 1934 (15
U.S.C. 78j-1), as amended by this Act, is amended by adding
at the end the following:
``(i) Preapproval Requirements.--
``(1) In general.--
``(A) Audit committee action.--All auditing services (which
may entail providing comfort
[[Page H5401]]
letters in connection with securities underwritings or
statutory audits required for insurance companies for
purposes of State law) and non-audit services, other than as
provided in subparagraph (B), provided to an issuer by the
auditor of the issuer shall be preapproved by the audit
committee of the issuer.
``(B) De minimus exception.--The preapproval requirement
under subparagraph (A) is waived with respect to the
provision of non-audit services for an issuer, if--
``(i) the aggregate amount of all such non-audit services
provided to the issuer constitutes not more than 5 percent of
the total amount of revenues paid by the issuer to its
auditor during the fiscal year in which the nonaudit services
are provided;
``(ii) such services were not recognized by the issuer at
the time of the engagement to be non-audit services; and
``(iii) such services are promptly brought to the attention
of the audit committee of the issuer and approved prior to
the completion of the audit by the audit committee or by 1 or
more members of the audit committee who are members of the
board of directors to whom authority to grant such approvals
has been delegated by the audit committee.
``(2) Disclosure to investors.--Approval by an audit
committee of an issuer under this subsection of a non-audit
service to be performed by the auditor of the issuer shall be
disclosed to investors in periodic reports required by
section 13(a).
``(3) Delegation authority.--The audit committee of an
issuer may delegate to 1 or more designated members of the
audit committee who are independent directors of the board of
directors, the authority to grant preapprovals required by
this subsection. The decisions of any member to whom
authority is delegated under this paragraph to preapprove an
activity under this subsection shall be presented to the full
audit committee at each of its scheduled meetings.
``(4) Approval of audit services for other purposes.--In
carrying out its duties under subsection (m)(2), if the audit
committee of an issuer approves an audit service within the
scope of the engagement of the auditor, such audit service
shall be deemed to have been preapproved for purposes of this
subsection.''.
SEC. 203. AUDIT PARTNER ROTATION.
Section 10A of the Securities Exchange Act of 1934 (15
U.S.C. 78j-1), as amended by this Act, is amended by adding
at the end the following:
``(j) Audit Partner Rotation.--It shall be unlawful for a
registered public accounting firm to provide audit services
to an issuer if the lead (or coordinating) audit partner
(having primary responsibility for the audit), or the audit
partner responsible for reviewing the audit, has performed
audit services for that issuer in each of the 5 previous
fiscal years of that issuer.''.
SEC. 204. AUDITOR REPORTS TO AUDIT COMMITTEES.
Section 10A of the Securities Exchange Act of 1934 (15
U.S.C. 78j-1), as amended by this Act, is amended by adding
at the end the following:
``(k) Reports to Audit Committees.--Each registered public
accounting firm that performs for any issuer any audit
required by this title shall timely report to the audit
committee of the issuer--
``(1) all critical accounting policies and practices to be
used;
``(2) all alternative treatments of financial information
within generally accepted accounting principles that have
been discussed with management officials of the issuer,
ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the registered
public accounting firm; and
``(3) other material written communications between the
registered public accounting firm and the management of the
issuer, such as any management letter or schedule of
unadjusted differences.''.
SEC. 205. CONFORMING AMENDMENTS.
(a) Definitions.--Section 3(a) of the Securities Exchange
Act of 1934 (15 U.S.C. 78c(a)) is amended by adding at the
end the following:
``(58) Audit committee.--The term `audit committee' means--
``(A) a committee (or equivalent body) established by and
amongst the board of directors of an issuer for the purpose
of overseeing the accounting and financial reporting
processes of the issuer and audits of the financial
statements of the issuer; and
``(B) if no such committee exists with respect to an
issuer, the entire board of directors of the issuer.
``(59) Registered public accounting firm.--The term
`registered public accounting firm' has the same meaning as
in section 2 of the Sarbanes-Oxley Act of 2002.''.
(b) Auditor Requirements.--Section 10A of the Securities
Exchange Act of 1934 (15 U.S.C. 78j-1) is amended--
(1) by striking ``an independent public accountant'' each
place that term appears and inserting ``a registered public
accounting firm'';
(2) by striking ``the independent public accountant'' each
place that term appears and inserting ``the registered public
accounting firm'';
(3) in subsection (c), by striking ``No independent public
accountant'' and inserting ``No registered public accounting
firm''; and
(4) in subsection (b)--
(A) by striking ``the accountant'' each place that term
appears and inserting ``the firm'';
(B) by striking ``such accountant'' each place that term
appears and inserting ``such firm''; and
(C) in paragraph (4), by striking ``the accountant's
report'' and inserting ``the report of the firm''.
(c) Other References.--The Securities Exchange Act of 1934
(15 U.S.C. 78a et seq.) is amended--
(1) in section 12(b)(1) (15 U.S.C. 78l(b)(1)), by striking
``independent public accountants'' each place that term
appears and inserting ``a registered public accounting
firm''; and
(2) in subsections (e) and (i) of section 17 (15 U.S.C.
78q), by striking ``an independent public accountant'' each
place that term appears and inserting ``a registered public
accounting firm''.
(d) Conforming Amendment.--Section 10A(f) of the Securities
Exchange Act of 1934 (15 U.S.C. 78k(f)) is amended--
(1) by striking ``Definition'' and inserting
``Definitions''; and
(2) by adding at the end the following: ``As used in this
section, the term `issuer' means an issuer (as defined in
section 3), the securities of which are registered under
section 12, or that is required to file reports pursuant to
section 15(d), or that files or has filed a registration
statement that has not yet become effective under the
Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it
has not withdrawn.''.
SEC. 206. CONFLICTS OF INTEREST.
Section 10A of the Securities Exchange Act of 1934 (15
U.S.C. 78j-1), as amended by this Act, is amended by adding
at the end the following:
``(l) Conflicts of Interest.--It shall be unlawful for a
registered public accounting firm to perform for an issuer
any audit service required by this title, if a chief
executive officer, controller, chief financial officer, chief
accounting officer, or any person serving in an equivalent
position for the issuer, was employed by that registered
independent public accounting firm and participated in any
capacity in the audit of that issuer during the 1-year period
preceding the date of the initiation of the audit.''.
SEC. 207. STUDY OF MANDATORY ROTATION OF REGISTERED PUBLIC
ACCOUNTING FIRMS.
(a) Study and Review Required.--The Comptroller General of
the United States shall conduct a study and review of the
potential effects of requiring the mandatory rotation of
registered public accounting firms.
(b) Report Required.--Not later than 1 year after the date
of enactment of this Act, the Comptroller General shall
submit a report to the Committee on Banking, Housing, and
Urban Affairs of the Senate and the Committee on Financial
Services of the House of Representatives on the results of
the study and review required by this section.
(c) Definition.--For purposes of this section, the term
``mandatory rotation'' refers to the imposition of a limit on
the period of years in which a particular registered public
accounting firm may be the auditor of record for a particular
issuer.
SEC. 208. COMMISSION AUTHORITY.
(a) Commission Regulations.--Not later than 180 days after
the date of enactment of this Act, the Commission shall issue
final regulations to carry out each of subsections (g)
through (l) of section 10A of the Securities Exchange Act of
1934, as added by this title.
(b) Auditor Independence.--It shall be unlawful for any
registered public accounting firm (or an associated person
thereof, as applicable) to prepare or issue any audit report
with respect to any issuer, if the firm or associated person
engages in any activity with respect to that issuer
prohibited by any of subsections (g) through (l) of section
10A of the Securities Exchange Act of 1934, as added by this
title, or any rule or regulation of the Commission or of the
Board issued thereunder.
SEC. 209. CONSIDERATIONS BY APPROPRIATE STATE REGULATORY
AUTHORITIES.
In supervising nonregistered public accounting firms and
their associated persons, appropriate State regulatory
authorities should make an independent determination of the
proper standards applicable, particularly taking into
consideration the size and nature of the business of the
accounting firms they supervise and the size and nature of
the business of the clients of those firms. The standards
applied by the Board under this Act should not be presumed to
be applicable for purposes of this section for small and
medium sized nonregistered public accounting firms.
TITLE III--CORPORATE RESPONSIBILITY
SEC. 301. PUBLIC COMPANY AUDIT COMMITTEES.
Section 10A of the Securities Exchange Act of 1934 (15
U.S.C. 78f) is amended by adding at the end the following:
``(m) Standards Relating to Audit Committees.--
``(1) Commission rules.--
``(A) In general.--Effective not later than 270 days after
the date of enactment of this subsection, the Commission
shall, by rule, direct the national securities exchanges and
national securities associations to prohibit the listing of
any security of an issuer that is not in compliance with the
requirements of any portion of paragraphs (2) through (6).
``(B) Opportunity to cure defects.--The rules of the
Commission under subparagraph (A) shall provide for
appropriate procedures for an issuer to have an opportunity
to cure any defects that would be the basis for a prohibition
under subparagraph (A), before the imposition of such
prohibition.
``(2) Responsibilities relating to registered public
accounting firms.--The audit committee of each issuer, in its
capacity as a committee of the board of directors, shall be
directly responsible for the appointment, compensation, and
oversight of the work of any registered public accounting
firm employed by that issuer (including resolution of
disagreements between management and the auditor regarding
financial reporting) for the purpose of preparing or issuing
an audit report or related work, and each such registered
public accounting firm shall report directly to the audit
committee.
``(3) Independence.--
``(A) In general.--Each member of the audit committee of
the issuer shall be a member of the board of directors of the
issuer, and shall otherwise be independent.
[[Page H5402]]
``(B) Criteria.--In order to be considered to be
independent for purposes of this paragraph, a member of an
audit committee of an issuer may not, other than in his or
her capacity as a member of the audit committee, the board of
directors, or any other board committee--
``(i) accept any consulting, advisory, or other
compensatory fee from the issuer; or
``(ii) be an affiliated person of the issuer or any
subsidiary thereof.
``(C) Exemption authority.--The Commission may exempt from
the requirements of subparagraph (B) a particular
relationship with respect to audit committee members, as the
Commission determines appropriate in light of the
circumstances.
``(4) Complaints.--Each audit committee shall establish
procedures for--
``(A) the receipt, retention, and treatment of complaints
received by the issuer regarding accounting, internal
accounting controls, or auditing matters; and
``(B) the confidential, anonymous submission by employees
of the issuer of concerns regarding questionable accounting
or auditing matters.
``(5) Authority to engage advisers.--Each audit committee
shall have the authority to engage independent counsel and
other advisers, as it determines necessary to carry out its
duties.
``(6) Funding.--Each issuer shall provide for appropriate
funding, as determined by the audit committee, in its
capacity as a committee of the board of directors, for
payment of compensation--
``(A) to the registered public accounting firm employed by
the issuer for the purpose of rendering or issuing an audit
report; and
``(B) to any advisers employed by the audit committee under
paragraph (5).''.
SEC. 302. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.
