[Congressional Record Volume 148, Number 103 (Thursday, July 25, 2002)]
[House]
[Pages H5462-H5480]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CONFERENCE REPORT ON H.R. 3763, SARBANES-OXLEY ACT OF 2002
Mr. OXLEY. Mr. Speaker, pursuant to the previous order of the House
of July 24, 2002, I call up the conference report 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.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to the order of the House of the
legislative day of Wednesday, July 24, 2002, the conference report is
considered read.
(For conference report and statement, see proceedings of the House of
July 24, 2002 at page H5393.)
The SPEAKER pro tempore. The gentleman from Ohio and the gentleman
from New York (Mr. LaFalce) each will control 30 minutes.
The Chair recognizes the gentleman from Ohio (Mr. Oxley).
Mr. OXLEY. Mr. Speaker, I yield myself 5 minutes.
Mr. Speaker, I bring to the floor today a tough, sensible conference
report that responds in a measured way to the very real crisis of
confidence among America's 85 million investors. I am proud of the
result we have reached. We act with the assurance that Congress must do
something, yet remain acutely aware of the dangers of overreacting to a
genuine problem and making matters worse.
Make no mistake, this is a difficult period for those who love and
cherish the free enterprise system. Since early 2000, our capital
markets, although still the most respected in the world, have
unquestionably suffered a series of blows--mostly self-inflicted--which
have truly damaged the public's faith in the integrity of corporate
America. The Committee on Financial Services, and this body, have not
sat idly by, however. Indeed, in response to Enron, Global Crossing and
other bankruptcies, my committee was the first out of the gate, holding
a series of hearings and passing a good, targeted bill on the House
floor in April with the support of 119 of my Democratic colleagues.
Nearly 3 months would go by before the Senate passed companion
legislation.
The Senate built on the House bill's chief objectives, strong
oversight of accountants, increased corporate responsibility, and
improved information for investors.
The conference report before us today includes important provisions
from both sides of the Capitol, but it also contains the following
proposals offered only by the House: Disclosure of important company
information to investors in real time, the inclusion of civil fines
levied by the SEC in restitution funds for defrauded investors, tougher
criminal penalties for a broad array of corporate crimes, and increased
SEC supervision of the accounting oversight board. Though by no means a
panacea, the conference report will help restore investor confidence in
our markets. Investors can be assured that convicted corporate
criminals will be sentenced to long jail time. In my view, the prospect
of doing time, real time, will serve as an effective deterrent to
wrongdoing in the corporate suite.
We saw a little bit of that yesterday with the arrest of the Adelphia
executives in New York. Investors will now get better information and
will get it faster and they will have more faith in the numbers because
the accountants will be more vigilant, as will audit committees.
This legislation, combined with the truly substantive and far-
reaching reforms proposed by the industry's self-regulatory
organizations and the brutal and unforgiving market forces, will help
restore faith in the system. A strong dose of character, honesty and
ethics would not hurt, either.
For two decades in Congress, I have advocated a free market approach
to regulation, but I also believe that capitalism can only flourish
under the rule of law. Those views are not at odds. In fact, they are
quite consistent. Government must be careful not to overreach and
stifle the entrepreneurial spirit that has made the United States the
most successful economy in the history of the world. At the same time,
government has a responsibility to punish--and do so swiftly and
severely--those who seek to cheat and steal from others.
I believe the conference report crafts a careful and appropriate
balance of these two philosophies. I am proud of the bipartisan process
that produced this legislation. Corporate accountability is an investor
and retiree issue. It is not a partisan issue, and those who would
attempt to make it so do a real disservice to all of us.
I urge all of my colleagues on both sides of the aisle to vote for
this historic, pro-investor bill.
Mr. Speaker, I reserve the balance of my time.
{time} 1030
Mr. LaFALCE. Mr. Speaker, I yield myself such time as I may consume.
(Mr. LaFALCE asked and was given permission to revise and extend his
remarks.)
Mr. LaFALCE. Mr. Speaker, it is with great pleasure that I rise today
in strong support of the conference report on H.R. 3763. Our conferees
have taken an already good bill passed by the Senate and have
strengthened it further.
The resulting legislation is a major step forward in reforming the
operations of our financial markets and rebuilding our system of
financial reporting in ways that will restore the confidence of
investors at home and abroad.
I am particularly gratified that the final bill includes many of the
provisions that I first introduced in the House and called for as early
as last year. The centerpiece of this bill is the creation of a strong
independent oversight board for the accounting industry. As with the
oversight board in my bill, the oversight board included in the final
conference report will be independently funded and will have strong
disciplinary, investigatory, and, most importantly, standard-setting
powers. I
[[Page H5463]]
thought this was extremely important. No longer will the accounting
industry be able to set the rules for itself without regard for the
interests of shareholders.
Moreover, as in my original bill, auditors will no longer be
permitted to perform consulting services that create conflict between
their duties to shareholders and their self-interests. These measures,
combined with the very important improvements in corporate governance,
will strengthen audit committees and their oversight of both auditors
and management. As a result, auditors will once again become the
watchdogs for the shareholders, rather than the lap dogs of management.
The requirements in the bill that CEOs and CFOs certify the financial
statements of their companies are again drawn from my original
legislation and substitutes that I offered on the floor in motions to
recommit. These requirements will ensure that executives will no longer
be able to evade responsibility for the numbers that their companies
put out. This requirement, combined with the tough criminal penalties
established by the bill, will help to ensure that executives are held
responsible if they seek to mislead and defraud investors.
We should be clear, however, that this should not be the end of
Congress' work in restoring the integrity of our financial reporting
system and our markets. Auditor conflicts and weak corporate governance
were significant contributors to the deterioration of our financial
reporting system. But the conflicts created by stock options were
another serious issue that we have yet to address. I regret that. So
there is more that we can and should do to limit the conflicts faced by
securities analysts, to strengthen corporate governance and to protect
workers laid off by bankrupt companies along the lines of an amendment
that the gentleman from Mississippi (Mr. Shows) had hoped to propose.
I have said and believe that this bill is an enormous victory for
workers and investors. But let me also say this: It is a victory for
the thousands and thousands of honest accountants and honest corporate
executives as well, the vast, vast preponderance of all accountants and
all corporate executives. With the measures we put in place by this
legislation, they now have the opportunity to reclaim their reputations
from those few who have brought shame on American business. It is my
hope that this legislation will begin to restore the reputation of
American business and financial markets as the best in the world.
General Leave
Mr. OXLEY. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
and include extraneous material on H.R. 3763.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Ohio?
There was no objection.
Mr. OXLEY. Mr. Speaker, I am pleased to yield 4 minutes to the
gentleman from Louisiana (Mr. Baker), the chairman of the Subcommittee
on Capital Markets, Insurance and Government Sponsored Enterprises.
Mr. BAKER. Mr. Speaker, I thank the chairman for yielding me time.
Mr. Speaker, this is indeed a very important moment in Congressional
history, and I wish to express my appreciation to the gentleman from
Ohio (Mr. Oxley), the ranking member, the gentleman from New York (Mr.
LaFalce), and Chairman Sarbanes and ranking member Gramm in the Senate.
They have done extraordinary work in bringing us to this point in time.
Much has been said about bringing those to justice who have violated
their corporate responsibility. I can think of no more sweeping change
in the current body of law than the conference report this House will
soon consider. It offers more change, breadth of change and
significance of change, than any Congressional action since the 1933
and 1934 Securities Acts themselves.
It is appropriate, I think, to recount how we got to this point. Last
year the Subcommittee on Capital Markets, Insurance and Government
Sponsored Enterprises, at the direction of the gentleman from Ohio
(Chairman Oxley) began its inquiry into the conduct of analysts and the
apparent conflict between their recommendations and what they seemed to
know about company performance. From that early beginning until now,
there has been revelation after revelation as to corporate wrongdoing.
Nothing perhaps made a more visual impact on American investors,
shareholders, pensioners and employees than watching the news yesterday
as corporate executives were handcuffed and hauled away. The people of
America are not only expecting it, they are demanding it. How is it
possible for a person to work all his life for a corporation, be given
stock rather than salary increases, and, on the verge of retirement, be
told that the stock is worthless, while the CEO of the corporation
seeks to retire in a $15 million mansion in Florida where he is above
and beyond the reach of the law? That is not acceptable. It is not
acceptable to me, I do not believe it is acceptable to this Congress,
and I know it is not acceptable to the working people of this country.
This is an outrage. There is no more privileged position in America
today than to be the CEO, CFO or leading manager of a Fortune 500
company. Of those people we expect the highest level of ethical and
moral conduct because of the extraordinary powers and opportunities
which they are granted by this wonderful free enterprise system. Today
we bring an end, I believe, to those abuses.
You must sign that statement, and if you sign it and it is not
accurate, there are consequences. If you misrepresent the material
facts of your corporation, if you lie about what is going on, there are
criminal consequences for that misrepresentation. If you choose simply
not to tell the truth, there are consequences for that
misrepresentation. In fact, the bill before us today doubles the
penalties for violations of those responsibilities.
But that is not enough. It is not enough to tell the truth. It is not
enough that after we catch you we put you a way for a long time. We
want to go after those ill-gotten gains, that profit you made by
misrepresenting the material facts of your corporation while
manipulating the books and profiting for your own best interests. We
want to make sure those mansions, those benefits, those golden
parachutes are collapsed, folded up neatly, put into a closet and sold
off so that the shareholders back home can get their hands on their
money. That is what has been lost in all of this.
A corporate executive takes capital from individual investors, hard-
working investors saving for their first home, their child's education
or their retirement, and has a fiduciary responsibility to manage that
money for their mutual good. What has happened, they have taken that
money and put it in their pocket.
I do not know how we are going to ultimately get to all of the State
bankruptcy protections that allow these corporate mansions to be built,
the extreme levels of financial worth, to allow a CEO to escape all of
his liabilities and move into the home, live there 6 months, sell it
and take the money and move to the south of France, but we are going to
get there. This bill does not go quite that far, but over the next
Congresses we are going to continue the work to make sure that no one
who is defrauded by an irresponsible act of corporate abuse does not
get full recompense for the wrong.
This is a great day, a great conference report. I salute the
gentleman from Ohio (Chairman Oxley) and Chairman Sarbanes for their
extraordinary work.
Mr. LaFALCE. Mr. Speaker, it is my pleasure to yield 2\1/4\ minutes
to the gentleman from Pennsylvania (Mr. Kanjorski), the distinguished
ranking member of the Subcommittee on Capital Markets, Insurance and
Government Sponsored Enterprises, who coauthored the original bill that
we introduced early this year that forms the gravamen of this bill.
Mr. KANJORSKI. Mr. Speaker, I thank the gentleman from New York for
yielding time.
Mr. Speaker, may I take the opportunity to say how pleased I am to be
here in support of this conference report, because I, together with the
gentleman from New York (Mr. LaFalce), opposed the bill originally
passed in April by the House of Representatives for the simple reason
that it was not sufficiently sound enough to meet the
[[Page H5464]]
needs that were even evident in April, and have become far more evident
now. But I dare say that as a result of the efforts of the gentleman
from New York (Mr. LaFalce) in crafting the alternative Democratic
proposal in the House that did not have the opportunity to go forth to
the conference, it did strengthen the Senate's hands in the drafting of
the Senate proposal, which ultimately is the basis for this conference
report.
Mr. Speaker, we have not solved everything, by a long shot. We have
much to do. But I believe that we have now put teeth into the
accounting process. I, for one, am a person that supports the
marketplace and non-government regulation, when possible. But if there
is anything we have learned over the last 9 or 10 months, it is the
absence of regulation has allowed the fox to take control of the hen
house at the corporate level at some of the financial institution
levels, at the accounting level, and we have seen grievous harm done
not only to these fine corporations, but to the investors in the
corporations, to the employees of the corporations, and to all the
pension funds and 401(k) fund investors across the country that took on
the representation of accounting firms and CEOs and boards and all
these people that things were done properly.
We have addressed accounting irregularities, executive abuse and
corporate governance malfeasance, but we must come back and do more,
and this is only the beginning.
