[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.