(a) Regulations Required.--The Commission shall, by rule,
require, for each company filing periodic reports under
section 13(a) or 15(d) of the Securities Exchange Act of 1934
(15 U.S.C. 78m, 78o(d)), that the principal executive officer
or officers and the principal financial officer or officers,
or persons performing similar functions, certify in each
annual or quarterly report filed or submitted under either
such section of such Act that--
(1) the signing officer has reviewed the report;
(2) based on the officer's knowledge, the report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements made, in light of the circumstances under which
such statements were made, not misleading;
(3) based on such officer's knowledge, the financial
statements, and other financial information included in the
report, fairly present in all material respects the financial
condition and results of operations of the issuer as of, and
for, the periods presented in the report;
(4) the signing officers--
(A) are responsible for establishing and maintaining
internal controls;
(B) have designed such internal controls to ensure that
material information relating to the issuer and its
consolidated subsidiaries is made known to such officers by
others within those entities, particularly during the period
in which the periodic reports are being prepared;
(C) have evaluated the effectiveness of the issuer's
internal controls as of a date within 90 days prior to the
report; and
(D) have presented in the report their conclusions about
the effectiveness of their internal controls based on their
evaluation as of that date;
(5) the signing officers have disclosed to the issuer's
auditors and the audit committee of the board of directors
(or persons fulfilling the equivalent function)--
(A) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
issuer's ability to record, process, summarize, and report
financial data and have identified for the issuer's auditors
any material weaknesses in internal controls; and
(B) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the issuer's internal controls; and
(6) the signing officers have indicated in the report
whether or not there were significant changes in internal
controls or in other factors that could significantly affect
internal controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
(b) Foreign Reincorporations Have No Effect.--Nothing in
this section 302 shall be interpreted or applied in any way
to allow any issuer to lessen the legal force of the
statement required under this section 302, by an issuer
having reincorporated or having engaged in any other
transaction that resulted in the transfer of the corporate
domicile or offices of the issuer from inside the United
States to outside of the United States.
(c) Deadline.--The rules required by subsection (a) shall
be effective not later than 30 days after the date of
enactment of this Act.
SEC. 303. IMPROPER INFLUENCE ON CONDUCT OF AUDITS.
(a) Rules To Prohibit.--It shall be unlawful, in
contravention of such rules or regulations as the Commission
shall prescribe as necessary and appropriate in the public
interest or for the protection of investors, for any officer
or director of an issuer, or any other person acting under
the direction thereof, to take any action to fraudulently
influence, coerce, manipulate, or mislead any independent
public or certified accountant engaged in the performance of
an audit of the financial statements of that issuer for the
purpose of rendering such financial statements materially
misleading.
(b) Enforcement.--In any civil proceeding, the Commission
shall have exclusive authority to enforce this section and
any rule or regulation issued under this section.
(c) No Preemption of Other Law.--The provisions of
subsection (a) shall be in addition to, and shall not
supersede or preempt, any other provision of law or any rule
or regulation issued thereunder.
(d) Deadline for Rulemaking.--The Commission shall--
(1) propose the rules or regulations required by this
section, not later than 90 days after the date of enactment
of this Act; and
(2) issue final rules or regulations required by this
section, not later than 270 days after that date of
enactment.
SEC. 304. FORFEITURE OF CERTAIN BONUSES AND PROFITS.
(a) Additional Compensation Prior to Noncompliance With
Commission Financial Reporting Requirements.--If an issuer is
required to prepare an accounting restatement due to the
material noncompliance of the issuer, as a result of
misconduct, with any financial reporting requirement under
the securities laws, the chief executive officer and chief
financial officer of the issuer shall reimburse the issuer
for--
(1) any bonus or other incentive-based or equity-based
compensation received by that person from the issuer during
the 12-month period following the first public issuance or
filing with the Commission (whichever first occurs) of the
financial document embodying such financial reporting
requirement; and
(2) any profits realized from the sale of securities of the
issuer during that 12-month period.
(b) Commission Exemption Authority.--The Commission may
exempt any person from the application of subsection (a), as
it deems necessary and appropriate.
SEC. 305. OFFICER AND DIRECTOR BARS AND PENALTIES.
(a) Unfitness Standard.--
(1) Securities exchange act of 1934.--Section 21(d)(2) of
the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(2)) is
amended by striking ``substantial unfitness'' and inserting
``unfitness''.
(2) Securities act of 1933.--Section 20(e) of the
Securities Act of 1933 (15 U.S.C. 77t(e)) is amended by
striking ``substantial unfitness'' and inserting
``unfitness''.
(b) Equitable Relief.--Section 21(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78u(d)) is amended by adding
at the end the following:
``(5) Equitable Relief.--In any action or proceeding
brought or instituted by the Commission under any provision
of the securities laws, the Commission may seek, and any
Federal court may grant, any equitable relief that may be
appropriate or necessary for the benefit of investors.''.
SEC. 306. INSIDER TRADES DURING PENSION FUND BLACKOUT
PERIODS.
(a) Prohibition of Insider Trading During Pension Fund
Blackout Periods.--
(1) In general.--Except to the extent otherwise provided by
rule of the Commission pursuant to paragraph (3), it shall be
unlawful for any director or executive officer of an issuer
of any equity security (other than an exempted security),
directly or indirectly, to purchase, sell, or otherwise
acquire or transfer any equity security of the issuer (other
than an exempted security) during any blackout period with
respect to such equity security if such director or officer
acquires such equity security in connection with his or her
service or employment as a director or executive officer.
(2) Remedy.--
(A) In general.--Any profit realized by a director or
executive officer referred to in paragraph (1) from any
purchase, sale, or other acquisition or transfer in violation
of this subsection shall inure to and be recoverable by the
issuer, irrespective of any intention on the part of such
director or executive officer in entering into the
transaction.
(B) Actions to recover profits.--An action to recover
profits in accordance with this subsection may be instituted
at law or in equity in any court of competent jurisdiction by
the issuer, or by the owner of any security of the issuer in
the name and in behalf of the issuer if the issuer fails or
refuses to bring such action within 60 days after the date of
request, or fails diligently to prosecute the action
thereafter, except that no such suit shall be brought more
than 2 years after the date on which such profit was
realized.
(3) Rulemaking Authorized.--The Commission shall, in
consultation with the Secretary of Labor, issue rules to
clarify the application of this subsection and to prevent
evasion thereof. Such rules shall provide for the application
of the requirements of paragraph (1) with respect to entities
treated as a single employer with respect to an issuer under
section 414(b), (c), (m), or (o) of the Internal Revenue Code
of 1986 to the extent necessary to clarify the application of
such requirements and to prevent evasion thereof. Such rules
may also provide for appropriate exceptions from the
requirements of this subsection, including exceptions for
purchases pursuant to an automatic dividend reinvestment
program or purchases or sales made pursuant to an advance
election.
(4) Blackout period.--For purposes of this subsection, the
term ``blackout period'', with respect to the equity
securities of any issuer--
(A) means any period of more than 3 consecutive business
days during which the ability of not fewer than 50 percent of
the participants or beneficiaries under all individual
account plans maintained by the issuer to purchase, sell, or
otherwise acquire or transfer an interest in any equity of
such issuer held in such an individual account plan is
temporarily suspended by the issuer or by a fiduciary of the
plan; and
(B) does not include, under regulations which shall be
prescribed by the Commission--
[[Page H5403]]
(i) a regularly scheduled period in which the participants
and beneficiaries may not purchase, sell, or otherwise
acquire or transfer an interest in any equity of such issuer,
if such period is--
(I) incorporated into the individual account plan; and
(II) timely disclosed to employees before becoming
participants under the individual account plan or as a
subsequent amendment to the plan; or
(ii) any suspension described in subparagraph (A) that is
imposed solely in connection with persons becoming
participants or beneficiaries, or ceasing to be participants
or beneficiaries, in an individual account plan by reason of
a corporate merger, acquisition, divestiture, or similar
transaction involving the plan or plan sponsor.
(5) Individual account plan.--For purposes of this
subsection, the term ``individual account plan'' has the
meaning provided in section 3(34) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1002(34), except that
such term shall not include a one-participant retirement plan
(within the meaning of section 101(i)(8)(B) of such Act (29
U.S.C. 1021(i)(8)(B))).
(6) Notice to directors, executive officers, and the
commission.--In any case in which a director or executive
officer is subject to the requirements of this subsection in
connection with a blackout period (as defined in paragraph
(4)) with respect to any equity securities, the issuer of
such equity securities shall timely notify such director or
officer and the Securities and Exchange Commission of such
blackout period.
(b) Notice Requirements to Participants and Beneficiaries
under ERISA.--
(1) In general.--Section 101 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1021) is amended by
redesignating the second subsection (h) as subsection (j),
and by inserting after the first subsection (h) the following
new subsection:
``(i) Notice of Blackout Periods to Participant or
Beneficiary Under Individual Account Plan.--
``(1) Duties of plan administrator.--In advance of the
commencement of any blackout period with respect to an
individual account plan, the plan administrator shall notify
the plan participants and beneficiaries who are affected by
such action in accordance with this subsection.
``(2) Notice requirements.--
``(A) In general.--The notices described in paragraph (1)
shall be written in a manner calculated to be understood by
the average plan participant and shall include--
``(i) the reasons for the blackout period,
``(ii) an identification of the investments and other
rights affected,
``(iii) the expected beginning date and length of the
blackout period,
``(iv) in the case of investments affected, a statement
that the participant or beneficiary should evaluate the
appropriateness of their current investment decisions in
light of their inability to direct or diversify assets
credited to their accounts during the blackout period, and
``(v) such other matters as the Secretary may require by
regulation.
``(B) Notice to participants and beneficiaries.--Except as
otherwise provided in this subsection, notices described in
paragraph (1) shall be furnished to all participants and
beneficiaries under the plan to whom the blackout period
applies at least 30 days in advance of the blackout period.
``(C) Exception to 30-day notice requirement.--In any case
in which--
``(i) a deferral of the blackout period would violate the
requirements of subparagraph (A) or (B) of section 404(a)(1),
and a fiduciary of the plan reasonably so determines in
writing, or
``(ii) the inability to provide the 30-day advance notice
is due to events that were unforeseeable or circumstances
beyond the reasonable control of the plan administrator, and
a fiduciary of the plan reasonably so determines in writing,
subparagraph (B) shall not apply, and the notice shall be
furnished to all participants and beneficiaries under the
plan to whom the blackout period applies as soon as
reasonably possible under the circumstances unless such a
notice in advance of the termination of the blackout period
is impracticable.
``(D) Written notice.--The notice required to be provided
under this subsection shall be in writing, except that such
notice may be in electronic or other form to the extent that
such form is reasonably accessible to the recipient.
``(E) Notice to issuers of employer securities subject to
blackout period.--In the case of any blackout period in
connection with an individual account plan, the plan
administrator shall provide timely notice of such blackout
period to the issuer of any employer securities subject to
such blackout period.
``(3) Exception for blackout periods with limited
applicability.--In any case in which the blackout period
applies only to 1 or more participants or beneficiaries in
connection with a merger, acquisition, divestiture, or
similar transaction involving the plan or plan sponsor and
occurs solely in connection with becoming or ceasing to be a
participant or beneficiary under the plan by reason of such
merger, acquisition, divestiture, or transaction, the
requirement of this subsection that the notice be provided to
all participants and beneficiaries shall be treated as met if
the notice required under paragraph (1) is provided to such
participants or beneficiaries to whom the blackout period
applies as soon as reasonably practicable.
``(4) Changes in length of blackout period.--If, following
the furnishing of the notice pursuant to this subsection,
there is a change in the beginning date or length of the
blackout period (specified in such notice pursuant to
paragraph (2)(A)(iii)), the administrator shall provide
affected participants and beneficiaries notice of the change
as soon as reasonably practicable. In relation to the
extended blackout period, such notice shall meet the
requirements of paragraph (2)(D) and shall specify any
material change in the matters referred to in clauses (i)
through (v) of paragraph (2)(A).
``(5) Regulatory exceptions.--The Secretary may provide by
regulation for additional exceptions to the requirements of
this subsection which the Secretary determines are in the
interests of participants and beneficiaries.
``(6) Guidance and model notices.--The Secretary shall
issue guidance and model notices which meet the requirements
of this subsection.