I heard the chairman of my subcommittee, the gentleman from Louisiana
(Mr. Baker), talk about something that I want to respond to. We have
seen on television all these mansions in Texas and Florida. I would say
to the gentleman from Louisiana (Mr. Baker), the answer is we do not
have to do a special bill. We can take out the exemption in the
bankruptcy law so every State in the Union has the same basic
principle, a $750 deduction, nothing else. There is no reason in Texas
and in Florida you can have a $25 million mansion, go into bankruptcy,
and keep your mansion.
Mr. OXLEY. Mr. Speaker, I yield 3 minutes to the gentleman from
Wisconsin (Mr. Sensenbrenner), the distinguished chairman of the
Committee on the Judiciary.
Mr. SENSENBRENNER. Mr. Speaker, 9 days ago on this floor I stated we
must crack down on the corporate criminals and rebuild America's
confidence in our markets. I said the best way to do that is to punish
the corporate wrongdoers and to punish them harshly. I am pleased to
say that the conference committee report before us today accomplishes
that goal.
The House members of the conference committee insisted on and
prevailed on all of the tougher penalties that were contained in H.R.
5118, the Corporate Fraud Accountability Act of 2002, which passed the
House overwhelmingly by a vote of 391 to 28.
Under these penalty provisions, corporate criminals are going to do
time; real time, real long time. The report increases the penalties for
mail and wire fraud from the current 5 years to 20 years and creates a
new securities fraud section that carries a maximum penalty of 25
years. It also strengthens laws that criminalize document shredding and
other forms of obstruction of justice and provides a maximum penalty of
20 years for such violation. The legislation punishes top corporate
executives that certify the financial statements of the company knowing
they are false by subjecting them to fines of up to $5 million and 20
years in prison, or both.
The provisions of the conference report also increase the penalty
criminal penalties for those who file false statements with the SEC to
a maximum penalty of $5 million and 20 years in prison, and, if a
corporation files a false statement, then the fines increase up to a
maximum of $25 million.
Mr. Speaker, the report also contains House language that makes it a
crime for someone to knowingly retaliate against a whistle blower and
provides a criminal penalty of up to 10 years for such offense. I would
also point out that the restitution laws for all criminal activity are
in place for these crimes as well, so the court can order restitution
for those shareholders and employees who have been defrauded.
By passing this conference committee report, America will know that
those who abuse the law and tarnish corporate America's reputation will
go to jail for a very long time. These are tough penalties that will
crack down on the corporate crooks and go a long way to protecting the
life savings of many Americans by making the price of such theft too
high.
I urge my colleagues to support this conference report.
{time} 1045
Mr. LaFALCE. Mr. Speaker, I yield 1\1/2\ minutes to the gentlewoman
from New York (Mrs. Maloney).
Mrs. MALONEY of New York. Mr. Speaker, I rise in strong support of
this conference report, the strongest reforms since FDR was President
in corporate law. Our markets run on trust and this trust has been
violated. This bill puts forward new tough standards based on old
values to restore investor confidence.
The overwhelming majority of the accountants in the U.S. are
hardworking, honest people, but the self-regulation of their industry
has failed. This bill responds with the Sarbanes-LaFalce proposal for
the strongest possible new independent accounting oversight board. It
also adopts the Sarbanes-LaFalce plan to put an end to the inherent
conflict of interest of allowing the same firm to provide both audit
and consulting services for the same client.
Investors have lost faith in boards of directors and managers to look
out for their interest. This legislation empowers independent members
of boards to hire and fire auditors, prohibits trades during pension
blackouts, requires CEOs and CFOs to certify the accuracy of their
company's financial statements, and if there are misrepresentations,
they face criminal penalties.
More and more Americans depend on the markets for a secure
retirement. Executives who take advantage of investors will now face
serious jail time for securities fraud, up to 25 years.
Importantly, the bill also authorizes $776 million for the SEC,
including money for pay parity.
Finally, I want to thank the gentleman from Ohio (Mr. Oxley) for his
work on this legislation and the hearings he held. I especially want to
thank the gentleman from New York (Mr. LaFalce) who recognized a crisis
in financial reporting years before it became front page news. This
legislation may be called the Sarbanes-Oxley Act, but much of it is the
hard work and product of the gentleman from New York (Mr. LaFalce) and
leader on the Committee on Financial Services, on the House floor and
in the conference.
Mr. OXLEY. Mr. Speaker, I yield 2 minutes to the distinguished
gentleman from Ohio (Mr. Boehner), the chairman of the Committee on
Education and the Workforce.
Mr. BOEHNER. Mr. Speaker, I am pleased that the conference report
before us contains two provisions that were in the Pension Reform Act
passed here in April. These two provisions were in the Senate bill and
were agreed to in the conference, one providing a 30-day notice of any
potential blackout period and, secondly, a proposal to make sure that
the top floor and the shop floor have the same rights when it comes to
selling of stock during blackout periods, and there is a prohibition on
16(b) employees, top-end employees, from selling stock during a
blackout period.
I am also pleased that contained in this legislation are new
penalties for violations of ERISA. The penalties have not been
increased or changed since 1974 when ERISA was first enacted. They are
in this bill.
Let me make it clear that the pension provisions that are in here
which mirror proposals made by President Bush back in April come
nowhere close to the comprehensive Pension Protection Act that the
House passed on April 11. We are still waiting for the other body to
act, and as the Washington Post noted this morning in their lead
editorial, this bill that we are passing today is the first step, but
if we are serious about restoring investor confidence, restoring the
confidence of American workers in their own retirement plans, it is
time for Congress to act on a pension bill.
While there is a lot of rhetoric coming from the other body, there is
no legislation and there is no opportunity to go to conference like we
did on this bill and to bring about good policy.
[[Page H5465]]
Several days ago, I described what was happening on this bill as a
stampede, and I want to say that I am very surprised, and I am very
surprised because we have two adults in this body, the two people who
chaired this conference, my good friend from Ohio (Mr. Oxley) and the
gentleman from Maryland (Mr. Sarbanes), who stood up to say, slow down,
let us try to make sure that we have sound policy here, and the
gentleman from Maryland was under great political pressure to do
nothing, but I have got to give him an awful lot of credit for his
willingness to sit down and to fix what were glaring problems that many
did not want to fix and wanted to pass in a rush to judgment. They both
should be congratulated for their excellent work.
Mr. LaFALCE. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman
from North Carolina (Mr. Watt).
Mr. WATT of North Carolina. Mr. Speaker, I thank the gentleman for
yielding time.
Let me applaud the chair and ranking member of the House Committee on
Financial Services for the job that they did starting the process. We
had a bill that was a reasonable start, that has been significantly
improved upon during the course of the conference, and one of the
things that the bill does is ratchet up criminal penalties, but I want
to take some time to say that I am not sure that just ratcheting up
criminal penalties will do the job.
But there are some things in the conference report which require us
and the SEC and the GAO to do additional studies and report back to the
committees of jurisdiction about either regulatory action that is
recommended or legislative action that is recommended, and one of those
things is an SEC study of violations and violators and whether we have
been aggressively going after the violators civilly and whether we have
undermined the ability of individuals to bring claims in civil court to
enforce their rights and protect their status as investors.
I do not want to overlook some of those studies that will be
reporting back to us because I think this bill is really just the first
step, and I applaud us for making that step.
Mr. OXLEY. Mr. Speaker, I yield 1 minute to the gentleman from Texas
(Mr. Smith) a conferee and a member of the Committee on the Judiciary.
(Mr. SMITH of Texas asked and was given permission to revise and
extend his remarks, and include extraneous material.)
Mr. SMITH of Texas. Mr. Speaker, I thank my friend from Ohio for
yielding me time.
Mr. Speaker, this conference report goes a long way in achieving two
necessary goals. First, it helps us determine who those are who have
abused the public trust, in general, and employees' trust and
stockholders' trust, in particular.
Second, this conference report makes sure that an appropriate level
of punishment is available.
In considering this conference report, though, we should remember
that the proportion of corporate executives who are culpable is a very,
very small fraction of the whole. The vast majority of executives are
law-abiding who have contributed much to the prosperity of America.
Finally, Mr. Speaker, I want to single out a business leader, Andy
Grove, chairman of the board of Intel, for his constructive suggestions
on how to increase corporate responsibility. Mr. Speaker, I have been
happy to have been a part of the conference that produced this
conference report. Mr. Speaker, I include in the Record two articles,
one written by Andy Grove and one about him.
[From the Washington Post, July 17, 2002]
Stigmatizing Business
(By Andrew S. Grove)
I grew up in Communist Hungary. Even though I graduated
from high school with excellent grades, I had no chance of
being admitted to college because I was labeled a ``class
alien.'' What earned me this classification was the mere fact
that my father had been a businessman. It's hard to describe
the feelings of an 18-year-old as he grasps the nature of a
social stigma directed at him. But never did I think that,
nearly 50 years later and in a different country, I would
feel some of the same emotions and face a similar stigma.
Over the past few weeks, in reaction to a series of
corporate scandals, the pendulum of public feeling has swung
from celebrating business executives as the architects of
economic growth to condemning them as a group of
untrustworthy, venal individuals.
I have been with Intel since its inception 34 years ago.
During that time we have become the world's largest chip
manufacturer and have grown to employ 50,000 workers in the
United States, whose average pay is around $70,000 a year.
Thousands of our employees have bought houses and put their
children through college using money from stock options. A
thousand dollars invested in the company when it went public
in 1971 would be worth about $1 million today, so we have
made many investors rich as well.
I am proud of what our company has achieved. I should also
feel energized to deal with the challenges of today, since we
are in one of the deepest technology recessions ever.
Instead, I'm having a hard time keeping my mind on our
business. I feel hunted, suspect--a ``class alien'' again.
I know I'm not alone in feeling this way. Other honest,
hard-working and capable business leaders feel similarly
demoralized by a political climate that has declared open
season on corporate executives and has let the faults,
however, egregious, of a few, taint the public perception of
all. This just at a time when their combined energy and
concentration are what's needed to reinvigorate our economy.
Moreover, I wonder if the reflexive reaction of focusing all
energies on punishing executives will address the problems
that have emerged over the past year.
Today's situation reminds me of an equally serious attack
on American business, one that required an equally serious
response. In the 1980s American manufacturers in industries
ranging from automobiles to semiconductors to photocopiers
were threatened by a flood of high-quality Japanese goods
produced at lower cost. Competing with these products exposed
the inherent weakness in the quality of our own products. It
was a serious threat. At first, American manufacturers
responded by inspecting their products more rigorously,
putting ever-increasing pressure on their quality assurance
organizations. I know this firsthand because this is what we
did at Intel.
Eventually, however, we and other manufacturers realized
that if the products were of inherently poor quality, no
amount of inspection would turn them into high-quality goods.
After much struggle--hand-wringing, finger-pointing,
rationalizing and attempts at damage control--we finally
concluded that the entire system of designing and
manufacturing goods, as well as monitoring the production
process, had to be changed. Quality could only be fixed by
addressing the entire cycle, from design to shipment to the
customer. This rebuilding from top to bottom led the
resurgence of U.S. manufacturing.
Corporate misdeeds, like poor quality, are a result of a
systemic problem, and a systemic problem requires a systemic
solution. I believe the solutions that are needed all fit
under the banner of ``separation of powers.''
Let's start with the position of chairman of the board of
directors. I think it is universally agreed that the
principal function of the board is to supervise and, if need
be, replace the CEO. Yet, in most American corporations, the
board chairman is the CEO. This poses a built-in conflict.
Reform should start with separating these two functions. (At
various times in Intel's history we have combined the
functions, but no longer.) Furthermore, stock exchanges
should require that boards of directors be predominantly made
up of independent members having no financial relationship
with the company. Separation of the offices of chairman and
CEO, and a board with something like a two-thirds majority of
independent directors, should be a condition for listing on
stock exchanges.
In addition, auditors should provide only one service:
auditing. Many auditing firms rely on auxiliary services to
make money, but if the major stock exchanges made auditing by
``pure'' firms a condition for listing, auditing would go
from being a loss leader for these companies to a profitable
undertaking. Would this drive the cost of auditing up? Beyond
a doubt. That's a cost of reform.
Taking the principle a step further, financial analysts
should be independent of the investment banks that do
business with corporations, a condition that could and should
be required and monitored by the Securities and Exchange
Commission.