``(7) Blackout period.--For purposes of this subsection--
``(A) In general.--The term `blackout period' means, in
connection with an individual account plan, any period for
which any ability of participants or beneficiaries under the
plan, which is otherwise available under the terms of such
plan, to direct or diversify assets credited to their
accounts, to obtain loans from the plan, or to obtain
distributions from the plan is temporarily suspended,
limited, or restricted, if such suspension, limitation, or
restriction is for any period of more than 3 consecutive
business days.
``(B) Exclusions.--The term `blackout period' does not
include a suspension, limitation, or restriction--
``(i) which occurs by reason of the application of the
securities laws (as defined in section 3(a)(47) of the
Securities Exchange Act of 1934),
``(ii) which is a change to the plan which provides for a
regularly scheduled suspension, limitation, or restriction
which is disclosed to participants or beneficiaries through
any summary of material modifications, any materials
describing specific investment alternatives under the plan,
or any changes thereto, or
``(iii) which applies only to 1 or more individuals, each
of whom is the participant, an alternate payee (as defined in
section 206(d)(3)(K)), or any other beneficiary pursuant to a
qualified domestic relations order (as defined in section
206(d)(3)(B)(i)).
``(8) Individual account plan.--
``(A) In general.--For purposes of this subsection, the
term `individual account plan' shall have the meaning
provided such term in section 3(34), except that such term
shall not include a one-participant retirement plan.
``(B) One-participant retirement plan.--For purposes of
subparagraph (A), the term `one-participant retirement plan'
means a retirement plan that--
``(i) on the first day of the plan year--
``(I) covered only the employer (and the employer's spouse)
and the employer owned the entire business (whether or not
incorporated), or
``(II) covered only one or more partners (and their
spouses) in a business partnership (including partners in an
S or C corporation (as defined in section 1361(a) of the
Internal Revenue Code of 1986)),
``(ii) meets the minimum coverage requirements of section
410(b) of the Internal Revenue Code of 1986 (as in effect on
the date of the enactment of this paragraph) without being
combined with any other plan of the business that covers the
employees of the business,
``(iii) does not provide benefits to anyone except the
employer (and the employer's spouse) or the partners (and
their spouses),
``(iv) does not cover a business that is a member of an
affiliated service group, a controlled group of corporations,
or a group of businesses under common control, and
``(v) does not cover a business that leases employees.''.
(2) Issuance of initial guidance and model notice.--The
Secretary of Labor shall issue initial guidance and a model
notice pursuant to section 101(i)(6) of the Employee
Retirement Income Security Act of 1974 (as added by this
subsection) not later than January 1, 2003. Not later than 75
days after the date of the enactment of this Act, the
Secretary shall promulgate interim final rules necessary to
carry out the amendments made by this subsection.
(3) Civil penalties for failure to provide notice.--Section
502 of such Act (29 U.S.C. 1132) is amended--
(A) in subsection (a)(6), by striking ``(5), or (6)'' and
inserting ``(5), (6), or (7)'';
(B) by redesignating paragraph (7) of subsection (c) as
paragraph (8); and
(C) by inserting after paragraph (6) of subsection (c) the
following new paragraph:
``(7) The Secretary may assess a civil penalty against a
plan administrator of up to $100 a day from the date of the
plan administrator's failure or refusal to provide notice to
participants and beneficiaries in accordance with section
101(i). For purposes of this paragraph, each violation with
respect to any single participant or beneficiary shall be
treated as a separate violation.''.
(3) Plan amendments.--If any amendment made by this
subsection requires an amendment to any plan, such plan
amendment shall not be required to be made before the first
plan year beginning on or after the effective date of this
section, if--
(A) during the period after such amendment made by this
subsection takes effect and before such first plan year, the
plan is operated in good faith compliance with the
requirements of such amendment made by this subsection, and
(B) such plan amendment applies retroactively to the period
after such amendment made by this subsection takes effect and
before such first plan year.
(c) Effective Date.--The provisions of this section
(including the amendments made thereby) shall take effect 180
days after the date of the enactment of this Act. Good faith
compliance with the requirements of such provisions in
advance of the issuance of applicable regulations thereunder
shall be treated as compliance with such provisions.
[[Page H5404]]
SEC. 307. RULES OF PROFESSIONAL RESPONSIBILITY FOR ATTORNEYS.
Not later than 180 days after the date of enactment of this
Act, the Commission shall issue rules, in the public interest
and for the protection of investors, setting forth minimum
standards of professional conduct for attorneys appearing and
practicing before the Commission in any way in the
representation of issuers, including a rule--
(1) requiring an attorney to report evidence of a material
violation of securities law or breach of fiduciary duty or
similar violation by the company or any agent thereof, to the
chief legal counsel or the chief executive officer of the
company (or the equivalent thereof); and
(2) if the counsel or officer does not appropriately
respond to the evidence (adopting, as necessary, appropriate
remedial measures or sanctions with respect to the
violation), requiring the attorney to report the evidence to
the audit committee of the board of directors of the issuer
or to another committee of the board of directors comprised
solely of directors not employed directly or indirectly by
the issuer, or to the board of directors.
SEC. 308. FAIR FUNDS FOR INVESTORS.
(a) Civil Penalties Added to Disgorgement Funds for the
Relief of Victims.--If in any judicial or administrative
action brought by the Commission under the securities laws
(as such term is defined in section 3(a)(47) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) the
Commission obtains an order requiring disgorgement against
any person for a violation of such laws or the rules or
regulations thereunder, or such person agrees in settlement
of any such action to such disgorgement, and the Commission
also obtains pursuant to such laws a civil penalty against
such person, the amount of such civil penalty shall, on the
motion or at the direction of the Commission, be added to and
become part of the disgorgement fund for the benefit of the
victims of such violation.
(b) Acceptance of Additional Donations.--The Commission is
authorized to accept, hold, administer, and utilize gifts,
bequests and devises of property, both real and personal, to
the United States for a disgorgement fund described in
subsection (a). Such gifts, bequests, and devises of money
and proceeds from sales of other property received as gifts,
bequests, or devises shall be deposited in the disgorgement
fund and shall be available for allocation in accordance with
subsection (a).
(c) Study Required.--
(1) Subject of study.--The Commission shall review and
analyze--
(A) enforcement actions by the Commission over the five
years preceding the date of the enactment of this Act that
have included proceedings to obtain civil penalties or
disgorgements to identify areas where such proceedings may be
utilized to efficiently, effectively, and fairly provide
restitution for injured investors; and
(B) other methods to more efficiently, effectively, and
fairly provide restitution to injured investors, including
methods to improve the collection rates for civil penalties
and disgorgements.
(2) Report Required.--The Commission shall report its
findings to the Committee on Financial Services of the House
of Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate within 180 days after of the date
of the enactment of this Act, and shall use such findings to
revise its rules and regulations as necessary. The report
shall include a discussion of regulatory or legislative
actions that are recommended or that may be necessary to
address concerns identified in the study.
(d) Conforming Amendments.--Each of the following
provisions is amended by inserting ``, except as otherwise
provided in section 308 of the Sarbanes-Oxley Act of 2002''
after ``Treasury of the United States'':
(1) Section 21(d)(3)(C)(i) of the Securities Exchange Act
of 1934 (15 U.S.C. 78u(d)(3)(C)(i)).
(2) Section 21A(d)(1) of such Act (15 U.S.C. 78u-1(d)(1)).
(3) Section 20(d)(3)(A) of the Securities Act of 1933 (15
U.S.C. 77t(d)(3)(A)).
(4) Section 42(e)(3)(A) of the Investment Company Act of
1940 (15 U.S.C. 80a-41(e)(3)(A)).
(5) Section 209(e)(3)(A) of the Investment Advisers Act of
1940 (15 U.S.C. 80b-9(e)(3)(A)).
(e) Definition.--As used in this section, the term
``disgorgement fund'' means a fund established in any
administrative or judicial proceeding described in subsection
(a).
TITLE IV--ENHANCED FINANCIAL DISCLOSURES
SEC. 401. DISCLOSURES IN PERIODIC REPORTS.
(a) Disclosures Required.--Section 13 of the Securities
Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at
the end the following:
``(i) Accuracy of Financial Reports.--Each financial report
that contains financial statements, and that is required to
be prepared in accordance with (or reconciled to) generally
accepted accounting principles under this title and filed
with the Commission shall reflect all material correcting
adjustments that have been identified by a registered public
accounting firm in accordance with generally accepted
accounting principles and the rules and regulations of the
Commission.
``(j) Off-Balance Sheet Transactions.--Not later than 180
days after the date of enactment of the Sarbanes-Oxley Act of
2002, the Commission shall issue final rules providing that
each annual and quarterly financial report required to be
filed with the Commission shall disclose all material off-
balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships
of the issuer with unconsolidated entities or other persons,
that may have a material current or future effect on
financial condition, changes in financial condition, results
of operations, liquidity, capital expenditures, capital
resources, or significant components of revenues or
expenses.''.
(b) Commission Rules on Pro Forma Figures.--Not later than
180 days after the date of enactment of the Sarbanes-Oxley
Act fo 2002, the Commission shall issue final rules providing
that pro forma financial information included in any periodic
or other report filed with the Commission pursuant to the
securities laws, or in any public disclosure or press or
other release, shall be presented in a manner that--
(1) does not contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make
the pro forma financial information, in light of the
circumstances under which it is presented, not misleading;
and
(2) reconciles it with the financial condition and results
of operations of the issuer under generally accepted
accounting principles.
(c) Study and Report on Special Purpose Entities.--
(1) Study required.--The Commission shall, not later than 1
year after the effective date of adoption of off-balance
sheet disclosure rules required by section 13(j) of the
Securities Exchange Act of 1934, as added by this section,
complete a study of filings by issuers and their disclosures
to determine--
(A) the extent of off-balance sheet transactions, including
assets, liabilities, leases, losses, and the use of special
purpose entities; and
(B) whether generally accepted accounting rules result in
financial statements of issuers reflecting the economics of
such off-balance sheet transactions to investors in a
transparent fashion.
(2) Report and recommendations.--Not later than 6 months
after the date of completion of the study required by
paragraph (1), the Commission shall submit a report to the
President, the Committee on Banking, Housing, and Urban
Affairs of the Senate, and the Committee on Financial
Services of the House of Representatives, setting forth--
(A) the amount or an estimate of the amount of off-balance
sheet transactions, including assets, liabilities, leases,
and losses of, and the use of special purpose entities by,
issuers filing periodic reports pursuant to section 13 or 15
of the Securities Exchange Act of 1934;
(B) the extent to which special purpose entities are used
to facilitate off-balance sheet transactions;
(C) whether generally accepted accounting principles or the
rules of the Commission result in financial statements of
issuers reflecting the economics of such transactions to
investors in a transparent fashion;
(D) whether generally accepted accounting principles
specifically result in the consolidation of special purpose
entities sponsored by an issuer in cases in which the issuer
has the majority of the risks and rewards of the special
purpose entity; and
(E) any recommendations of the Commission for improving the
transparency and quality of reporting off-balance sheet
transactions in the financial statements and disclosures
required to be filed by an issuer with the Commission.
SEC. 402. ENHANCED CONFLICT OF INTEREST PROVISIONS.
(a) Prohibition on Personal Loans to Executives.--Section
13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m), as
amended by this Act, is amended by adding at the end the
following:
``(k) Prohibition on Personal Loans to Executives.--
``(1) In general.--It shall be unlawful for any issuer (as
defined in section 2 of the Sarbanes-Oxley Act of 2002),
directly or indirectly, including through any subsidiary, to
extend or maintain credit, to arrange for the extension of
credit, or to renew an extension of credit, in the form of a
personal loan to or for any director or executive officer (or
equivalent thereof) of that issuer. An extension of credit
maintained by the issuer on the date of enactment of this
subsection shall not be subject to the provisions of this
subsection, provided that there is no material modification
to any term of any such extension of credit or any renewal of
any such extension of credit on or after that date of
enactment.