The point is this: The chairman, board of directors, CEO,
CFO, accountants and analysts could each stop a debacle from
developing. A systemic approach to ensuring the separation of
powers would put them in a position where they would be free
and motivated to take action.
I am not against prosecuting individuals responsible for
financial chicanery and other bad behavior. In fact, this
must be done. But tarring and feathering CEOs and CFOs as a
class will not solve the underlying problem. Restructuring
and strengthening the entire system of checks and balances of
the institutions that make up and monitor the U.S. capital
markets would serve us far better.
Reworking design, engineering and manufacturing processes
to meet the quality challenge from the Japanese in the 1980s
took five to 10 years. It was motivated by tremendous losses
in market share and employment. Similarly, the tremendous
loss of market value from the recent scandals provides a
strong motivation for reform. But let us not kid ourselves.
Effective reform will take years of painstaking
reconstruction.
Our society faces huge problems. Many of our citizens have
no access to health care; some of our essential
infrastructure is deteriorating; the war on terror and our
domestic
[[Page H5466]]
security require additional resources. Attacking these
problems requires a vital economy. Shouldn't we take time to
think through how we can address the very real problems in
our corporations without demonizing and demoralizing the
managers whose entrepreneurial energy is needed to drive our
economy?
The writer is chairman of Intel Corp.
[From the Wall Street Journal, July 22, 2002]
The Beltway Bubble
Since President Bush unleashed the political furies on the
private sector with his speech on July 9, stocks on the Dow
have fallen by about 13.5%, including another 4.6% on Friday.
This can only mean that investors are demanding more
regulation, more punitive laws and more anti-business
rhetoric, right?
Believe it or not, that's what some people with allegedly
above-average IQs are writing. The truth is closer to the
opposite, with investors now discounting not just for market
risk but for a new and dangerous element of political and
regulatory risk. With Congress in a stampede, and Mr. Bush
abdicating veto oversight, the law of unintended consequences
is in the saddle riding events.
Consider the fine print now contained in legislation
sponsored by Joe Biden and Orrin Hatch that whooped through
the Senate last week. Time magazine made Intel Chairman
Andrew Grove its man of the year in 1997. But Senator Bush,
with his vast corporate experience, is now insisting on
language that would likely drive Mr. Grove and independent
chairmen like him out of the business.
Here's the problem: The Biden-Hatch bill would require that
CEOs, chief financial officers and board chairmen all
certify, under threat of criminal sanction, the accuracy of
company financial statements. This makes sense for CEOs and
CFOs, who are actively managing the business. And for
companies that combine the CEO and chairman positions this is
also logical.
But some companies prefer to divide the CEO and chairman
posts, with the CEO running the business but the chairman
playing the role of counselor or independent intermediary
with the board of director. It's one way of helping the board
supervise the CEO, which is supposed to be a main goal of the
latest corporate ``reforms.''
Yet the Biden legislation would all but end this often
useful division of responsibility. Very few non-CEO chairmen
in their right mind are going to risk jail by certifying
results they are not actively managing. Mr. Grove, for
example, gave up his CEO duties at Intel in 1998 at age 61,
but he retains the chairman title that allows him to set the
agenda for board meetings and consult with CEO Craig Barrett.
``It's a very healthy thing,'' Mr. Grove tells us. ``The
power of setting the agenda is incredible. I basically
control what we are going to talk about at board meetings,
not Craig.'' Other companies that have non-CEO chairmen
include Cisco and Microsoft, where Bill Gates gave up his
chief executive role to Steve Ballmer but is obviously still
a valuable contributor to the company. Whatever else
investors are clamoring for, we doubt it's a high technology
sector without the skills and institutional memory of Andy
Grove and Bill Gates.
By the way, the Biden-Hatch bill contains other troubling
provisions that someone at the White House should inspect. In
its language demanding that CEOs certify their financial
results, it uses words like ``appropriateness'' and
``recklessly'' that are vague and legally undefined. This
will only invite prosecutorial abuse, not to mention a trial-
lawyer field day, which may in fact be why those words have
quietly made their way into the Senate-passed bill. (Senator
Hatch, were you paying attention?) If Congress is going to
put CEOs in prison for a decade or more, doesn't it have an
obligation to make sure that what they get sent away for is
some specific and actual crime?
The Biden language shows how in Washington's current mood
the zeal to punish business is trampling common sense. Any
House Member who raises any doubt about the wisdom of
anything in the Senate bill gets a media pounding as a lackey
of business.
Obviously something is going to pass this year. But it
would help the economy, as well as corporate governance, if
the politicians burst their own bubble of righteousness and
first thought carefully about the real-world consequences of
what they're doing.
Mr. LaFALCE. Mr. Speaker, I yield 1\1/2\ minutes to the gentlewoman
from California (Ms. Waters), a distinguished member of the conference
committee.
Ms. WATERS. Mr. Speaker, I am very pleased to have been a part of the
conference committee, and we are finally legislating a corporate
responsibility bill. It is long overdue, and if, in fact, the gentleman
from New York (Mr. LaFalce), our ranking member, had had his way on the
House side, we would have had a tougher bill and we would have had it a
long time ago.
Unfortunately, even though I am very appreciative for the work that
the gentleman from Ohio (Mr. Oxley) eventually did on this bill, if he
had taken the leadership of our ranking member, we would have had this
bill passed out a long time ago, and it would have been even tougher.
This bill will make corporate CEOs and others responsible. They will
have to sign the financial statements, and they will have to take
responsibility. I participated in one aspect of the bill for
disgorgement so that these people who are committing fraud will not be
able to realize the gains that they would have, to put that money back
into a disgorgement account.
We are also, in this bill, curbing the practice of the insider loans.
We are protecting whistleblowers. We are eliminating conflict of
interest and setting up an independent board to oversee accounting
firms.
This is a good start. We are going to see more of the scenes that we
are seeing with Adelphia where corporate giants who have committed
fraud are going to be taken out in handcuffs.
We are going to have to do more as the days roll along. We are going
to find that there are more crimes being committed. I am very
appreciative to the Democrats in this House for providing the strong
leadership that was necessary to force the adoption of this conference
report and this legislation.
Mr. OXLEY. Mr. Speaker, I am pleased to yield 2 minutes to the
gentlewoman from New York (Mrs. Kelly), the chairwoman of the
Subcommittee on Oversight and Investigations of the Committee on
Financial Services, and a member of the conference committee.
Mrs. KELLY. Mr. Speaker, I thank the gentleman from Ohio for yielding
me the time.
Mr. Speaker, today we are here to approve the conference agreement
for the corporate accountability legislation. With the Senate adoption
of the House's top priorities of tougher penalties, openness, so the
investor can evaluate a company before they invest and money back to
defrauded investors, this conference agreement stands as a product that
both sides can be proud of.
This legislation punishes corporate crooks. It strengthens oversight
of the accounting industry and empowers investors with much faster
access to critical information about the companies in which they
invest. This legislation will shine a bright light into the shadows of
America's corporate board rooms so the public is not kept in the dark,
and when they make an investment, that investment will be sound and
based on truth and openness and honesty.
The corporate executives, the heads of these businesses, need to know
they are being watched and they will be put in jail if they use their
company to line their own pockets at the expense of our investors.
I applaud the gentleman from Ohio (Mr. Oxley) and his excellent staff
and Senator Sarbanes and his fine staff. They need to be recognized for
the conception of most of the provisions in this bill and the fortitude
and the resolve to bring the legislation forward through this process
in a very bipartisan and open manner.
Last week, Chairman Greenspan spoke before the Committee on Financial
Services about how strong our economy is and talking about that our
economy is strong even though our corporate system is frayed. This
legislation contains the tools necessary to mend the bonds which have
been abused by the people who have been motivated by greed and
strengthen others, which ensure a strong and vibrant economy.
Chairman Greenspan also emphasized that the criminal penalties
section in this legislation is the most important part of this
legislation. With the Senate acceptance of the House's tougher
penalties, we have ensured that the most important part of this
legislation is the best possible.
I look forward to our passing this conference report today so it can
be sent to the White House so the President can enact this legislation
giving employees and investors the needed protections and confidence
they require and they deserve.
Mr. LaFALCE. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman
from Texas (Mr. Bentsen) a distinguished member of the committee.
(Mr. BENTSEN asked and was given permission to revise and extend his
remarks.)
Mr. BENTSEN. Mr. Speaker, I rise in strong support of this bill. I
need to say to my colleagues I am actually surprised. I think this is a
very good conference report. The recent declines in
[[Page H5467]]
the U.S. equity markets are due in large part and have been exacerbated
by the breakdown in corporate governance, and a lot of the shenanigans,
quite frankly, that has been going on in corporate America, whether it
is Enron, WorldCom, Adelphia, Xerox, you name it.
This bill is really quite substantive because of the work of the
gentleman from New York whom I think we all owe a great debt of
gratitude for on this bill that really starts to address this, and
Members have gone through the substantive aspects, the oversight body,
the limitations on consulting, the new disgorgement rules, criminal
penalties, bans on egregious practices and corporate loans, all of
those items, and there are many in this bill, and I am surprised at how
well it has been put together.
I think what is also important about this legislation is that it
sends a very clear message from the Congress, and I hope we have a
strong vote today in the House on this bill, because it is not just the
substantive factors or the interpretive factors of this bill.
{time} 1100
For too long Congress has sent a very mixed message to the regulators
of what they are supposed to do. All of us know we can pass laws to do
lots of things, but unless they are enforced, they will be meaningless.
This bill puts us on record of enforcing the laws with respect to
public accounting, with respect to corporate governance; changing
things that, quite frankly, a few years ago I would have been
surprised. A few years ago, people were trying to get outsiders off of
corporate boards. Now we are mandating them on corporate boards.
So I want to commend the managers, the chairman and the ranking
member, but particularly the gentleman from New York (Mr. LaFalce) for
the work he has done on this bill. He deserves a great deal of credit.
This is a good bill, it ought to get a large degree of support so
investors will make decisions on economic issues and not lack
confidence.
Mr. OXLEY. Mr. Speaker, I yield 1 minute to the gentleman from
California (Mr. Royce), a member of the conference committee.
Mr. ROYCE. Mr. Speaker, I thank the chairman for yielding me this
time; and actually, this measure contains the best of both, some
Democrat ideas and some Republican ideas. I think the final language on
the independent accounting board was very close to the Sarbanes bill.
But the provision put forward by House Republicans that we would now
have 25 years hard time for securities fraud is important. It will be a
deterrent.
I am delighted to see the concept that we are going to criminalize
shredding, the concept that we are going to increase penalties for wire
fraud and mail fraud. The Republican idea also that when we get
convictions, when this SEC brings back the resources from those who
have committed corporate malfeasance, that money will then go back to
the shareholders, the Baker's amendment, that is an important gain for
this bill.
I think Chairman Oxley, in including the provision to disclose
material changes to financial conditions and in real time so that the
public sees that as soon as any insider trader sees that is another
important change that we brought in on the Republican side of the House
bill.
So this is the best of both Democrat and Republican concepts, and it
will protect the shareholders in the future and offer deterrence.
Mr. LaFALCE. Mr. Speaker, how much time do I have left?
The SPEAKER pro tempore (Mr. Sweeney). The gentleman from New York
has 17\3/4\ minutes remaining.
Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentlewoman from
Oregon (Ms. Hooley).
Ms. HOOLEY of Oregon. Mr. Speaker, I would like to congratulate
Chairman Oxley and the gentleman from Louisiana (Mr. Baker) for finding
the willingness to simply do what is needed to fix the problem in our
accounting system and to restore investor confidence in corporate
America.
I also thank the gentleman from New York (Mr. LaFalce) and the
gentleman from Pennsylvania (Mr. Kanjorski) for their foresight and
early leadership. We needed to restore the public confidence in the
market. Tens of millions of Americans invest in the market and tens of
millions more work in publicly traded companies. It is these
individuals and these individuals alone who this Congress must protect.
After all, this is the people's body, not the Fortune 500 body.
So I thank my colleagues for sitting down with the gentleman from New
York (Mr. LaFalce) and Senator Sarbanes and delivering on a bill that
puts the interest of the public first. My colleagues' actions prove
that bipartisanship is a tangible commodity. I would hope that the
consensus we were able to reach on this bill can be replicated in other
badly needed measures.
Before closing, I would like to point out that no one, no one has
worked harder on this bill than our ranking member, the gentleman from
New York (Mr. LaFalce). While we have not agreed on everything, the
gentleman's efforts to protect consumers and investors has been
unfailing and will be sorely missed in the 108th Congress.
Mr. OXLEY. Mr. Speaker, I am pleased to yield 2 minutes to the
gentlewoman from New Jersey (Mrs. Roukema).
(Mrs. ROUKEMA asked and was given permission to revise and extend her
remarks.)
Mrs. ROUKEMA. Mr. Speaker, I rise in strong support of this
legislation, and I certainly want to commend the Speaker of the House
and the chairman of the committee for bringing it up before the August
recess.
Certainly there has been a lot of discussion, and I do not have to go
over it again, about the crisis of confidence that there has been. That
has been more than adequately stated. But the crisis of confidence in
our economic system has been out there, and dealing with this
legislation today takes us a giant step in the right direction to
restoring that confidence in both our corporate leaders as well as our
Congress and the free enterprise system, which we commend.
I want to thank Chairman Oxley and certainly the gentleman from
Louisiana (Mr. Baker) for making the point in the conference committee.
As strongly as I supported the Sarbanes bill, they did add improvements
to the bill, which deal with, but it is the FAIR fund to return the
ill-gotten gains and the real time corporate disclosure provisions. And
I thank the gentleman from Ohio (Mr. Oxley) and the gentleman from
Louisiana (Mr. Baker) for including them in this conference report.
However, I will say that it is not perfect. It is very good, but not
perfect. I am disappointed, more than a little bit, in the fact that we
did not deal with the accounting treatment of stock options. I was very
disappointed in that, but I accept it as part of this agreement. And I
also accept it because I am confident that Senator McCain will be
advancing another form of this legislation in the future in the other
body, and I believe that we will then be able to have a proper and full
discussion.
In conclusion, I would like to say that this is landmark legislation,
a key element of Congress' effort to eliminate corruption in corporate
America. The bill tells corporate criminals that they are no longer
above the law, and it holds those executives who have defrauded the
investors and harmed the American economic system, holds them
accountable with tough new criminal penalties. It also helps to close
the loopholes that have allowed them to continue these offenses in the
corporate community.
Mr. Speaker, once again, I certainly thank the chairman and the
gentleman from Louisiana (Mr. Baker), as well as the ranking member,
the gentleman from New York (Mr. LaFalce), and our other Democrat
colleagues for their bipartisan cooperative effort.
Mr. Speaker, I rise in strong support of the (H.R. 3763) Corporate
and Auditing Accountability, Responsibility, and Transparency Act of
2002, and I want to commend the Speaker of the House for showing clear
vision and strong leadership in bringing this legislation to the Floor.
I also want to commend the gentleman from Ohio, the Chairman Oxley of
our Committee on Financial Services, for living up to his commitment to
bring this important legislation back to the House before we begin our
summer district work period. And I strongly commend Representative John
LaFalce for his leadership and cooperation in structuring the
bipartisan support.
Mr. Speaker, over the last few months our economy has been damaged by
the drip-drip-
[[Page H5468]]
drip of newspaper stories, television accounts and press releases
recounting the latest corporate accounting scandal, revenue over-
projection, financial irregularity or out-and-out ``cooking of the
books'' by our captains of industry.
I agree with the President of the United States and the Chairman of
the Federal Reserve, Alan Greenspan, who each said last week that the
foundation of our economy is strong. And that we are continuing to
recover from the financial downturn precipitated by the terrorist
attacks of last September 11.
But still, we face a crisis of confidence. Every public opinion poll
shows that the American people have low-expectations when it comes to
the economy, and they think that a majority of corporate leaders are
crooks and that this is an area where Congress can and must act in a
bipartisan manner.
Indeed, irresponsible corporate leaders have forced us to act. The
American people expect us to act. The American economy needs us to act.
In fact, the mere prospect of our actions today helped produce a steep
rise in the stock market yesterday. We must continue to restore
confidence in the Congress and in our free enterprise system. And today
we are taking a giant step.
Last April, House passage of the Corporate and Auditing
Accountability, Responsibility and Transparency Act was a giant step in
the right direction. Senate passage of the so-called Sarbanes bill was
another critical step forward. And today, we complete the Congressional
journey by passing this legislation.
The Chairman of the conference committee has outlined the major
provisions of this bill. Suffice it to say that I am pleased that the
conference report establishes a new, independent oversight board,
funded by publicly traded companies, to monitor the accounting
industry. The bill also forbids accounting firms from performing many
other services for their public company audit clients, including
consulting. It would also establish a host of new important reporting
and disclosure requirements for public companies.
I want to commend Chairmen Oxley and Baker for their contributions to
this strong conference report. As noted by Chairman Oxley in his debate
the House Committee added strong demands: real-time corporate
disclosure to protect investors by giving them the information they
need to safeguard their financial future; establishment of the FAIR
fund to return ill-gotten corporate gains to investors; significantly
increased criminal penalties for corporate crooks that defraud the
public, shred documents or otherwise obstruct justice. Criminals can
steal more money with a briefcase than with a gun. Businessmen who
extort the American public should be punished like the common criminals
they are. This bill ensures that corporate wrongdoers go to jail for
their crimes.
I would also add that the final legislative package includes two
important pension-related provisions from our Education and Workforce
Committee. One would bar company insiders from selling their own stock
during ``blackout'' periods when workers can't make changes to their
401(k)s; and the other would require pension plan administrators to
notify workers 30 days before the start of any ``blackout'' period
affecting their pensions.
However, I have to say that I am disappointed that the conference
agreement includes no provision to address the question of the
accounting treatment of stock options. I believe this is a mistake.
Congress should require the Federal Accounting Standards Board to deal
with it. And I am confident that Senator McCain will be advancing
legislation on options in the other body.
In the final analysis, this is a landmark legislation--a key element
of Congress' effort to eliminate corruption in corporate America. This
bill tells corporate criminals that they are no longer `above the law.'
it holds those executives who have defrauded investors and harmed the
American economic system accountable with tough new criminal penalties.
It helps to close the loopholes that have allowed for continued
offenses in America's corporate community.
Mr. Speaker, the American people expect us to act. The economy needs
us to act. I urge my colleagues to live up to and now we are acting.
Support the Conference report.
I yield back the balance of my time.
Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentleman from
Vermont (Mr. Sanders), a member of the committee.
Mr. SANDERS. Mr. Speaker, I thank the gentleman for yielding me this
time. This legislation is an important step forward, and I support it;
but it should be clear that if we are serious about tackling corporate
greed, much more needs to be done.
We have seen in recent years that the heads of the largest
corporations in this country have lied about their financial
statements, they have cheated on their taxes, moved their companies
abroad, and they have thrown loyal American workers out on the street
as they move companies to China. They have cut the pensions and health
care benefits of their workers. Now is the time for us to address that
overall question of corporate greed.
The most important thing that we can do is to pass real campaign
finance reform, public funding of elections. So once and for all we end
the scourge of big money dominating the White House and the United
States Congress, and once and for all we begin to represent all
Americans rather than the rich and the powerful.
Mr. OXLEY. Mr. Speaker, I am pleased now to yield 1 minute to the
gentleman from Delaware (Mr. Castle).
Mr. CASTLE. Mr. Speaker, let me thank all those involved in putting
this together.
For all those individuals out there who shudder when they see the
stock market reports, or like me, do not open any envelopes that
contain any information about their own assets at this point, but let
them pile up in a corner, this bill is for you. It takes a lot of
strong and positive steps, as have been outlined here in terms of
dealing with the corporate responsibility and the corporate governance
issues we needed to address.
I believe we have seen the clouds, I believe we have seen the rain in
the form of Enron, WorldCom, and a few others. Now we are seeing the
clearing someplace out there, as we search to get brighter. And,
hopefully, it will get even brighter yet. This piece of legislation may
be a first step, but it is a very large first step we have taken.
Like others who have spoken today, I believe we do have to deal with
other issues. I believe we have to look at the question of expensing
options. I believe we have to look at separating analysts from the
investment banking side of a number of firms in the United States of
America. Perhaps we can go to less dependence on quarterly reports,
more real-time reporting in terms of financial information coming from
the corporations and a variety of other steps.
But I think that Congress has stepped forward in a very responsible
fashion, and I congratulate everybody. The gentleman from New York (Mr.
LaFalce), I know, had a lot of ideas in this, as well as the gentleman
from Ohio (Mr. Oxley), and the Senator from Maryland, Mr. Sarbanes, on
the other side. They have done a wonderful job.
This should start to give reassurance to our markets and to people
across America.
Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentlewoman from
California (Ms. Lee), a member of the committee.
Ms. LEE. Mr. Speaker, I rise today in strong support of this
conference agreement to H.R. 3763, which significantly reforms our
current system to bring true responsibility and accountability to these
major corporations who have used creative accounting and fraud to
advance their own greed.
I want to especially thank our ranking member on the Committee on
Financial Services for all of his hard work, the gentleman from New
York (Mr. LaFalce), for pushing these very strong reforms, and to
Chairman Oxley for ensuring that this is a bipartisan plan.
While I was extremely disappointed that the Republican leadership
brought up such a weak bill earlier this year, one that I voted
against, I am delighted that they agreed to a much stronger provision
in the LaFalce legislation.
This agreement protects employees and investors, separates auditing
and consulting functions, which got Enron and the other corporations
into the mess that they are in now, and sets up an independent board.
Now, I hope that soon Congress can take the next step and provide
restitution to laid-off workers and investors who lose their life
savings. CEOs and high- ranking executives should forego their golden
parachutes and multimillion-dollar-year bonuses while their companies
are going bankrupt, and instead give workers and investors first rights
to these funds.
Once again I want to thank the gentleman from New York (Mr. LaFalce)
for his leadership and Chairman Oxley for bringing such a responsible
bill to the House floor.
[[Page H5469]]
Mr. OXLEY. Mr. Speaker, may I inquire as to how much time remains on
both sides.
The SPEAKER pro tempore. The gentleman from Ohio (Mr. Oxley) has 11
minutes remaining, and the gentleman from New York (Mr. LaFalce) has
14\3/4\ minutes remaining.
Mr. OXLEY. Mr. Speaker, I yield 2 minutes to the gentleman from
California (Mr. Cox), a member of the conference committee.
Mr. COX. Mr. Speaker, I thank the chairman for his extraordinary good
work.
Fraud and unfair dealing are the enemies of the free enterprise
system. And as we can see from the turmoil in our markets, our country
is paying a very high price because of the corporate fiduciaries who
have broken faith with their employees and their investors.
We have tough laws on the books to deal with all manner of crime,
including corporate crime; but just as bacteria mutate to avoid the
latest antibiotics, those who cook the books are constantly changing
their recipes, and we have to keep our laws and our remedies up to
date.
Enron, Global Crossing, WorldCom, and the other cases that we have
seen have all centered around accounting frauds. Abuses of accounting
rules were central to each of these cases. Using the regulatory thicket
of detailed accounting rules, the malefactors in these cases
intentionally structured sham transactions to disguise their true
financial condition. That is why the central reform in this legislation
is the creation of an accounting oversight board to see to it that
accounting standards once again make financial reports truthful,
honest, and clear.
As we raise the legal standard here today, we should bear in mind our
obligations to do still more to raise ethical standards so that the
best and the brightest will continue to want to join the accounting
profession; so that our most experienced citizens, possessed of good
judgment, are willing to undertake the significant oversight
responsibilities on corporate boards of directors; and so that
entrepreneurs will still take the risks and dream boldly without fear
of being second-guessed if the race is not won.
This is an important step we are taking today, Mr. Speaker. I am very
happy to join in support of this conference report.
Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentlewoman from
Ohio (Mrs. Jones), a member of the committee.
(Mrs. JONES of Ohio asked and was given permission to revise and
extend her remarks.)