``(2) Limitation.--Paragraph (1) does not preclude any home
improvement and manufactured home loans (as that term is
defined in section 5 of the Home Owners' Loan Act (12
U.S.C. 1464)), consumer credit (as defined in section 103
of the Truth in Lending Act (15 U.S.C. 1602)), or any
extension of credit under an open end credit plan (as
defined in section 103 of the Truth in Lending Act (15
U.S.C. 1602)), or a charge card (as defined in section
127(c)(4)(e) of the Truth in Lending Act (15 U.S.C.
1637(c)(4)(e)), or any extension of credit by a broker or
dealer registered under section 15 of this title to an
employee of that broker or dealer to buy, trade, or carry
securities, that is permitted under rules or regulations
of the Board of Governors of the Federal Reserve System
pursuant to section 7 of this title (other than an
extension of credit that would be used to purchase the
stock of that issuer), that is--
``(A) made or provided in the ordinary course of the
consumer credit business of such issuer;
``(B) of a type that is generally made available by such
issuer to the public; and
``(C) made by such issuer on market terms, or terms that
are no more favorable than those offered by the issuer to the
general public for such extensions of credit.
``(3) Rule of construction for certain loans.--Paragraph
(1) does not apply to any loan made or maintained by an
insured depository institution (as defined in section 3 of
the Federal Deposit Insurance Act (12 U.S.C. 1813)), if the
loan is subject to the insider lending restrictions of
section 22(h) of the Federal Reserve Act (12 U.S.C. 375b).''.
[[Page H5405]]
SEC. 403. DISCLOSURES OF TRANSACTIONS INVOLVING MANAGEMENT
AND PRINCIPAL STOCKHOLDERS.
(a) Amendment.--Section 16 of the Securities Exchange Act
of 1934 (15 U.S.C. 78p) is amended by striking the heading of
such section and subsection (a) and inserting the following:
``SEC. 16. DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS.
``(a) Disclosures Required.--
``(1) Directors, officers, and principal stockholders
required to file.--Every person who is directly or indirectly
the beneficial owner of more than 10 percent of any class of
any equity security (other than an exempted security) which
is registered pursuant to section 12, or who is a director or
an officer of the issuer of such security, shall file the
statements required by this subsection with the Commission
(and, if such security is registered on a national securities
exchange, also with the exchange).
``(2) Time of filing.--The statements required by this
subsection shall be filed--
``(A) at the time of the registration of such security on a
national securities exchange or by the effective date of a
registration statement filed pursuant to section 12(g);
``(B) within 10 days after he or she becomes such
beneficial owner, director, or officer;
``(C) if there has been a change in such ownership, or if
such person shall have purchased or sold a security-based
swap agreement (as defined in section 206(b) of the Gramm-
Leach-Bliley Act (15 U.S.C. 78c note)) involving such equity
security, before the end of the second business day following
the day on which the subject transaction has been executed,
or at such other time as the Commission shall establish, by
rule, in any case in which the Commission determines that
such 2-day period is not feasible.
``(3) Contents of statements.--A statement filed--
``(A) under subparagraph (A) or (B) of paragraph (2) shall
contain a statement of the amount of all equity securities of
such issuer of which the filing person is the beneficial
owner; and
``(B) under subparagraph (C) of such paragraph shall
indicate ownership by the filing person at the date of
filing, any such changes in such ownership, and such
purchases and sales of the security-based swap agreements as
have occurred since the most recent such filing under such
subparagraph.
``(4) Electronic filing and availability.--Beginning not
later than 1 year after the date of enactment of the
Sarbanes-Oxley Act of 2002--
``(A) a statement filed under subparagraph (C) of paragraph
(2) shall be filed electronically;
``(B) the Commission shall provide each such statement on a
publicly accessible Internet site not later than the end of
the business day following that filing; and
``(C) the issuer (if the issuer maintains a corporate
website) shall provide that statement on that corporate
website, not later than the end of the business day following
that filing.''.
(b) Effective Date.--The amendment made by this section
shall be effective 30 days after the date of the enactment of
this Act.
SEC. 404. MANAGEMENT ASSESSMENT OF INTERNAL CONTROLS.
(a) Rules Required.--The Commission shall prescribe rules
requiring each annual report required by section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m
or 78o(d)) to contain an internal control report, which
shall--
(1) state the responsibility of management for establishing
and maintaining an adequate internal control structure and
procedures for financial reporting; and
(2) contain an assessment, as of the end of the most recent
fiscal year of the issuer, of the effectiveness of the
internal control structure and procedures of the issuer for
financial reporting.
(b) Internal Control Evaluation and Reporting.--With
respect to the internal control assessment required by
subsection (a), each registered public accounting firm that
prepares or issues the audit report for the issuer shall
attest to, and report on, the assessment made by the
management of the issuer. An attestation made under this
subsection shall be made in accordance with standards for
attestation engagements issued or adopted by the Board. Any
such attestation shall not be the subject of a separate
engagement.
SEC. 405. EXEMPTION.
Nothing in section 401, 402, or 404, the amendments made by
those sections, or the rules of the Commission under those
sections shall apply to any investment company registered
under section 8 of the Investment Company Act of 1940 (15
U.S.C. 80a-8).
SEC. 406. CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS.
(a) Code of Ethics Disclosure.--The Commission shall issue
rules to require each issuer, together with periodic reports
required pursuant to section 13(a) or 15(d) of the Securities
Exchange Act of 1934, to disclose whether or not, and if not,
the reason therefor, such issuer has adopted a code of ethics
for senior financial officers, applicable to its principal
financial officer and comptroller or principal accounting
officer, or persons performing similar functions.
(b) Changes in Codes of Ethics.--The Commission shall
revise its regulations concerning matters requiring prompt
disclosure on Form 8-K (or any successor thereto) to require
the immediate disclosure, by means of the filing of such
form, dissemination by the Internet or by other electronic
means, by any issuer of any change in or waiver of the code
of ethics for senior financial officers.
(c) Definition.--In this section, the term ``code of
ethics'' means such standards as are reasonably necessary to
promote--
(1) honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest between
personal and professional relationships;
(2) full, fair, accurate, timely, and understandable
disclosure in the periodic reports required to be filed by
the issuer; and
(3) compliance with applicable governmental rules and
regulations.
(d) Deadline for Rulemaking.--The Commission shall--
(1) propose rules to implement this section, not later than
90 days after the date of enactment of this Act; and
(2) issue final rules to implement this section, not later
than 180 days after that date of enactment.
SEC. 407. DISCLOSURE OF AUDIT COMMITTEE FINANCIAL EXPERT.
(a) Rules Defining ``Financial Expert''.--The Commission
shall issue rules, as necessary or appropriate in the public
interest and consistent with the protection of investors, to
require each issuer, together with periodic reports required
pursuant to sections 13(a) and 15(d) of the Securities
Exchange Act of 1934, to disclose whether or not, and if not,
the reasons therefor, the audit committee of that issuer is
comprised of at least 1 member who is a financial expert, as
such term is defined by the Commission.
(b) Considerations.--In defining the term ``financial
expert'' for purposes of subsection (a), the Commission shall
consider whether a person has, through education and
experience as a public accountant or auditor or a principal
financial officer, comptroller, or principal accounting
officer of an issuer, or from a position involving the
performance of similar functions--
(1) an understanding of generally accepted accounting
principles and financial statements;
(2) experience in--
(A) the preparation or auditing of financial statements of
generally comparable issuers; and
(B) the application of such principles in connection with
the accounting for estimates, accruals, and reserves;
(3) experience with internal accounting controls; and
(4) an understanding of audit committee functions.
(c) Deadline for Rulemaking.--The Commission shall--
(1) propose rules to implement this section, not later than
90 days after the date of enactment of this Act; and
(2) issue final rules to implement this section, not later
than 180 days after that date of enactment.
SEC. 408. ENHANCED REVIEW OF PERIODIC DISCLOSURES BY ISSUERS.
(a) Regular and Systematic Review.--The Commission shall
review disclosures made by issuers reporting under section
13(a) of the Securities Exchange Act of 1934 (including
reports filed on Form 10-K), and which have a class of
securities listed on a national securities exchange or traded
on an automated quotation facility of a national securities
association, on a regular and systematic basis for the
protection of investors. Such review shall include a review
of an issuer's financial statement.
(b) Review Criteria.--For purposes of scheduling the
reviews required by subsection (a), the Commission shall
consider, among other factors--
(1) issuers that have issued material restatements of
financial results;
(2) issuers that experience significant volatility in their
stock price as compared to other issuers;
(3) issuers with the largest market capitalization;
(4) emerging companies with disparities in price to earning
ratios;
(5) issuers whose operations significantly affect any
material sector of the economy; and
(6) any other factors that the Commission may consider
relevant.
(c) Minimum Review Period.--In no event shall an issuer
required to file reports under section 13(a) or 15(d) of the
Securities Exchange Act of 1934 be reviewed under this
section less frequently than once every 3 years.
SEC. 409. REAL TIME ISSUER DISCLOSURES.
Section 13 of the Securities Exchange Act of 1934 (15
U.S.C. 78m), as amended by this Act, is amended by adding at
the end the following:
``(l) Real Time Issuer Disclosures.--Each issuer reporting
under section 13(a) or 15(d) shall disclose to the public on
a rapid and current basis such additional information
concerning material changes in the financial condition or
operations of the issuer, in plain English, which may include
trend and qualitative information and graphic presentations,
as the Commission determines, by rule, is necessary or useful
for the protection of investors and in the public
interest.''.
TITLE V--ANALYST CONFLICTS OF INTEREST
SEC. 501. TREATMENT OF SECURITIES ANALYSTS BY REGISTERED
SECURITIES ASSOCIATIONS AND NATIONAL SECURITIES
EXCHANGES.
(a) Rules Regarding Securities Analysts.--The Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by
inserting after section 15C the following new section:
``SEC. 15D. SECURITIES ANALYSTS AND RESEARCH REPORTS.
``(a) Analyst Protections.--The Commission, or upon the
authorization and direction of the Commission, a registered
securities association or national securities exchange, shall
have adopted, not later than 1 year after the date of
enactment of this section, rules reasonably designed to
address conflicts of interest that can arise when securities
analysts recommend equity securities in research reports and
public appearances, in order to improve the objectivity of
research and provide investors with more useful and reliable
information, including rules designed--
[[Page H5406]]
``(1) to foster greater public confidence in securities
research, and to protect the objectivity and independence of
securities analysts, by--
``(A) restricting the prepublication clearance or approval
of research reports by persons employed by the broker or
dealer who are engaged in investment banking activities, or
persons not directly responsible for investment research,
other than legal or compliance staff;
``(B) limiting the supervision and compensatory evaluation
of securities analysts to officials employed by the broker or
dealer who are not engaged in investment banking activities;
and
``(C) requiring that a broker or dealer and persons
employed by a broker or dealer who are involved with
investment banking activities may not, directly or
indirectly, retaliate against or threaten to retaliate
against any securities analyst employed by that broker or
dealer or its affiliates as a result of an adverse, negative,
or otherwise unfavorable research report that may adversely
affect the present or prospective investment banking
relationship of the broker or dealer with the issuer that is
the subject of the research report, except that such rules
may not limit the authority of a broker or dealer to
discipline a securities analyst for causes other than such
research report in accordance with the policies and
procedures of the firm;
``(2) to define periods during which brokers or dealers who
have participated, or are to participate, in a public
offering of securities as underwriters or dealers should not
publish or otherwise distribute research reports relating to
such securities or to the issuer of such securities;
``(3) to establish structural and institutional safeguards
within registered brokers or dealers to assure that
securities analysts are separated by appropriate
informational partitions within the firm from the review,
pressure, or oversight of those whose involvement in
investment banking activities might potentially bias their
judgment or supervision; and
``(4) to address such other issues as the Commission, or
such association or exchange, determines appropriate.