Mrs. JONES of Ohio. Mr. Speaker, I know that this committee is very
short of time, and so I will give my time back to the ranking member;
but I want to say it is a shame that we were here in April doing
legislation like this and ended up having to come back when we really
realized that we needed to hold CEOs accountable.
Mr. Speaker, I rise today in strong support of H.R. 3763, the
Conference Report on Corporate Responsibility and I seek permission to
revise and extend my remarks.
The events of the past months have underscored the importance of
transparency in corporate governance. While many believed that Enron
was an isolated occurrence, the failures of Tyco, Global Crossing, and
WorldCom have eroded confidence in the markets, both here and overseas.
Investment in the stock market is important to our economy and as a
wealth-creating tool for people of all income levels. Although the
majority of companies are operated honestly, investors will not trust
the market if they believe that their money is not safe. If investors
don't invest--the economy will stagnate which hurts people at every
level of our society. Recent drops in value of stock markets both here
and around the world reflect uncertainty and a current lack of investor
confidence.
It is our responsibility to hold accountable those companies and
individuals that act dishonestly and erode investor confidence. I
support this bill and I commend the conferees because they have crafted
a strong piece of legislation. This bill would remove conflicts of
interest and strengthen corporate accountability by a number of key
reforms such as: creating a strong and independent board to oversee the
accounting profession; by requiring separation of the auditing and
accounting functions of firms; by reforming the independence of stock
analysts and decreasing the influence of investment banking firms over
analysts; by authorizing $776 million to the Securities and Exchange
Commission to enable them to achieve higher staffing levels to enforce
the law.
Although these reforms are needed, there are other, holistic changes
that need to take place as well.
Over the past decade, CEO tenure has dropped while salaries have
risen dramatically. This has created a climate in which some dishonest
CEO's may be tempted to ``take the money and run.'' This costs a pall
on the majority of executives who operate honestly.
When CEO's and others are compensated with stock options, the options
are not shown as a business expense on a company's balance sheet. This
distorts the cost of these options to shareholders, who are not
provided a clear picture of a company's financial position. It may also
provide an incentive to ``cook the books'' to achieve quick gains in
stock price for an executives' personal benefit. This malfeasance has a
clear effect on workers who lose their jobs and investors who lose
their money.
I support the Democratic proposal to allow stockholders to determine
whether management is compensated with stock options. This change in
corporate governance would ultimately reward companies that operate
cleanly by restoring investor confidence in companies with transparent
operations.
Mr. Speaker, this week Congress has accomplished a great deal to help
workers, investors, and the stability of markets the world over. We
will continue to build our economy over the weeks and months to come.
Mr. OXLEY. Mr. Speaker, I yield 2 minutes to the gentleman from
Pennsylvania (Mr. Toomey).
Mr. TOOMEY. Mr. Speaker, I thank the chairman for yielding me this
time.
Mr. Speaker, the outright fraud of the recent accounting scandals
constitutes theft that is appalling in nature and staggering in size.
Millions of honest hardworking Americans who played by the rules, made
sacrifices so that they could save and invest, saw those investments
devastated when they were lied to by senior executives who cooked the
books for their own personal gains.
Fact is, we have been robbed; and the outrage is justified. But,
today, Congress will pass tough legislation to begin to restore
confidence, to start to provide new protections for small investors,
workers and pension holders.
Mr. Speaker, as you know, we passed a strong bill in this House last
April. I am very happy that we finally got a product from the other
body in July and we were able very quickly to reach a consensus and
pass this tough historic legislation that will just take us closer to
that vital goal that we are trying to accomplish, which is greater
transparency and truthfulness in financial reporting.
I would just want to remind my colleagues that despite the calamities
that we have recently seen, our free enterprise system is still the
greatest wealth- producing, poverty-destroying, opportunity-creating
system in the history of the world. And with these reforms, our system
will start to recover the confidence that it deserves from investors in
America and all around the world.
{time} 1115
Mr. Speaker, I want to congratulate the gentleman from Ohio (Mr.
Oxley), the gentleman from New York (Mr. LaFalce), and the other
members of the conference committee for getting this job done quickly.
Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentlewoman from
Indiana (Ms. Carson), a member of the Committee on Financial Services.
(Ms. CARSON of Indiana asked and was given permission to revise and
extend her remarks.)
Ms. CARSON of Indiana. Mr. Speaker, I thank the gentleman for
yielding me this time.
Mr. Speaker, I want to applaud the gentleman from New York (Mr.
LaFalce), the ranking member, for staying the course and insisting that
we protect America and American investors, and also to Senator
Sarbanes.
I rise in support of H.R. 3763 for many reasons. I realize that
regardless of what we call it, there was passed by this Congress in
1994 a bill called Private Securities Litigation Reform Act which
opened up the floodgates for corporate greed. I appreciate the
gentleman from New York (Mr. LaFalce) staying the course and giving
more money to SEC so they have more resources to overseeing all these
public companies, over 17,000 plus.
[[Page H5470]]
Mr. Speaker, I rise to voice my support for the conference report on
H.R. 3763, however today we are being asked to vote on the minimum that
Congress should do and not the best.
According to the U.S. Department of Labor, within the past year, from
May of 2001 to May of 2002 the unemployment rate in my home district of
Indianapolis, IN rose from just under 3% to 4.5%. Now, there are more
than 39,000 people unemployed in the city of Indianapolis alone.
This high rate of unemployment is severely straining my state's
health care plan. According to the Indianapolis Star, enrollment in
Indiana's Medicaid program will reach its highest level ever to cover
nearly 800,000 residents, which is 56,000 more than are currently
covered now. This increase in program participants has caused a $660
million difference between the budget and actual Medicare costs and is
playing a major role Indiana's budget crisis. This is a problem that
more than 40 states have to deal with in this current economic crisis.
Mr. Speaker, even though we have all of these impressive statistics,
they really have very little meaning to the average American worker.
What means something to them is when they see their retirement benefits
and life savings going down the drain because some large corporation
has misled their investors.
Mr. Speaker, the corporate crisis has hit home in Indiana as well.
Indiana has its own Enron in AES Corporation, the global power company
and new owner of Indianapolis Power and Light. Like Enron, IPALCO
management sold stock while employees were encouraged to keep investing
in the company plan. After AES took control the value of employee stock
fell from $180,000 to around $18,000.
Now, as the Indianapolis Star reported last week, people like Joe
Nelson, a coal-handling supervisor at IPALCO, who had saved almost
$400,000 after 31 years of work can no longer retire. Joe has been
forced to open up a lawn mowing business just to help pay for the
bills.
Joe and his family are not alone, Mr. Speaker, many Americans are
being forced to postpone their retirement. In a recent Gallup pole 20%
of those surveyed said they expect to delay their retirement by an
average of 4.4 years because of the recent economic crisis.
We are constantly told that the stock drops are rollercoasters,
binges and economic hangovers that will disappear. However, it is the
retirement dreams of hard working hoosiers and the pension fund of
state governments that we see vanishing with little chance of
reappearance.
The Conference bill before us today provides the absolute minimum
protections to protect investors and restore market confidence.
Still, this measure could be stronger and certainly disgorging the
ill-gotten gains of these criminals and redistributing profits to the
victims must be the next step.
We hear frequently that there is little that Congress should do and
limit our interference. However, Congress passage of The Private
Securities Litigation Reform Act of 1995 got us to where we are today.
It repealed the civil RICO, thereby preventing defrauded investors from
obtaining triple damages when they bring securities fraud claims.
Mr. Speaker, if we are to restore market confidence, and investors
and workers are to be made whole, Congress must pass a strong bill that
sets penalties, protects whistleblowers, sends wrongdoers to jail, and
ensures transparency.
Assets required through fraud and betrayal of confidence should not
be allowed to stand when countless Americans close to retirement must
now rethink how they will downgrade their retired lives.
Mr. Speaker, indeed, if crime does not pay. Congress must reaffirm
that truth. We cannot, and must not, remain confused and weak in our
response to this crime wave.
We are a free market and American business interests but American
business must begin to conduct itself like it is interested in
Americans.
Mr. OXLEY. Mr. Speaker, I yield 1 minute to the gentleman from New
Jersey (Mr. Ferguson).
Mr. FERGUSON. Mr. Speaker, I rise in strong support of this
conference report. We have heard a lot of partisan posturing in the
last several weeks about this issue and trying to use this issue for
partisan gain. This issue is not about partisan politics, this is about
people, hard-working Americans who play by the rules, working toward
their own retirement and economic security.
Today we can finally put the partisan bickering aside and pass real
reforms that are going to save and protect the retirement security of
millions of Americans. This is not a win for either side on the
political aisle, this is a win for employees and investors and our free
market system that is based on the concept of trust.
Both the bill we passed in April and the bill that the Senate passed
more recently had good provisions, and this bill before us today, the
conference report, combines the strongest features of both bills. It
incorporates strong accounting oversight and bans firms from offering
services that create conflicts of interest. It establishes tough
criminal penalties because corporate criminals should not be allowed to
keep the money at the expense of hard-working Americans who wind up
suffering. No more mansions, no more yachts, no more private jets or
guaranteed cozy retirement packages for corporate executives who betray
the public trust. By passing this legislation, we send a clear message
to the corporate CEOs and to the accounting firms who monitor their
companies, let me be very clear: If you violate the public trust, if
you flush down the retirement security of millions of Americans, you
will and you deserve to go to jail.
Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentleman from New
York (Mr. Crowley).
Mr. CROWLEY. Mr. Speaker, I rise in strong support of this conference
report as it represents real reforms to protect investors, and will
lead to the first steps to restore investor confidence in our markets.
In addition to strengthening the role of the audit committees,
prohibiting executives from trading the stocks when employees cannot,
and including strong language with respect to disgorgement, this bill
also cracks down on the formerly unaccountable accountants. As every
American with a 401(k) knows, working Americans saw new examples of
accounting abuses almost daily, leading to a complete breakdown in the
system of outside auditing of publicly traded firms.
This bill prohibits these practices and I salute the ranking member,
the gentleman from New York (Mr. LaFalce), for championing these types
of reforms from day one, even when Democrats were being voted down on
party line votes in the committee to pass these types of reforms. This
bill strengthens audit committees, punishes criminal acts by greedy
CEOs and, most importantly, will ensure the independent auditors of
America's publicly traded corporations are actually independent.
I think that this landmark legislation serves as a great tribute to
our departing colleague, the gentleman from New York (Mr. LaFalce).
This House and all American investors owe a deep debt of gratitude to
the gentleman. This is a good bill, and I salute the gentleman from
Ohio (Mr. Oxley), Senator Sarbanes, and especially the gentleman from
New York (Mr. LaFalce) for their hard work.
Mr. OXLEY. Mr. Speaker, I yield 1 minute to the gentlewoman from New
Mexico (Mrs. Wilson).
Mrs. WILSON of New Mexico. Mr. Speaker, we have had some greedy
people who cooked the books, aided by accountants who dishonored their
profession. That is fraud, and they should go to jail for it. Now we
are going to tighten down some of the rules of the system to make sure
that this cannot happen again, and to restore confidence in the
American system of free enterprise.
I support American free enterprise, and because I support free
enterprise, we need to crack down on people who would break the law and
steal people's retirement security and the amount of money they are
saving for their kids' education.
It is a good step forward, and I commend the committee for their hard
work and for sending a clear message to the American people. We are a
country of free enterprise, and we will not tolerate people who break
the law.
Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentleman from New
York (Mr. Israel), a member of the Committee on Financial Services.
Mr. ISRAEL. Mr. Speaker, I rise to support this conference report,
but with a word of caution. This bill offers new rules and regulations.
The fact is that we had rules, and they were ignored. We had laws and
they were broken. We had regulations and they were worthless. We had
laws on the books, and the books were cooked.
[[Page H5471]]
Now we have new laws, and I am sure we have plenty of lawyers already
parsing the words and figuring out ways around them.
Mr. Speaker, all of the new rules and regulations will not be
effective if the fox continues to guard the henhouse. The words in this
bill will be no more than words if regulators continue to look the
other way. With this bill has to come true reform in how the White
House and the SEC and the Justice Department enforce those laws. The
American people played by the rules. They have seen their retirements
delayed, their college tuition funds depleted, their downpayments
disappear. Now they will be watching how serious Washington is, not on
the day that we pass this bill, but in the years going forward when it
must be enforced. We will be judged not by what we pass today, but by
how it is enforced tomorrow.
Mr. OXLEY. Mr. Speaker, I yield 1 minute to the gentleman from
Pennsylvania (Mr. Gekas).
Mr. GEKAS. Mr. Speaker, I rise in strong support of this legislation,
and one of the strong elements in it is what attracts me to a positive
vote for all of us in this measure. That is the tougher penalties that
are built into the new system that we are about to embark upon. The
deterrent value of that by itself makes it worthwhile for us to support
this legislation.
But as a passing glance on this whole scene, the American public
ought to take some satisfaction from the fact that the current law, the
law that is now on the books, has brought to justice the Arthur
Andersen firm, has brought to justice others in the various schemes
that have come to light, indictments are pending, and just recently we
had a picture in the Washington Post of the Adelphia CEOs being brought
to justice.
Mr. Speaker, as we are about to make the penalties tougher, we should
feel a little bit better about the current system because it is
bringing some of these people to justice.
Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentleman from
Texas (Mr. Doggett).
Mr. DOGGETT. Mr. Speaker, surely it is a true mark of success when
the same Republican leadership allows this bill to reach the floor
after they refused to respond years ago with genuine change, and, even
after the Enron fiasco, they rejected strong new laws, and who only a
few hours ago this very week were trying to mangle the determined
reform efforts of the gentleman from New York (Mr. LaFalce) and Mr.
Sarbanes. ``Success,'' by this measure, yes.
But for those who are about to retire and now see their retirement
account vanished, for those who saved to support a young person
obtaining a worthwhile college degree and now have only worthless
securities, for those who labored in their jobs and find themselves
jobless, this success comes a little too late to celebrate. They cannot
even afford the champagne cork to pop. For thousands of Americans, an
ounce of prevention from Congress that would have truly ensured a
vigilant public watchdog instead of a toothless lapdog for corporate
wrongdoers would have been worth much more than this belated pound of
cure that comes long after so many have suffered so very severely. They
can justifiably ask this Congress, ``Where were you when we needed
you?''
Mr. OXLEY. Mr. Speaker, I yield 1 minute to the gentlewoman from
Pennsylvania (Ms. Hart), a valuable member of our committee.
Ms. HART. Mr. Speaker, I thank the gentleman for yielding me this
time.
The House's decision to bring this bill to a conference with the
Senate was much derided, especially by those on the other side of the
aisle. But I am here to support this conference report and bring up a
couple of points that are very important in the bill that would not
have been included but for the decision of the gentleman from Ohio (Mr.
Oxley) and others to bring this bill to a conference.
The most important is that many people lose money when these
corporate criminals steal money. Those people are the investors, the
employees of those companies. The Senate bill did not include any
provision for those people to recover their money. That was placed into
the bill in conference placed in by the Republican House. This is one
of the most important issues to those who have invested in 401(k)s for
their retirement, and those saving money for their children's
education. Those people will be able to recover monies as a result of a
decision by the House to go to conference as a result of this fine
conference report that we will vote on today.
Mr. Speaker, the adoption of real-time disclosure will help people
make better decisions, and as a result of this conference report, we
will have much better enforcement.
Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentleman from
North Carolina (Mr. Price), a former member of the Committee on
Financial Services.
Mr. PRICE of North Carolina. Mr. Speaker, I rise in strong support of
the conference report on the Corporate Accountability and Accounting
Reform bill. I particularly want to commend the ranking member, the
gentleman from New York (Mr. LaFalce), for his steadfast leadership. I
also want to congratulate our House Republican conferees who, after
opposing the House counterpart of the Senate bill, offered by
Democrats, have finally read the economic tea leaves and capitulated to
the Senate on the bill's major provisions.
We now have a bill that creates a strong accounting oversight board,
restricts the nonaudit services that accounting firms can provide to
audit clients, implements tough new corporate responsibility standards,
requires public companies to disclose financial information quickly and
accurately, prohibits stock analysts' conflicts of interest, and
authorizes the SEC to enhance its investigative and enforcement
capabilities.
At last we have a serious reform bill. I urge my colleagues to
support it.
Mr. LaFALCE. Mr. Speaker, I yield 2 minutes to the gentleman from
Michigan (Mr. Bonior), the distinguished former minority leader.
Mr. BONIOR. Mr. Speaker, I thank the gentleman for yielding me this
time.
Mr. Speaker, if Americans work hard, they deserve a good wage. If
they get sick, they deserve health care. If they put a lifetime of
service into a company or government, they deserve a pension that
nobody can take away.
Over the last several months, we have witnessed despicable acts of
corporate irresponsibility by some of our Nation's largest
corporations. Workers and investors in Enron and DCT and WorldCom and
others, they have seen their life investments, their life savings,
disappear, their pensions wiped out, their health care benefits stolen,
their lives destroyed in many instances.
{time} 1130
Those at the top have refused to take responsibility while everybody
else has taken the fall.
We are here today to send a message loud and clear that if somebody
breaks the security laws, if they rob hard-working people of their
pensions, they will go to jail just like they would if they would rob a
bank. We are standing here to today and we are standing for the rights
of working people to know that their wages and their pensions and their
benefits are secure.
Mr. Speaker, this is a good effort and a good work by the gentleman
from New York (Mr. LaFalce) and Mr. Sarbanes and others in this body. I
commend it to my colleagues, and I urge them to vote yes on this
conference report.
Mr. LaFALCE. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman
from New York (Mr. Hinchey).
Mr. HINCHEY. Mr. Speaker, beginning in 1995, the leadership of this
Congress was successful in the following deregulatory efforts. They
shielded accountants and corporations from shareholder lawsuits. They
killed new Securities and Exchange Commission proposals to increase
standards to ensure that auditors are independent and objective in
certifying corporate numbers. They cut the Securities and Exchange
Commission budget, essentially limiting their ability to protect
investors from security scam artists. They passed deregulation of
energy derivatives, which enabled Enron to run wild, and they opposed
President Clinton's efforts to participate in international efforts to
check offshore tax havens. In other words, they created the climate
[[Page H5472]]
and increased the incentives to commit the kind of corporate fraud that
has robbed millions of Americans of their pensions and financial
security.
This bill corrects some of those, let me call them, mistakes. But it
does not do all that needs to be done. It does not deal with the issue
of corrupt manipulation of stock options. It does not deal with the
problem of fraudulent IPOs. Yes, this bill is a good bill as far as it
goes. It is certainly better than that cream puff legislation that was
out here last April or the fraudulent piece that came out here last
week. This is a much better effort and deals to some extent, to a
significant extent, with the real problems that were created as a
result of the deregulation mania that swept through this House and the
other House as well beginning in 1995. So let us pass it but let us not
kid ourselves. This was created here. It needs to be corrected here and
the job is not yet done.
Mr. LaFALCE. Mr. Speaker, I yield 1\1/2\ minutes to the gentlewoman
from Texas (Ms. Jackson-Lee), a member of the Committee on the
Judiciary.
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the gentleman from New
York (Mr. LaFalce) and the gentleman from Ohio (Mr. Oxley) as well who,
as he will recall in the early days of the Enron debacle, I joined him
in his hearings and I thank him for the kindness extended. And for
those of us in Houston, we thought that the world had collapsed and it
was only us.
I remember a teaming town hall meeting that I held with the interim
leadership of Enron, and one of those laid-off employees stood up and
said that he budgets his shaving cream and his toothpaste because he
was barely left with 75 cents. Those employees were laid off within 24
hours after Enron had filed bankruptcy, within 72 hours of giving
retention bonuses of $105 million to corporate execs.
But then we found out there was a roll call of corporate failures in
America. We knew it was not us, but we realized that on behalf of
America we had to do something. And I am glad that Mr. LaFalce stayed
strong on the strength and the toughness of these legislative
initiatives that would bring us now to the point where we do have
criminal penalties for securities fraud, and though I have an omnibus
bill that includes many of these features, and I am delighted that they
are incorporated in this legislation, we needed to speak now and we are
speaking now because we have legislation that penalizes those who would
alter or destroy documents.
It unfolded again in Houston as the Andersen trial proceeded. We give
shareholders the right to sue and most of all we require reports when
corporate insiders dump their stock. But, Mr. Speaker, we have yet one
more thing to do and I hope we will do it, and that is, to give secured
status to those unemployed workers who suffer when a company files
bankruptcy, and I hope we will pass that legislation in the near
future. I ask my colleagues to vote for this bill that will send a
strong message to the corporate markets of America.
This has been a year when the faith of ordinary Americans has been
badly shaken. The restatements of corporate earnings have been followed
by accusations of corporate wrongdoing at some of the country's largest
and most touted corporations, including Global Crossing, Bristol Myers
Squibb, Tyco International, and Worldcom Inc. The billions of dollars
in losses in shareholder equity are mounting every day.
The string of recent corporate disclosures undermines investor
confidence, scares off foreign investment, and slows down an already
shaky recovery. To me, it is not enough to talk about accountability,
you have to act to ensure it. Innocent investors have been betrayed by
the abuses of creative accounting practices and financial disclosure or
more appropriately non-disclosure. I am appalled at what has happened
to them as a result of this tragic event.
In today's economy, there is an emerging crisis of a lack of
universal confidence in our markets. What has failed is nothing more
than the system of overseeing our capital markets. We have an
opportunity and obligation to repair the trust of investors. It's
tempting to brush aside business ethics as a nebulous, well-intentioned
subject suitable for business school, with little practical value in
the real world. That is a big mistake. A 2000 survey by the Ethics
Resource Center found that 43 percent of respondents believed their
supervisors don't set good examples of integrity. The same percentage
felt pressured to compromise their organization's ethics on the job.
That's a startling number, two years before Enron imploded.
A crucial feature of corporate ethics is the understanding of the
business organization as a moral actor. Moral actor means that the
company can be held responsible and accountable from an ethical
perspective.
It is important to recall that the insistence on corporate ethics
does not diminish the importance of the ethics of individuals and
institutions. Corporate ethics fills a gap and recognizes the crucial
roles which business organizations play in modern societies. When moral
actors are held responsible for what they can do the usual games of
finger-pointing and blaming each other can be reduced. It has become
common practice for corporations to prepare an ethics code for the
guidance of their officers and employees. However, one corporate C.E.O.
has argued that this is simply an empty gesture since, ``those
corporations with a sound moral base do not need it and for the others
it is just a fig leaf.'' This is supported by the fact that the
introduction of corporate codes did not prevent the recent white collar
scandals.
There is a tendency in many corporate ethics codes not to make the
same clear cut demands of its directors as are made of its employees.
Consequently, it is difficult for employees to refrain from full
disclosure when managerial pressure is constantly brought upon them to
make a sale at any price. Moreover, corporate ethics codes which
promote whistle blowing, must in all fairness provide protection
(financial, moral and job security) for the whistle blower. No
corporate ethical code can operate when management policy seeks to find
legal loopholes in the requirements of the fiscal or regulatory
authorities. Just as the codes require individual conscience and
morality so do they require corporate management understanding that to
be law abiding is not enough.
I believe this is the time for immediate action by Congress as
thousands of employees and families are counting on congressional
leadership to rise up against corporate failures. Congress has a
responsibility to working class citizens of this country to provide
legislation that (1) ensures plan protection of retirement accounts, by
requiring plan diversification; (2) provides employees with investment
advice about plan assets; and (3) expands and imposes both civil and
criminal liability for pension plan fiduciaries and administrators. I
think that Congress has failed to enact the reforms needed to curb
these corporate accounting scandals.
The Enron debacle stands as a corporate wrong. The Enron fiasco has
established beyond a shadow of a doubt that white collar fraud can be
incredibly damaging and costs innocent Americans billions of dollars of
their hard earned money. Enron employees worked hard to build Enron
into one of America's largest and most profitable corporations, and
they should not be punished for what their corporate managers did.
Employees are fearful of losing their jobs. Investors are worried
whether they should continue to hold stocks in these failing
corporations and the stock market. Retirees are concerned about the
safety of their pensions. All these concerns undermine confidence in
our financial markets and have the potential to derail our economic
recovery. Because of all the corporate scandals that we have seen,
thousands of workers have been hurt, and millions of investors and
retirees have seen their 401(k)s gutted. I have introduced a bill that
protects workers, protects shareholders, and protects pensions, H.R.