``(b) Disclosure.--The Commission, or upon the
authorization and direction of the Commission, a registered
securities association or national securities exchange, shall
have adopted, not later than 1 year after the date of
enactment of this section, rules reasonably designed to
require each securities analyst to disclose in public
appearances, and each registered broker or dealer to disclose
in each research report, as applicable, conflicts of interest
that are known or should have been known by the securities
analyst or the broker or dealer, to exist at the time of the
appearance or the date of distribution of the report,
including--
``(1) the extent to which the securities analyst has debt
or equity investments in the issuer that is the subject of
the appearance or research report;
``(2) whether any compensation has been received by the
registered broker or dealer, or any affiliate thereof,
including the securities analyst, from the issuer that is the
subject of the appearance or research report, subject to such
exemptions as the Commission may determine appropriate and
necessary to prevent disclosure by virtue of this paragraph
of material non-public information regarding specific
potential future investment banking transactions of such
issuer, as is appropriate in the public interest and
consistent with the protection of investors;
``(3) whether an issuer, the securities of which are
recommended in the appearance or research report, currently
is, or during the 1-year period preceding the date of the
appearance or date of distribution of the report has been, a
client of the registered broker or dealer, and if so, stating
the types of services provided to the issuer;
``(4) whether the securities analyst received compensation
with respect to a research report, based upon (among any
other factors) the investment banking revenues (either
generally or specifically earned from the issuer being
analyzed) of the registered broker or dealer; and
``(5) such other disclosures of conflicts of interest that
are material to investors, research analysts, or the broker
or dealer as the Commission, or such association or exchange,
determines appropriate.
``(c) Definitions.--In this section--
``(1) the term `securities analyst' means any associated
person of a registered broker or dealer that is principally
responsible for, and any associated person who reports
directly or indirectly to a securities analyst in connection
with, the preparation of the substance of a research report,
whether or not any such person has the job title of
`securities analyst'; and
``(2) the term `research report' means a written or
electronic communication that includes an analysis of equity
securities of individual companies or industries, and that
provides information reasonably sufficient upon which to base
an investment decision.''.
(b) Enforcement.--Section 21B(a) of the Securities Exchange
Act of 1934 (15 U.S.C. 78u-2(a)) is amended by inserting
``15D,'' before ``15B''.
(c) Commission Authority.--The Commission may promulgate
and amend its regulations, or direct a registered securities
association or national securities exchange to promulgate and
amend its rules, to carry out section 15D of the Securities
Exchange Act of 1934, as added by this section, as is
necessary for the protection of investors and in the public
interest.
TITLE VI--COMMISSION RESOURCES AND AUTHORITY
SEC. 601. AUTHORIZATION OF APPROPRIATIONS.
Section 35 of the Securities Exchange Act of 1934 (15
U.S.C. 78kk) is amended to read as follows:
``SEC. 35. AUTHORIZATION OF APPROPRIATIONS.
``In addition to any other funds authorized to be
appropriated to the Commission, there are authorized to be
appropriated to carry out the functions, powers, and duties
of the Commission, $776,000,000 for fiscal year 2003, of
which--
``(1) $102,700,000 shall be available to fund additional
compensation, including salaries and benefits, as authorized
in the Investor and Capital Markets Fee Relief Act (Public
Law 107-123; 115 Stat. 2390 et seq.);
``(2) $108,400,000 shall be available for information
technology, security enhancements, and recovery and
mitigation activities in light of the terrorist attacks of
September 11, 2001; and
``(3) $98,000,000 shall be available to add not fewer than
an additional 200 qualified professionals to provide enhanced
oversight of auditors and audit services required by the
Federal securities laws, and to improve Commission
investigative and disciplinary efforts with respect to such
auditors and services, as well as for additional professional
support staff necessary to strengthen the programs of the
Commission involving Full Disclosure and Prevention and
Suppression of Fraud, risk management, industry technology
review, compliance, inspections, examinations, market
regulation, and investment management.''.
SEC. 602. APPEARANCE AND PRACTICE BEFORE THE COMMISSION.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.)
is amended by inserting after section 4B the following:
``SEC. 4C. APPEARANCE AND PRACTICE BEFORE THE COMMISSION.
``(a) Authority To Censure.--The Commission may censure any
person, or deny, temporarily or permanently, to any person
the privilege of appearing or practicing before the
Commission in any way, if that person is found by the
Commission, after notice and opportunity for hearing in the
matter--
``(1) not to possess the requisite qualifications to
represent others;
``(2) to be lacking in character or integrity, or to have
engaged in unethical or improper professional conduct; or
``(3) to have willfully violated, or willfully aided and
abetted the violation of, any provision of the securities
laws or the rules and regulations issued thereunder.
``(b) Definition.--With respect to any registered public
accounting firm or associated person, for purposes of this
section, the term `improper professional conduct' means--
``(1) intentional or knowing conduct, including reckless
conduct, that results in a violation of applicable
professional standards; and
``(2) negligent conduct in the form of--
``(A) a single instance of highly unreasonable conduct that
results in a violation of applicable professional standards
in circumstances in which the registered public accounting
firm or associated person knows, or should know, that
heightened scrutiny is warranted; or
``(B) repeated instances of unreasonable conduct, each
resulting in a violation of applicable professional
standards, that indicate a lack of competence to practice
before the Commission.''.
SEC. 603. FEDERAL COURT AUTHORITY TO IMPOSE PENNY STOCK BARS.
(a) Securities Exchange Act of 1934.--Section 21(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78u(d)), as
amended by this Act, is amended by adding at the end the
following:
``(6) Authority of a court to prohibit persons from
participating in an offering of penny stock.--
``(A) In general.--In any proceeding under paragraph (1)
against any person participating in, or, at the time of the
alleged misconduct who was participating in, an offering of
penny stock, the court may prohibit that person from
participating in an offering of penny stock, conditionally or
unconditionally, and permanently or for such period of time
as the court shall determine.
``(B) Definition.--For purposes of this paragraph, the term
`person participating in an offering of penny stock' includes
any person engaging in activities with a broker, dealer, or
issuer for purposes of issuing, trading, or inducing or
attempting to induce the purchase or sale of, any penny
stock. The Commission may, by rule or regulation, define such
term to include other activities, and may, by rule,
regulation, or order, exempt any person or class of persons,
in whole or in part, conditionally or unconditionally, from
inclusion in such term.''.
(b) Securities Act of 1933.--Section 20 of the Securities
Act of 1933 (15 U.S.C. 77t) is amended by adding at the end
the following:
``(g) Authority of a Court To Prohibit Persons From
Participating in an Offering of Penny Stock.--
``(1) In general.--In any proceeding under subsection (a)
against any person participating in, or, at the time of the
alleged misconduct, who was participating in, an offering of
penny stock, the court may prohibit that person from
participating in an offering of penny stock, conditionally or
unconditionally, and permanently or for such period of time
as the court shall determine.
``(2) Definition.--For purposes of this subsection, the
term `person participating in an offering of penny stock'
includes any person engaging in activities with a broker,
dealer, or issuer for purposes of issuing, trading, or
inducing or attempting to induce the purchase or sale of, any
penny stock. The Commission may, by rule or regulation,
define such term to include other activities, and may, by
rule, regulation, or order, exempt any person or class of
persons, in whole or in part, conditionally or
unconditionally, from inclusion in such term.''.
SEC. 604. QUALIFICATIONS OF ASSOCIATED PERSONS OF BROKERS AND
DEALERS.
(a) Brokers and Dealers.--Section 15(b)(4) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended--
(1) by striking subparagraph (F) and inserting the
following:
``(F) is subject to any order of the Commission barring or
suspending the right of the person to be associated with a
broker or dealer;''; and
[[Page H5407]]
(2) in subparagraph (G), by striking the period at the end
and inserting the following: ``; or
``(H) is subject to any final order of a State securities
commission (or any agency or officer performing like
functions), State authority that supervises or examines
banks, savings associations, or credit unions, State
insurance commission (or any agency or office performing like
functions), an appropriate Federal banking agency (as defined
in section 3 of the Federal Deposit Insurance Act (12 U.S.C.
1813(q))), or the National Credit Union Administration,
that--
``(i) bars such person from association with an entity
regulated by such commission, authority, agency, or officer,
or from engaging in the business of securities, insurance,
banking, savings association activities, or credit union
activities; or
``(ii) constitutes a final order based on violations of any
laws or regulations that prohibit fraudulent, manipulative,
or deceptive conduct.''.
(b) Investment Advisers.--Section 203(e) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-3(e)) is amended--
(1) by striking paragraph (7) and inserting the following:
``(7) is subject to any order of the Commission barring or
suspending the right of the person to be associated with an
investment adviser;'';
(2) in paragraph (8), by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end the following:
``(9) is subject to any final order of a State securities
commission (or any agency or officer performing like
functions), State authority that supervises or examines
banks, savings associations, or credit unions, State
insurance commission (or any agency or office performing like
functions), an appropriate Federal banking agency (as defined
in section 3 of the Federal Deposit Insurance Act (12 U.S.C.
1813(q))), or the National Credit Union Administration,
that--
``(A) bars such person from association with an entity
regulated by such commission, authority, agency, or officer,
or from engaging in the business of securities, insurance,
banking, savings association activities, or credit union
activities; or
``(B) constitutes a final order based on violations of any
laws or regulations that prohibit fraudulent, manipulative,
or deceptive conduct.''.
(c) Conforming Amendments.--
(1) Securities exchange act of 1934.--The Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended--
(A) in section 3(a)(39)(F) (15 U.S.C. 78c(a)(39)(F))--
(i) by striking ``or (G)'' and inserting ``(H), or (G)'';
and
(ii) by inserting ``, or is subject to an order or
finding,'' before ``enumerated'';
(B) in each of section 15(b)(6)(A)(i) (15 U.S.C.
78o(b)(6)(A)(i)), paragraphs (2) and (4) of section 15B(c)
(15 U.S.C. 78o-4(c)), and subparagraphs (A) and (C) of
section 15C(c)(1) (15 U.S.C. 78o-5(c)(1))--
(i) by striking ``or (G)'' each place that term appears and
inserting ``(H), or (G)''; and
(ii) by striking ``or omission'' each place that term
appears, and inserting ``, or is subject to an order or
finding,''; and
(C) in each of paragraphs (3)(A) and (4)(C) of section
17A(c) (15 U.S.C. 78q-1(c))--
(i) by striking ``or (G)'' each place that term appears and
inserting ``(H), or (G)''; and
(ii) by inserting ``, or is subject to an order or
finding,'' before ``enumerated'' each place that term
appears.
(2) Investment advisers act of 1940.--Section 203(f) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-3(f)) is
amended--
(A) by striking ``or (8)'' and inserting ``(8), or (9)'';
and
(B) by inserting ``or (3)'' after ``paragraph (2)''.
TITLE VII--STUDIES AND REPORTS
SEC. 701. GAO STUDY AND REPORT REGARDING CONSOLIDATION OF
PUBLIC ACCOUNTING FIRMS.