5110, the Omnibus Corporate Reform and Restoration Act of 2002.
H.R. 5110 prioritizes employees by allowing them to make claims on
their corporation, after the corporation has filed for bankruptcy
protection, for wages or severance of up to $15,000. This is important
because workers have worked hard to build profitable corporations, and
should not be penalized by the fraudulent behavior of their corporate
managers.
Moreover, H.R. 5110 provides oversight of Boards of Directors, and
prohibits loans to company officers and directors, and creates criminal
penalties for destroying or altering documents. In addition, the bill
effectively prevents plan administrators from engaging in unlawful and
unethical practices, and ensures that plan participants who are allowed
to diversify their interest are adequately represented on pension
boards and receive adequate independent investment advise. In addition,
H.R. 5110 punished those who destroy or manipulate evidence of fraud.
H.R. 5110 provides prosecutors with better tools to effectively
prosecute and punish those who defraud investors and provides for tough
criminal penalties to make them think twice before defrauding the
public.
[[Page H5473]]
H.R. 5110 toughens criminal penalties for altering or destroying
documents. It also prohibits loans to officers and directors, which are
authorized by the Board of Directors. It establishes a 20 percent
Limitation on Employer Stock and Real Property held by Participant in
Certain Individual Account Plans. In addition, H.R. 5110 allows for
plan participants to ``opt out'' of the 20 percent limitation provided
that they give signed and written notice of such waiver. H.R. 5110
improves Accounting Standards for Special Purpose Entities [SPE]. It
compels the SEC to direct the Financial Accounting Standards Board to
revise applicable SPE accounting language, by increasing the 3 percent
rule to 10 percent. The 3 percent rule currently calls for an owner
independent of the would-be-parent to make a substantive equity
investment of at least 3 percent of the SPE's total capital.
The Senate has passed S. 2673, Public Company Accounting Reform and
Investor Protection Act of 2002 sponsored by Senator Paul Sarbanes.
This makes key improvements over our current system. It creates a
strong independent audit oversight board to audit the auditors. It
restricts the non-audit services that an accounting firm can provide to
public companies it audits. What this means is that auditors will not
have conflicts of interest which would interfere with their auditing.
In addition, it says that CEOs and CFOs must certify the accuracy of
financial statements and disclosures. Also, S. 2673 requires CEOs and
CFOs to relinquish bonuses and other incentive-based compensation and
profit on stock sales in the event of an accounting restatement
resulting from fraud. And most importantly, it authorizes funding for
the SEC to $776 million, as compared to the $469 million in President
Bush's budget request for the SEC.
It appears that the Republicans are trying to slow down the progress
of the Sarbanes bill, by bringing a bill that would impose tougher
criminal penalties on fraudulent corporate executives. They have passed
H.R. 5118, Corporate Fraud Accountability Act of 2002. Most troubling
about H.R. 5118 is the lack of whistleblower protection and the
extension of the statute of limitations for investor lawsuits.
S. 2673 extends whistleblower protections to corporate employees,
thereby protecting them from retaliation in cases of fraud and other
acts of corporate misconduct. Whistleblowers in the private sector,
like Sharron Watkins, should be afforded the same protections as
government whistleblowers. The Republican bill omits this provision.
Consequenlty, S. 2673 amends the unnecessarily restrictive statute of
limitations governing private securities claims. Under current law,
defrauded investors have only one year from the date on which the
alleged violation was discovered or three years after the date on which
the alleged violation occurred. Because these type of violations are
often successfully concealed for several years, the Senate increased
the time period to 2 years after the date on which the alleged
violation was discovered or 5 years after the date on which the alleged
violation occurred. This protects investors, but the Republican bill
lacks this provision.
Alan Greenspan, the Federal Reserve chairman, pointed out, in his
testimony to the Senate Banking Committee on July 17th, that a
corporate culture blighted by infectious greed was the cause of the
breakdown in confidence among investors. Chairman Greenspan, who has
been an advocate of deregulation and reliance on market forces to
police good business practices, acknowledged that he had been mistaken
in initially opposing government involvement in oversight of auditing.
``My view was always that accountants knew or had to know that the
market value of their companies rested on the integrity of their
operations'' and that government regulation of accounting was therefore
``unnecessary and indeed most inappropriate, but I was wrong''.
If the Chairman of the Federal Reserve says that his opinion was
wrong concerning oversight of auditors, then change is needed. We must
restore confidence in our financial markets by establishing sound
guidelines for corporate governance and auditing that investors can
trust and feel confident with their investments. I ask my colleagues to
support H.R. 2763, the corporate accountability report which includes
many of the provisions of my Omnibus Corporate Responsibility Act, H.R.
5110, and is now much stronger with whistleblower protection and
criminal penalties for document destruction and bad decisions by
corporate executives.
Mr. LaFALCE. Mr. Speaker, I yield myself the balance of my time.
This has been a long journey. I remember when we assumed jurisdiction
for the first time in the House Committee on Financial Services over
the field of securities. That was January of 2001. And one of the very
first things I did was to begin meeting with representatives from the
SEC, the Securities and Exchange Commission; and most especially with
the acting chairman at the time, Laura Unger, former staff assistant to
Senator D'Amato; and also with the chief accountant at the time, Mr.
Lynn Turner.
And from Ms. Unger I learned how grossly understaffed the SEC was. I
learned from her how much more money they believed they needed than
they were able to get out of OMB. I learned how limited their staff
resources were in comparison with the enormous increase in their work
load and I brought this to the attention of the House Committee on
Financial Services during hearings and during markups. We really should
have increased the authorization for the SEC much, much earlier.
From Mr. Turner I learned about the enormous number of earnings
restatements that the SEC was mandating. As a matter of fact, they were
tripling in 6 months what they had done the prior entire year. And I
learned about the earnings manipulation that was taking place in
corporate America, the earnings manipulation that was being done by
corporate officers, acquiesced in either knowingly, or unknowingly in a
great many instances--probably in most--by corporate directors, and
acquiesced in, either knowingly or unknowingly, but complicitly by
auditors, oftentimes with a conflict of interest.
I learned, too, about the enormous conflicts of interest that
research analysts had. That alarmed me so much so that I sent a
newsletter out to each and every one of my constituents in early 2001
called ``Protecting Your Investments'' where I talked about earnings
manipulation, where I talked about the desire of corporate officers,
directors, et cetera to increase market capitalization because their
compensation was based, in large part, on stock options and how we
needed to do something about that.
I talked in that newsletter about the conflicts of interest that
research analysts have because they have become hypesters, spinsters in
order to obtain investment banking business for their securities firms.
And I was disappointed when the only bill we took up was a bill that
would reduce the SEC fees. We did have one good provision in that bill,
and that was pay parity, but I thought we needed to give attention in
2001 to all of those issues. I was also disappointed when President
Bush, at the end of 2001, did sign that bill and could not bring
himself to even mention pay parity and the need for pay parity. All he
talked about was how wonderful it is to cut the fees that individuals
have to pay before the SEC.
I was disappointed when, even after Enron, which was at the very end
of 2001, when this should have been a matter that everybody was
concerned about. Wanting to do something, the President barely
mentioned the problems in corporate America and could not bring himself
to mention the problems of Enron. I was further disappointed because I
was writing the President letter after letter that his budget in
February of 2002 called for a minuscule increase of 6 percent, which
was not enough to do anything. We needed so much more, as Chairman
Oxley knows, because in 2002, we did pass a bill significantly
increasing the authorization, although not the appropriations, for the
SEC.
It has been a long journey. There have been good and bad ideas from
both Democrats and Republicans. I introduced the best bill that my
staff and I could think of early in 2002. I wish it had passed earlier.
It did not. I think an awful lot of its best ideas are in this
conference report, as are an awful lot of the best ideas of the
gentleman from Ohio and others, and I think we can stand proud today on
this product. I just wish we would have acted upon it earlier. There
are lessons to be learned from this for the future. This could fade
from memory.
[[Page H5474]]
Mr. Speaker, how much time do I have left?
The SPEAKER pro tempore (Mr. Sweeney). The gentleman's time has
expired.
Mr. LaFALCE. Let us vote for the bill. And we know what those lessons
are. Let us heed them in the future.
Mr. Speaker, I ask unanimous consent for 1 more minute.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from New York?
There was no objection.
Mr. LaFALCE. We would not be here today without the tremendous work
of staff. Staff really does it all. We put our names on legislation,
but staff really does the work. I have had a great staff. My staff
director, Jeanne Roslanowick, who is also my general counsel, is
magnificent. I have had so many individuals I cannot mention them all,
but Lawranne Stewart and Michael Paese of my staff have devoted almost
all their time from the day they came with me in drafting this
legislation. They gave it to the Senate, they worked with the Senate
staff basically, and Senator Sarbanes and his staff basically took our
work product. It is their work product, not mine, and they should be
recognized. If there are any names on this bill, it should be the names
of the staffers who really drafted it.
Mr. OXLEY. Mr. Speaker, I yield myself the balance of my time.
The SPEAKER pro tempore. The gentleman from Ohio is recognized for
3\1/2\ minutes.
Mr. OXLEY. Mr. Speaker, we indeed, I would say to my friend from New
York, have come a long way. This has been quite a journey. The
gentleman from New York pointed out that we had first gotten that
jurisdiction in the new Committee on Financial Services last January,
and what a ride it has been on a number of very important issues, but
nothing is more important really than restoring investor confidence in
our system, and that is really what brings us here today in this
legislation.
Our committee was the first to have a hearing when Enron became an
issue. That was back last year, in December. We were the first
committee to have a hearing on the WorldCom bankruptcy. We then passed
meaningful legislation, known as CARTA, back in April when nobody
thought we could do it, passed it out of the committee on a bipartisan
vote, came to the floor, it passed by a 3-to-1 margin with 119
Democrats voting for that legislation, and the heart and soul of what
we have today was embodied in the CARTA legislation.
There is a lot of misinformation out there that that is not the case.
Believe me, the idea of having an oversight board, an independent
oversight board, tightening the rules through the SEC, providing more
penalties and more transparency all were embodied in the CARTA
legislation and that is why it enjoyed such wide bipartisan support.
And then 3 months later, the Senate acted when the WorldCom situation
blew up, and I give them a great deal of credit. That is what brings us
here today, to adopt this conference report.
We have made enormous progress. The SEC is strengthened
substantially. The gentleman from New York mentioned the analyst issue.
Chairman Baker, at my direction last year, started hearings on analyst
conflicts and it brought us to a press conference in February in which
we announced that the SEC and the SROs were getting together and
drafting regulations. Those regulations have been in effect now for 2
weeks. Nobody knows about it because everybody is paying attention to
what is going on here in the Congress, but those are very important
rules that are going to be very effective in dealing with analysts and
their conflicts. The New York Stock Exchange, the NASDAQ, announced
listing requirements, again, virtually ignored in the media but really
have teeth in terms of corporate governance. They are saying to these
folks, ``If you don't get your act together, you're not going to be
listed on the NASDAQ or the New York Stock Exchange.''
{time} 1145
The Business Roundtable stepped forward with best practices.
So we are here today to celebrate, I think, a very strong bipartisan
bill. This is how the process works. We had great consultation and work
with the Senate. I want to pay tribute to my good friend from New York,
the ranking member of our committee, who I worked with on a number of
issues, and also in particular Senator Sarbanes, the chairman of the
Banking Committee in the Senate. I cannot think of anybody that I have
worked with in my 21 years in the Congress who has been more open to
ideas and suggestions and has been more professional in the way he has
handled himself on this important legislation, and he deserves a great
deal of credit for getting us where we are today.
Sometimes in the world of Washington politics it is all about who is
up, who is down, who has won, who has lost. The bottom line here is the
American people have won. We have restored or are beginning to restore
investor confidence with what we have done, as well as what happened in
the private sector and among the regulators.
Yes, we strengthened the SEC, and, yes, even with the increased
authorization, I would say to my friend from New York, the SEC will
still be getting twice the amount of fees that it will take to run the
organization.