(a) Study Required.--The Comptroller General of the United
States shall conduct a study--
(1) to identify--
(A) the factors that have led to the consolidation of
public accounting firms since 1989 and the consequent
reduction in the number of firms capable of providing audit
services to large national and multi-national business
organizations that are subject to the securities laws;
(B) the present and future impact of the condition
described in subparagraph (A) on capital formation and
securities markets, both domestic and international; and
(C) solutions to any problems identified under subparagraph
(B), including ways to increase competition and the number of
firms capable of providing audit services to large national
and multinational business organizations that are subject to
the securities laws;
(2) of the problems, if any, faced by business
organizations that have resulted from limited competition
among public accounting firms, including--
(A) higher costs;
(B) lower quality of services;
(C) impairment of auditor independence; or
(D) lack of choice; and
(3) whether and to what extent Federal or State regulations
impede competition among public accounting firms.
(b) Consultation.--In planning and conducting the study
under this section, the Comptroller General shall consult
with--
(1) the Commission;
(2) the regulatory agencies that perform functions similar
to the Commission within the other member countries of the
Group of Seven Industrialized Nations;
(3) the Department of Justice; and
(4) any other public or private sector organization that
the Comptroller General considers appropriate.
(c) Report Required.--Not later than 1 year after the date
of enactment of this Act, the Comptroller General shall
submit a report on the results of the study required by this
section to the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Financial Services
of the House of Representatives.
SEC. 702. COMMISSION STUDY AND REPORT REGARDING CREDIT RATING
AGENCIES.
(a) Study Required.--
(1) In general.--The Commission shall conduct a study of
the role and function of credit rating agencies in the
operation of the securities market.
(2) Areas of consideration.--The study required by this
subsection shall examine--
(A) the role of credit rating agencies in the evaluation of
issuers of securities;
(B) the importance of that role to investors and the
functioning of the securities markets;
(C) any impediments to the accurate appraisal by credit
rating agencies of the financial resources and risks of
issuers of securities;
(D) any barriers to entry into the business of acting as a
credit rating agency, and any measures needed to remove such
barriers;
(E) any measures which may be required to improve the
dissemination of information concerning such resources and
risks when credit rating agencies announce credit ratings;
and
(F) any conflicts of interest in the operation of credit
rating agencies and measures to prevent such conflicts or
ameliorate the consequences of such conflicts.
(b) Report Required.--The Commission shall submit a report
on the study required by subsection (a) to the President, the
Committee on Financial Services of the House of
Representatives, and the Committee on Banking, Housing, and
Urban Affairs of the Senate not later than 180 days after the
date of enactment of this Act.
SEC. 703. STUDY AND REPORT ON VIOLATORS AND VIOLATIONS.
(a) Study.--The Commission shall conduct a study to
determine, based upon information for the period from January
1, 1998, to December 31, 2001--
(1) the number of securities professionals, defined as
public accountants, public accounting firms, investment
bankers, investment advisers, brokers, dealers, attorneys,
and other securities professionals practicing before the
Commission--
(A) who have been found to have aided and abetted a
violation of the Federal securities laws, including rules or
regulations promulgated thereunder (collectively referred to
in this section as ``Federal securities laws''), but who have
not been sanctioned, disciplined, or otherwise penalized as a
primary violator in any administrative action or civil
proceeding, including in any settlement of such an action or
proceeding (referred to in this section as ``aiders and
abettors''); and
(B) who have been found to have been primary violators of
the Federal securities laws;
(2) a description of the Federal securities laws violations
committed by aiders and abettors and by primary violators,
including--
(A) the specific provision of the Federal securities laws
violated;
(B) the specific sanctions and penalties imposed upon such
aiders and abettors and primary violators, including the
amount of any monetary penalties assessed upon and collected
from such persons;
(C) the occurrence of multiple violations by the same
person or persons, either as an aider or abettor or as a
primary violator; and
(D) whether, as to each such violator, disciplinary
sanctions have been imposed, including any censure,
suspension, temporary bar, or permanent bar to practice
before the Commission; and
(3) the amount of disgorgement, restitution, or any other
fines or payments that the Commission has assessed upon and
collected from, aiders and abettors and from primary
violators.
(b) Report.--A report based upon the study conducted
pursuant to subsection (a) shall be submitted to the
Committee on Banking, Housing, and Urban Affairs of the
Senate, and the Committee on Financial Services of the House
of Representatives not later than 6 months after the date of
enactment of this Act.
SEC. 704. STUDY OF ENFORCEMENT ACTIONS.
(a) Study Required.--The Commission shall review and
analyze all enforcement actions by the Commission involving
violations of reporting requirements imposed under the
securities laws, and restatements of financial statements,
over the 5-year period preceding the date of enactment of
this Act, to identify areas of reporting that are most
susceptible to fraud, inappropriate manipulation, or
inappropriate earnings management, such as revenue
recognition and the accounting treatment of off-balance sheet
special purpose entities.
(b) Report Required.--The Commission shall report its
findings to the Committee on Financial Services of the House
of Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate, not later than 180 days after
the date of enactment of this Act, and shall use such
findings to revise its rules and regulations, as necessary.
The report shall include a discussion of regulatory or
legislative steps that are recommended or that may be
necessary to address concerns identified in the study.
SEC. 705. STUDY OF INVESTMENT BANKS.
(a) GAO Study.--The Comptroller General of the United
States shall conduct a study on whether investment banks and
financial advisers assisted public companies in manipulating
their earnings and obfuscating their true financial
condition. The study should address the
[[Page H5408]]
rule of investment banks and financial advisers--
(1) in the collapse of the Enron Corporation, including
with respect to the design and implementation of derivatives
transactions, transactions involving special purpose
vehicles, and other financial arrangements that may have had
the effect of altering the company's reported financial
statements in ways that obscured the true financial picture
of the company;
(2) in the failure of Global Crossing, including with
respect to transactions involving swaps of fiberoptic cable
capacity, in the designing transactions that may have had the
effect of altering the company's reported financial
statements in ways that obscured the true financial picture
of the company; and
(3) generally, in creating and marketing transactions which
may have been designed solely to enable companies to
manipulate revenue streams, obtain loans, or move liabilities
off balance sheets without altering the economic and business
risks faced by the companies or any other mechanism to
obscure a company's financial picture.
(b) Report.--The Comptroller General shall report to
Congress not later than 180 days after the date of enactment
of this Act on the results of the study required by this
section. The report shall include a discussion of regulatory
or legislative steps that are recommended or that may be
necessary to address concerns identified in the study.
TITLE VIII--CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY
SEC. 801. SHORT TITLE.
This title may be cited as the ``Corporate and Criminal
Fraud Accountability Act of 2002''.
SEC. 802. CRIMINAL PENALTIES FOR ALTERING DOCUMENTS.
(a) In General.--Chapter 73 of title 18, United States
Code, is amended by adding at the end the following:
``Sec. 1519. Destruction, alteration, or falsification of
records in Federal investigations and bankruptcy
``Whoever knowingly alters, destroys, mutilates, conceals,
covers up, falsifies, or makes a false entry in any record,
document, or tangible object with the intent to impede,
obstruct, or influence the investigation or proper
administration of any matter within the jurisdiction of any
department or agency of the United States or any case filed
under title 11, or in relation to or contemplation of any
such matter or case, shall be fined under this title,
imprisoned not more than 20 years, or both.
``Sec. 1520. Destruction of corporate audit records
``(a)(1) Any accountant who conducts an audit of an issuer
of securities to which section 10A(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78j-1(a)) applies, shall
maintain all audit or review workpapers for a period of 5
years from the end of the fiscal period in which the audit or
review was concluded.
``(2) The Securities and Exchange Commission shall
promulgate, within 180 days, after adequate notice and an
opportunity for comment, such rules and regulations, as are
reasonably necessary, relating to the retention of relevant
records such as workpapers, documents that form the basis of
an audit or review, memoranda, correspondence,
communications, other documents, and records (including
electronic records) which are created, sent, or received in
connection with an audit or review and contain conclusions,
opinions, analyses, or financial data relating to such an
audit or review, which is conducted by any accountant who
conducts an audit of an issuer of securities to which
section 10A(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78j-1(a)) applies. The Commission may, from time to
time, amend or supplement the rules and regulations that
it is required to promulgate under this section, after
adequate notice and an opportunity for comment, in order
to ensure that such rules and regulations adequately
comport with the purposes of this section.
``(b) Whoever knowingly and willfully violates subsection
(a)(1), or any rule or regulation promulgated by the
Securities and Exchange Commission under subsection (a)(2),
shall be fined under this title, imprisoned not more than 10
years, or both.
``(c) Nothing in this section shall be deemed to diminish
or relieve any person of any other duty or obligation imposed
by Federal or State law or regulation to maintain, or refrain
from destroying, any document.''.
(b) Clerical Amendment.--The table of sections at the
beginning of chapter 73 of title 18, United States Code, is
amended by adding at the end the following new items:
``1519. Destruction, alteration, or falsification of records in Federal
investigations and bankruptcy.
``1520. Destruction of corporate audit records.''.
SEC. 803. DEBTS NONDISCHARGEABLE IF INCURRED IN VIOLATION OF
SECURITIES FRAUD LAWS.
Section 523(a) of title 11, United States Code, is
amended--
(1) in paragraph (17), by striking ``or'' after the
semicolon;
(2) in paragraph (18), by striking the period at the end
and inserting ``; or''; and
(3) by adding at the end, the following:
``(19) that--
``(A) is for--
``(i) the violation of any of the Federal securities laws
(as that term is defined in section 3(a)(47) of the
Securities Exchange Act of 1934), any of the State securities
laws, or any regulation or order issued under such Federal or
State securities laws; or
``(ii) common law fraud, deceit, or manipulation in
connection with the purchase or sale of any security; and
``(B) results from--
``(i) any judgment, order, consent order, or decree entered
in any Federal or State judicial or administrative
proceeding;
``(ii) any settlement agreement entered into by the debtor;
or
``(iii) any court or administrative order for any damages,
fine, penalty, citation, restitutionary payment, disgorgement
payment, attorney fee, cost, or other payment owed by the
debtor.''.
SEC. 804. STATUTE OF LIMITATIONS FOR SECURITIES FRAUD.
(a) In General.--Section 1658 of title 28, United States
Code, is amended--
(1) by inserting ``(a)'' before ``Except''; and
(2) by adding at the end the following:
``(b) Notwithstanding subsection (a), a private right of
action that involves a claim of fraud, deceit, manipulation,
or contrivance in contravention of a regulatory requirement
concerning the securities laws, as defined in section
3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(47)), may be brought not later than the earlier of--
``(1) 2 years after the discovery of the facts constituting
the violation; or
``(2) 5 years after such violation.''.
(b) Effective Date.--The limitations period provided by
section 1658(b) of title 28, United States Code, as added by
this section, shall apply to all proceedings addressed by
this section that are commenced on or after the date of
enactment of this Act.
(c) No Creation of Actions.--Nothing in this section shall
create a new, private right of action.
SEC. 805. REVIEW OF FEDERAL SENTENCING GUIDELINES FOR
OBSTRUCTION OF JUSTICE AND EXTENSIVE CRIMINAL
FRAUD.
(a) Enhancement of Fraud and Obstruction of Justice
Sentences.--Pursuant to section 994 of title 28, United
States Code, and in accordance with this section, the United
States Sentencing Commission shall review and amend, as
appropriate, the Federal Sentencing Guidelines and related
policy statements to ensure that--
(1) the base offense level and existing enhancements
contained in United States Sentencing Guideline 2J1.2
relating to obstruction of justice are sufficient to deter
and punish that activity;
(2) the enhancements and specific offense characteristics
relating to obstruction of justice are adequate in cases
where--
(A) the destruction, alteration, or fabrication of evidence
involves--
(i) a large amount of evidence, a large number of
participants, or is otherwise extensive;
(ii) the selection of evidence that is particularly
probative or essential to the investigation; or
(iii) more than minimal planning; or
(B) the offense involved abuse of a special skill or a
position of trust;
(3) the guideline offense levels and enhancements for
violations of section 1519 or 1520 of title 18, United States
Code, as added by this title, are sufficient to deter and
punish that activity;
(4) a specific offense characteristic enhancing sentencing
is provided under United States Sentencing Guideline 2B1.1
(as in effect on the date of enactment of this Act) for a
fraud offense that endangers the solvency or financial
security of a substantial number of victims; and
(5) the guidelines that apply to organizations in United
States Sentencing Guidelines, chapter 8, are sufficient to
deter and punish organizational criminal misconduct.
(b) Emergency Authority and Deadline for Commission
Action.--The United States Sentencing Commission is requested
to promulgate the guidelines or amendments provided for under
this section as soon as practicable, and in any event not
later than 180 days after the date of enactment of this Act,
in accordance with the prcedures set forth in section 219(a)
of the Sentencing Reform Act of 1987, as though the authority
under that Act had not expired.
SEC. 806. PROTECTION FOR EMPLOYEES OF PUBLICLY TRADED
COMPANIES WHO PROVIDE EVIDENCE OF FRAUD.
(a) In General.--Chapter 73 of title 18, United States
Code, is amended by inserting after section 1514 the
following:
``Sec. 1514A. Civil action to protect against retaliation in
fraud cases
``(a) Whistleblower Protection for Employees of Publicly
Traded Companies.--No company with a class of securities
registered under section 12 of the Securities Exchange Act of
1934 (15 U.S.C. 78l), or that is required to file reports
under section 15(d) of the Securities Exchange Act of 1934
(15 U.S.C. 78o(d)), or any officer, employee, contractor,
subcontractor, or agent of such company, may discharge,
demote, suspend, threaten, harass, or in any other manner
discriminate against an employee in the terms and conditions
of employment because of any lawful act done by the
employee--
``(1) to provide information, cause information to be
provided, or otherwise assist in an investigation regarding
any conduct which the employee reasonably believes
constitutes a violation of section 1341, 1343, 1344, or 1348,
any rule or regulation of the Securities and Exchange
Commission, or any provision of Federal law relating to fraud
against shareholders, when the information or assistance is
provided to or the investigation is conducted by--
``(A) a Federal regulatory or law enforcement agency;
``(B) any Member of Congress or any committee of Congress;
or
``(C) a person with supervisory authority over the employee
(or such other person working for the employer who has the
authority to investigate, discover, or terminate misconduct);
or
[[Page H5409]]
``(2) to file, cause to be filed, testify, participate in,
or otherwise assist in a proceeding filed or about to be
filed (with any knowledge of the employer) relating to an
alleged violation of section 1341, 1343, 1344, or 1348, any
rule or regulation of the Securities and Exchange Commission,
or any provision of Federal law relating to fraud against
shareholders.
``(b) Enforcement Action.--
``(1) In general.--A person who alleges discharge or other
discrimination by any person in violation of subsection (a)
may seek relief under subsection (c), by--
``(A) filing a complaint with the Secretary of Labor; or
``(B) if the Secretary has not issued a final decision
within 180 days of the filing of the complaint and there is
no showing that such delay is due to the bad faith of the
claimant, bringing an action at law or equity for de novo
review in the appropriate district court of the United
States, which shall have jurisdiction over such an action
without regard to the amount in controversy.
``(2) Procedure.--
``(A) In general.--An action under paragraph (1)(A) shall
be governed under the rules and procedures set forth in
section 42121(b) of title 49, United States Code.
``(B) Exception.--Notification made under section
42121(b)(1) of title 49, United States Code, shall be made to
the person named in the complaint and to the employer.
``(C) Burdens of proof.--An action brought under paragraph
(1)(B) shall be governed by the legal burdens of proof set
forth in section 42121(b) of title 49, United States Code.
``(D) Statute of limitations.--An action under paragraph
(1) shall be commenced not later than 90 days after the date
on which the violation occurs.
``(c) Remedies.--
``(1) In general.--An employee prevailing in any action
under subsection (b)(1) shall be entitled to all relief
necessary to make the employee whole.
``(2) Compensatory damages.--Relief for any action under
paragraph (1) shall include--
``(A) reinstatement with the same seniority status that the
employee would have had, but for the discrimination;
``(B) the amount of back pay, with interest; and
``(C) compensation for any special damages sustained as a
result of the discrimination, including litigation costs,
expert witness fees, and reasonable attorney fees.
``(d) Rights Retained by Employee.--Nothing in this section
shall be deemed to diminish the rights, privileges, or
remedies of any employee under any Federal or State law, or
under any collective bargaining agreement.''.
(b) Clerical Amendment.--The table of sections at the
beginning of chapter 73 of title 18, United States Code, is
amended by inserting after the item relating to section 1514
the following new item:
``1514A. Civil action to protect against retaliation in fraud cases.''.
SEC. 807. CRIMINAL PENALTIES FOR DEFRAUDING SHAREHOLDERS OF
PUBLICLY TRADED COMPANIES.
(a) In General.--Chapter 63 of title 18, United States
Code, is amended by adding at the end the following:
``Sec. 1348. Securities fraud
``Whoever knowingly executes, or attempts to execute, a
scheme or artifice--
``(1) to defraud any person in connection with any security
of an issuer with a class of securities registered under
section 12 of the Securities Exchange Act of 1934 (15 U.S.C.
78l) or that is required to file reports under section 15(d)
of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)); or
``(2) to obtain, by means of false or fraudulent pretenses,
representations, or promises, any money or property in
connection with the purchase or sale of any security of an
issuer with a class of securities registered under section 12
of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or
that is required to file reports under section 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o(d));
shall be fined under this title, or imprisoned not more than
25 years, or both.''.
(b) Clerical Amendment.--The table of sections at the
beginning of chapter 63 of title 18, United States Code, is
amended by adding at the end the following new item:
``1348. Securities fraud.''.
TITLE IX--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS
SEC. 901. SHORT TITLE.
This title may be cited as the ``White-Collar Crime Penalty
Enhancement Act of 2002''.
SEC. 902. ATTEMPTS AND CONSPIRACIES TO COMMIT CRIMINAL FRAUD
OFFENSES.
(a) In General.--Chapter 63 of title 18, United States
Code, is amended by inserting after section 1348 as added by
this Act the following:
``Sec. 1349. Attempt and conspiracy
``Any person who attempts or conspires to commit any
offense under this chapter shall be subject to the same
penalties as those prescribed for the offense, the commission
of which was the object of the attempt or conspiracy.
(b) Clerical Amendment.--The table of sections at the
beginning of chapter 63 of title 18, United States Code, is
amended by adding at the end the following new item:
``1349. Attempt and conspiracy.''.
SEC. 903. CRIMINAL PENALTIES FOR MAIL AND WIRE FRAUD.
(a) Mail Fraud.--Section 1341 of title 18, United States
Code, is amended by striking ``five'' and inserting ``20''.
(b) Wire Fraud.--Section 1343 of title 18, United States
Code, is amended by striking ``five'' and inserting ``20''.
SEC. 904. CRIMINAL PENALTIES FOR VIOLATIONS OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974.
Section 501 of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1131) is amended--
(1) by striking ``$5,000'' and inserting ``$100,000'';
(1) by striking ``one year'' and inserting ``10 years'';
and
(3) by striking ``$100,000'' and inserting ``$500,000''.
SEC. 905. AMENDMENT TO SENTENCING GUIDELINES RELATING TO
CERTAIN WHITE-COLLAR OFFENSES.
(a) Directive to the United States Sentencing Commission.--
Pursuant to its authority under section 994(p) of title 18,
United States Code, and in accordance with this section, the
United States Sentencing Commission shall review and, as
appropriate, amend the Federal Sentencing Guidelines and
related policy statements to implement the provisions of this
Act.
(b) Requirements.--In carrying out this section, the
Sentencing Commission shall--
(1) ensure that the sentencing guidelines and policy
statements reflect the serious nature of the offenses and the
penalties set forth in this Act, the growing incidence of
serious fraud offenses which are identified above, and the
need to modify the sentencing guidelines and policy
statements to deter, prevent, and punish such offenses;
(2) consider the extent to which the guidelines and policy
statements adequately address whether the guideline offense
levels and enhancements for violations of the sections
amended by this Act are sufficient to deter and punish such
offenses, and specifically, are adequate in view of the
statutory increases in penalties contained in this Act;
(3) assure reasonable consistency with other relevant
directives and sentencing guidelines;
(4) account for any additional aggravating or mitigating
circumstances that might justify exceptions to the generally
applicable sentencing ranges;
(5) make any necessary conforming changes to the sentencing
guidelines; and
(6) assure that the guidelines adequately meet the purposes
of sentencing, as set forth in section 3553(a)(2) of title
18, United States Code.
(c) Emergency Authority and Deadline for Commission
Action.--The United States Sentencing Commission is requested
to promulgate the guidelines or amendments provided for under
this section as soon as practicable, and in any event not
later than 180 days after the date of enactment of this Act,
in accordance with the procedures set forth in section 219(a)
of the Sentencing Reform Act of 1987, as though the authority
under that Act had not expired.
SEC. 906. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.
(a) In General.--Chapter 63 of title 18, United States
Code, is amended by inserting after section 1349, as created
by this Act, the following:
``Sec. 1350. Failure of corporate officers to certify
financial reports
(a) Certification of Periodic Financial Reports.--Each
periodic report containing financial statements filed by an
issuer with the Securities Exchange Commission pursuant to
section 13(a) or 15(d) of the Securities Exchange Act of 1934
(15 U.S.C. 78m(a) or 78o(d)) shall be accompanied by a
written statement by the chief executive officer and chief
financial officer (or equivalent thereof) of the issuer.
``(b) Content.--The statement required under subsection (a)
shall certify that the periodic report containing the
financial statements fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act pf 1934
(15 U.S.C. 78m or 78o(d)) and that information contained in
the periodic report fairly presents, in all material
respects, the financial condition and results of operations
of the issuer.
``(c) Criminal Penalties.--Whoever--
``(1) certifies any statement as set forth in subsections
(a) and (b) of this section knowing that the periodic report
accompanying the statement does not comport with all the
requirements set forth in this section shall be fined not
more than $1,000,000 or imprisoned not more than 10 years, or
both; or
``(2) willfully certifies any statement as set forth in
subsections (a) and (b) of this section knowing that the
periodic report accompanying the statement does not comport
with all the requirements set forth in this section shall be
fined not more than $5,000,000, or imprisoned not more than
20 years, or both.''.
(b) Clerical Amendment.--The table of sections at the
beginning of chapter 63 of title 18, United States Code, is
amended by adding at the end the following:
``1350. Failure of corporate officers to certify financial reports.''.
TITLE X--CORPORATE TAX RETURNS
SEC. 1001. SENSE OF THE SENATE REGARDING THE SIGNING OF
CORPORATE TAX RETURNS BY CHIEF EXECUTIVE
OFFICERS.
It is the sense of the Senate that the Federal income tax
return of a corporation should be signed by the chief
executive officer of such corporation.
TITLE XI--CORPORATE FRAUD ACCOUNTABILITY
SEC. 1101. SHORT TITLE.
This title may be cited as the ``Corporate Fraud
Accountability Act of 2002''.
SEC. 1102. TAMPERING WITH A RECORD OR OTHERWISE IMPEDING AN
OFFICIAL PROCEEDING.
Section 1512 of title 18, United States Code, is amended--
[[Page H5410]]
(1) by redesignating subsections (c) through (i) as
subsections (d) through (j), respectively; and
(2) by inserting after subsection (b) the following new
subsection:
``(c) Whoever corruptly--
``(1) alters, destroys, mutilates, or conceals a record,
document, or other object, or attempts to do so, with the
intent to impair the object's integrity or availability for
use in an official proceeding; or
``(2) otherwise obstructs, influences, or impedes any
official proceeding, or attempts to do so,
shall be fined under this title or imprisoned not more than
20 years, or both.''.
SEC. 1103. TEMPORARY FREEZE AUTHORITY FOR THE SECURITIES AND
EXCHANGE COMMISSION.
(a) In General.--Section 21C(c) of the Securities Exchange
Act of 1934 (15 U.S.C. 78u-3(c)) is amended by adding at the
end the following:
``(3) Temporary freeze.--
``(A) In general.--
``(i) Issuance of temporary order.--Whenever, during the
course of a lawful investigation involving possible
violations of the Federal securities laws by an issuer of
publicly traded securities or any of its directors, officers,
partners, controlling persons, agents, or employees, it shall
appear to the Commission that it is likely that the issuer
will make extraordinary payments (whether compensation or
otherwise) to any of the foregoing persons, the Commission
may petition a Federal district court for a temporary order
requiring the issuer to escrow, subject to court supervision,
those payments in an interest-bearing account for 45 days.
``(ii) Standard.--A temporary order shall be entered under
clause (i), only after notice and opportunity for a hearing,
unless the court determines that notice and hearing prior to
entry of the order would be impracticable or contrary to the
public interest.
``(iii) Effective period.--A temporary order issued under
clause (i) shall--
``(I) become effective immediately;
``(II) be served upon the parties subject to it; and
``(III) unless set aside, limited or suspended by a court
of competent jurisdiction, shall remain effective and
enforceable for 45 days.
``(iv) Extensions authorized.--The effective period of an
order under this subparagraph may be extended by the court
upon good cause shown for not longer than 45 additional days,
provided that the combined period of the order shall not
exceed 90 days.
``(B) Process on Determination of violations.--
``(i) Violations charged.--If the issuer or other person
described in subparagraph (A) is charged with any violation
of the Federal securities laws before the expiration of the
effective period of a temporary order under subparagraph (A)
(including any applicable extension period), the order shall
remain in effect, subject to court approval, until the
conclusion of any legal proceedings related thereto, and the
affected issuer or other person, shall have the right to
petition the court for review of the order.
``(ii) Violations not charged.--If the issuer or other
person described in subparagraph (A) is not charged with any
violation of the Federal securities laws before the
expiration of the effective period of a temporary order under
subparagraph (A) (including any applicable extension period),
the escrow shall terminate at the expiration of the 45-day
effective period (or the expiration of any extension
period, as applicable), and the disputed payments (with
accrued interest) shall be returned to the issuer or other
affected person.''.
(b) Technical Amendment.--Section 21C(c)(2) of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) is
amended by striking ``This'' and inserting ``paragraph (1)''.
SEC. 1104. AMENDMENT TO THE FEDERAL SENTENCING GUIDELINES.
(a) Request for Immediate Consideration by The United
States Sentencing Commission.--Pursuant to its authority
under section 994(p) of title 28, United States Code, and in
accordance with this section, the United States Sentencing
Commission is requested to--
(1) promptly review the sentencing guidelines applicable to
securities and accounting fraud and related offenses;
(2) expeditiously consider the promulgation of new
sentencing guidelines or amendments to existing sentencing
guidelines to provide an enhancement for officers or
directors of publicly traded corporations who commit fraud
and related offenses; and
(3) submit to Congress an explanation of actions taken by
the Sentencing Commission pursuant to paragraph (2) and any
additional policy recommendations the Sentencing Commission
may have for combating offenses described in paragraph (1).
(b) Considerations in Review.--In carrying out this
section, the Sentencing Commission is requested to--
(1) ensure that the sentencing guidelines and policy
statements reflect the serious nature of securities, pension,
and accounting fraud and the need for aggressive and
appropriate law enforcement action to prevent such offenses;
(2) assure reasonable consistency with other relevant
directives and with other guidelines;
(3) account for any aggravating or mitigating circumstances
that might justify exceptions, including circumstances for
which the sentencing guidelines currently provide sentencing
enhancements;
(4) ensure that guideline offense levels and enhancements
for an obstruction of justice offense are adequate in cases
where documents or other physical evidence are actually
destroyed or fabricated;
(5) ensure that the guideline offense levels and
enhancements under United States Sentencing Guideline 2B1.1
(as in effect on the date of enactment of this Act) are
sufficient for a fraud offense when the number of victims
adversely involved is significantly greater than 50;
(6) make any necessary conforming changes to the sentencing
guidelines; and
(7) assure that the guidelines adequately meet the purposes
of sentencing as set forth in section 3553 (a)(2) of title
18, United States Code.
(c) Emergency Authority and Deadline For Commission
Action.--The United States Sentencing Commission is requested
to promulgate the guidelines or amendments provided for under
this section as soon as practicable, and in any event not
later than the 180 days after the date of enactment of this
Act, in accordance with the procedures sent forth in section
21(a) of the Sentencing Reform Act of 1987, as though the
authority under that Act had not expired.
SEC. 1105. AUTHORITY OF THE COMMISSION TO PROHIBIT PERSONS
FROM SERVING AS OFFICERS OR DIRECTORS.
(a) Securities Exchange Act of 1934.--Section 21C of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-3) is amended
by adding at the end the following:
``(f) Authority of the Commission to Prohibit Persons From
Serving as Officers or Directors.--In any cease-and-desist
proceeding under subsection (a), the Commission may issue an
order to prohibit, conditionally or unconditionally, and
permanently or for such period of time as it shall determine,
any person who has violated section 10(b) or the rules or
regulations thereunder, from acting as an officer or director
of any issuer that has a class of securities registered
pursuant to section 12, or that is required to file reports
pursuant to section 15(d), if the conduct of that person
demonstrates unfitness to serve as an officer or director of
any such issuer.''.
(b) Securities Act of 1933.--Section 8A of the Securities
Act of 1933 (15 U.S.C. 77h-1) is amended by adding at the end
of the following:
``(f) Authority of the Commission to Prohibit Persons From
Serving as Officers or Directors.--In any cease-and-desist
proceeding under subsection (a), the Commission may issue an
order to prohibit, conditionally or unconditionally, and
permanently or for such period of time as it shall determine,
any person who has violated section 17(a)(1) or the rules or
regulations thereunder, from acting as an officer or director
of any issuer that has a class of securities registered
pursuant to section 12 of the Securities Exchange Act of
1934, or that is required to file reports pursuant to section
15(d) of that Act, if the conduct of that person demonstrates
unfitness to serve as an officer or director of any such
issuer.''.
SEC. 1106. INCREASED CRIMINAL PENALTIES UNDER SECURITIES
EXCHANGE ACT OF 1934.
Section 32(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78ff(a)) is amended--
(1) by striking ``$1,000,000, or imprisoned not more than
10 years'' and inserting ``$5,000,000, or imprisoned not more
than 20 years''; and
(2) by striking ``$2,500,000'' and inserting
``$25,000,000''.
SEC. 1107. RETALIATION AGAINST INFORMANTS.
(a) In General.--Section 1513 of title 18, United States
Code, is amended by adding at the end the following:
``(e) Whoever knowingly, with the intent to retaliate,
takes any action harmful to any person, including
interference with the lawful employment or livelihood of any
person, for providing to a law enforcement officer any
truthful information relating to the commission or possible
commission of any Federal offense, shall be fined under this
title or imprisoned not more than 10 years, or both.''.
And the Senate agree to the same.
From the Committee on Financial Services, for consideration
of the House bill and the Senate amendments, and
modifications committed to conference:
Michael G. Oxley,
Richard H. Baker,
Ed Royce,
Robert W. Ney,
Sue W. Kelly,
Chris Cox,
John J. LaFalce,
Barney Frank,
Paul E. Kanjorski,
Maxine Waters,
Provided that Mr. Shows is appointed in lieu of Ms. Waters
for consideration of section 11 of the House bill and section
305 of the Senate amendment, and modifications committed to
conference:
Ronnie Shows,
From the Committee on Education and the Workforce, for
consideration of sections 306 and 904 of the Senate
amendment, and modifications committed to conference:
John Boehner,
Sam Johnson,
George Miller,
From the Committee on Energy and Commerce, for consideration
of sections 108 and 109 of the Senate amendment, and
modifications committed to conference:
Billy Tauzin,
James Greenwood,
John D. Dingell,
From the Committee on the Judiciary, for consideration of
section 105 and titles VIII and IX of the Senate amendment,
and modifications committed to conference:
F. James Sensenbrenner,
Lamar Smith,
John Conyers,
From the Committee on Ways and Means, for consideration of
section 109 of the Senate amendment, and modifications
committed to conference:
William Thomas,
Jim McCrery,
Charles b. Rangel,
Managers on the Part of the House.
Paul Sarbanes,
[[Page H5411]]
Christopher Dodd,
Tim Johnson,
Jack Reed,
Patrick J. Leahy,
Richard C. Shelby,
Robert F. Bennett,
Michael B. Enzi,
Managers on the Part of the Senate.
JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE
The managers on the part of the House and the Senate at the
conference on the disagreeing votes of the two Houses on the
amendment of the Senate to the bill (H.R. 3763), to protect
investors by improving the accuracy and reliability of
corporate disclosures made pursuant to the securities laws,
and for other purposes, submit the following joint statement
to the House and the Senate in explanation of the effect of
the action agreed upon by the managers and recommended in the
accompanying conference report:
The Senate amendment struck all of the House bill after the
enacting clause and inserted a substitute text.
The House recedes from its disagreement to the amendment of
the Senate with an amendment that is a substitute for the
House bill and the Senate amendment. The differences between
the House bill, the Senate amendment, and the substitute
agreed to in conference are noted below, except for clerical
corrections, conforming changes made necessary by agreements
reached by the conferees, and minor drafting and clerical
changes.
The Managers on the part of the House and the Senate met on
July 19 and July 24, 2002 (the House chairing), and
reconciled the differences between the House bill and the
Senate amendment.
From the Committee on Financial Services, for consideration
of the House bill and the Senate amendments, and
modifications committed to conference:
Michael G. Oxley,
Richard H. Baker,
Ed Royce,
Robert W. Ney,
Sue W. Kelly,
Chris Cox,
John J. LaFalce,
Barney Frank,
Paul E. Kanjorski,
Maxine Waters,
Provided that Mr. Shows is appointed in lieu of Ms. Waters
for consideration of section 11 of the House bill and section
305 of the Senate amendment, and modifications committed to
conference:
Ronnie Shows,
From the Committee on Education and the Workforce, for
consideration of sections 306 and 904 of the Senate
amendment, and modifications committed to conference:
John Boehner,
Sam Johnson,
George Miller,
From the Committee on Energy and Commerce, for consideration
of sections 108 and 109 of the Senate amendment, and
modifications committed to conference:
Billy Tauzin,
James Greenwood,
John d. Dingell,
From the Committee on the Judiciary, for consideration of
section 105 and titles VIII and IX of the Senate amendment,
and modifications committed to conference:
F. James Sensenbrenner,
Lamar Smith,
John Conyers,
From the Committee on Ways and Means, for consideration of
section 109 of the Senate amendment, and modifications
committed to conference:
William Thomas,
Jim McCrery,
Charles B. Rangel,
Managers on the Part of the House.
Paul Sarbanes,
Christopher Dodd,
Tim Johnson,
Jack Reed,
Patrick J. Leahy,
Richard C. Shelby,
Robert F. Bennett,
Michael B. Enzi,
Managers on the Part of the Senate.