This has been a wonderful experience I think for all of us, and I
would encourage and urge all of the Members to support this very strong
conference report. Let us get this bill to the President for his
signature, hopefully as early as next week.
I think all of us can take a great deal of pride in what we have been
able to accomplish today.
Mrs. MINK of Hawaii. Mr. Speaker, I rise in strong support of H.R.
3763, the Accounting Industry Reform Act. It represents an important
step to restoring the integrity of our corporate system. I commend the
conferees for producing a strong and effective piece of legislation.
At Enron, Adelphi, and WorldCom, executives and auditors cooked the
books in order to fatten their bank accounts while placing the
interests of their companies, their employees, and their shareholders
at risk. The public has responded to these accounting lapses with
understandable outrage. Thousands lost their savings. Even more lost
their retirement accounts. Thousands are without work, and companies
are facing bankruptcy.
H.R. 3673 imposes tough criminal penalties for corporate wrongdoing.
Many will serve time in jail. Among other things, it punishes those who
defraud shareholders of publicly traded companies and those who destroy
or create evidence with the specific intent of obstructing justice. The
bill also gives shareholders adequate time to pursue securities-fraud
cases, protects those who disclose information that help detect and
stop fraud, and compensates victims of securities fraud.
H.R. 3673 provides that corporate executives must certify their
financial reports and forces those found guilty of noncompliance to
forfeit profits and bonuses they may receive. It prevents officers and
directors who engage in wrongdoing to move from one company to another.
And, the bill prohibits corporations from providing ``sweetheart''
loans--that is, direct or indirect personal loans--to or for any
director or executive officer.
I strongly urge my colleagues to support H.R. 3673 and send a strong
message to executives, auditors, stock analysts, and directors that we
will no longer tolerate a corporate culture of greed that places entire
companies, thousands of jobs, and billions of dollars worth of private
investments at risk.
Mr. ETHERIDGE. Mr. Speaker, I rise in support of this corporate
reform bill to crack down on crooked business executives. This Congress
must take action to rein in these crooks and restore confidence in
American corporations.
Mr. Speaker, we must all remember that this bill regulates public
corporations, not privately-held companies. By accepting money from
private citizens, these corporations bear a special responsibility to
their investors and need to be held accountable.
The American financial system has been the envy of the world because
of its long history of integrity. Both individuals and corporate money
managers around the world have long believed that they could invest in
American stocks with confidence. They believed that the information
they received from public companies was timely and accurate.
Lately that trust has been sorely tested, and the plunging stock
market is a clear indicator of investor fears.
H.R. 3763, the Accounting Industry Reform Bill, will help restore
investor confidence in America's financial markets by instituting a
series of reforms that will increase corporate responsibility
standards, improve regulatory oversight and toughen criminal penalties.
With this legislation Congress sends a clear message to the American
people that we will not tolerate skirting securities laws in order to
obscure or cover-up financial mismanagement
[[Page H5475]]
and mask corporate greed. This bill will enact common-sense reforms for
publicly traded companies to keep investors safe and restore faith in
our economic institutions.
The American people put their trust and their money into the stock
market as a savings vehicle for their children's education, their
retirements and their financial stability. We owe it to them to make
sure everyone, not just corporate insiders and rich investors, has
access to the same accurate, clear and timely information on which to
base their financial decisions. I urge America's business leaders to
work with Congress and regulatory authorities to successfully implement
these new reforms, punish corporate criminals and restore confidence in
our financial markets.
Mr. GEORGE MILLER of California. Mr. Speaker, I rise in support of
the conference report on H.R. 3763, the ``Corporate and Auditing
Accountability, Responsibility, and Transparency Act of 2002.'' The
fact that the U.S. Congress is responding so quickly and strongly to
the corporate scandals that are unfolding each day demonstrates how
serious the problem is and the danger to the entire U.S. economy. Much
of the focus has been on the huge salaries, giant golden parachutes,
and obscene loans, all for the executives who were mismanaging many of
these corporations.
But that relentless greed has led to financial ruin for tens of
thousands of employees and shattered the retirement security of
hundreds of thousands of others. Throughout the 1990's, Wall Street
kept telling everyone that the stock market could be an ever expanding
pie and everyone would be a winner. People who had never bought a stock
in their lives were convinced to invest, and often, invest with
inadequate information about how to do so and protect their economic
security at the same time.
But little by little, many companies had to lie and steal to keep the
myth going. And now we are all paying the price. I hope the bill before
us will stem the tide. I hope Wall Street and Main Street will wake up
and learn to play by the rules once again. And let's be clear: this
bill establishes much tougher rules. There is no magic way to make
money. Companies have to earn it. They have to make products that
people want to buy. They have to treat people fairly. You can't cook
the books and pretend you have profits. Corporate America has to go
back to the basics and earn the trust of the American people again.
I particularly want to comment on the effect the still-unfolding
corporate scandals have had on our pension system and the work still
before Congress. Part of today's problem has also involved companies
using their pension plans like company bank accounts. That behavior
must stop, and Government regulators must do a better job to ensure it
has stopped. Pension plans are the employees' money. Workers should
have involvement and be provided full information on how their pension
plan is operated.
The bill before us requires pension plans to provide 30 days advance
notice of any restrictions on the sale of employer stock or other plan
investments. A proposal first included in the pension reform bill
proposed by Democrats on the Committee on Education and the workforce.
I am glad that the bill toughens current ERISA criminal penalties for
ERISA violations.
I am glad the bill cracks down on insider trading and loans to
corporate officers, a provision first proposed in legislation I
recently introduced.
But, we need to go even further. It is time for the Congress to pass
strong pension reform to protect the retirement security of all
employees. We need to give workers a right to control their own pension
funds. We need pension funds and mutual funds to demand better
corporate governance. We need to look more aggressively at the adequacy
of our retirement system. American workers will not be able to retire
if their 401(K)s continue to be treated as piggy banks for Wall Street.
We have a lot of work still ahead of us, but today is a great step
forward. I urge the Congress to continue to be vigilant and ensure that
corporations play by the rules and act fairly.
Mr. OXLEY. Mr. Speaker, it is my understanding that the Board will
have discretion to contract or outsource certain tasks to be undertaken
pursuant to this legislation and the regulations promulgated under the
Act. Examples of tasks suitable for contracting or outsourcing would
include maintenance of computer databases and registration records. Of
course, an exercise of discretion in this manner does not absolve the
Board of responsibility for the proper execution of the contracted or
outsourced tasks.
Mr. BEREUTER. Mr. Speaker, this Member rises today to express his
strong support for the conference report on H.R. 3763, the Public
Company Accounting and Investor Protection Act of 2002. This bill is
necessary to protect investors by ensuring auditor independence in the
accounting of publicly traded companies.
Recent corporate scandals, such as Enron, Arthur Andersen, WorldCom,
Global Crossing, and Tyco, have shaken investor confidence in the U.S.
stock market. The ``looting'' of businesses for unreasonable personal
gain and the flagrant deception of stockholders and investors by top
executives in some instances has been outrageous. This Member believes
that a renewed sense of corporate responsibility in America is needed
in order to restore the trust of investors. Guilty corporate leaders
should serve prison terms and not in ``country club'' prisons. As a
result of these recent corporate scandals, Congress is voting today on
this conference report in order to strengthen the laws which govern
publicly held corporations and accounting firms.
This Member would like to first express his appreciation to the
distinguished gentleman from Illinois (Mr. Hastert), the Speaker of the
House, and the Distinguished gentleman from Texas (Mr. Armey), the
Majority Leader of the House, for bringing this conference report to
the House Floor before the August recess and thereby sending a strong
signal--that corporations, and those individuals who run such
corporations, must be responsible, and if they are not responsible,
then this legislation will ensure that they pay a stiff price for such
arrogance and deception.
This Member would also like to express his appreciation to the
distinguished gentleman from Ohio (Mr. Oxley), the Chairman of the
House Financial Services Committee, for his steadfast efforts to bring
this conference report to the House Floor. In addition, this Member
would like to express his appreciation to the distinguished gentleman
from Louisiana (Mr. Baker), the Chairman of the Financial Services
Subcommittee on Capital Markets, Insurance, and Government Sponsored
Enterprises, for his innovative efforts, which are included in this
conference report. Lastly, this Member would also like to give
recognition to the distinguished gentleman from Maryland
(Senator Sarbanes), the Chairman of the Senate Banking Committee, for
his good faith efforts in negotiating this conference report.
It is very important to note that in April the House acted first in
response to this crisis of confidence in corporate responsibility when
the House passed its original version of corporate accounting reform
(H.R. 3763) on April 24, 2002, by a bipartisan vote of 334-90. The
Senate later passed its legislation (S.2673) on July 15, 2002, by a
vote of 97-0. However, subsequent to the House and Senate's passage of
their respective bills, many more corporate accounting scandals have
been brought to the public's attention. Therefore, to address these
increasingly serious matters, the House passed the Corporate Fraud
Accountability Act of 2002 (H.R. 5118) on July 16, 2002, to further
strengthen criminal penalties and provide jail terms for accounting and
auditing improprieties at publicly traded companies. As such, this
Member is pleased that the conference report for H.R. 3763 properly
takes the best provisions from each of the House-passed bills and the
Senate-passed bill in order to give maximum future protection to
American investors.
Therefore, this Member would like to discuss the following important
provisions of the conference report for H.R. 3763, which provide the
following: (1) creates a public company accounting oversight board; (2)
increases auditor independence; (3) stiffens criminal penalties; (4)
holds corporate executives accountable; and (5) provides for enhanced
corporate disclosures to investors.
1. public company accounting oversight board
First, the conference report creates a public company accounting
oversight board consisting of five members whom are independent of the
accounting industry. Three of the five members must never have been
practicing accountants and the other two members may only be
accountants who have not practiced activiely for the past five years.
This oversight board is authorized to set auditing, quality control and
independence standards and it has disciplinary powers to impose
sanctions including a finding that a firm is not qualified to audit
publicly held companies.
Under current law, accountants for publicly held corporations are
subject to partial oversight by both their professional organizations
and governmental agencies, including the American Institute of
Certified Public Accountants, the Federal Accounting Standards Board,
the Securities and Exchange Commission, and the state boards of
accountancy which license accountants at the state level.
2. auditor independence
The H.R. 3763 conference report also addresses the problems of
auditor independence which, for example, were evident in Arthur
Andersen's disputed accounting of Enron. This Member would like to
focus on the following three auditor independence provisions of this
legislation which: makes the audit committee of the board of directors
of a publicly held corporation responsible for the hiring,
compensation, and the oversight of the independent auditor; prohibits
accounting companies from providing enumerated consulting and auditing
[[Page H5476]]
services to publicly held companies (This addresses an obvious conflict
of interest. It is important to note that this conference report states
that auditors may provide permitted consulting services, such as tax
preparation, for their publicly held auditing clients with the approval
of the audit committee of the client's board of directors.); and
requires the rotation of the chief audit partner after auditing a
publicly held company for five consecutive years.
3. Strengthens Criminal Penalties
The H.R. 3763 conference report appropriately increases the criminal
punishment for those corporate crooks who defraud their investors. For
example, the conference report creates a new crime of ``securities
fraud'' whereby whoever knowingly executes a scheme or artifice to
defraud any person in connection with any security shall be fined and/
or imprisoned for not more than 25 years. In addition, this conference
report also increases the criminal maximum prison term for mail fraud
and wire fraud violations from 5 to 20 years.
Furthermore, the conference report for H.R. 3763 strengthens the laws
that criminalize document shredding and other forms of obstruction of
justice. This conference report allows a maximum prison term of 20
years for tampering with evidence and a maximum prison term of up to 10
years for destruction of audit records. It is important to note that
the criminal penalties in this conference report are very similar to
those found in the Corporate Fraud Accountability Act of 2002 (H.R.
5118) which the House passed on July 16, 2002.
4. Holds Corporate Executives Accountable
As is well documented, recently a number of corporate executives have
abused their power to the great detriment of their shareholders. For
example, some corporate executives, who defrauded their investors of
their savings, are still able to live in their extravagant mansions.
The conference report for H.R. ??36763 addresses these abuses, as the
agreement requires chief executive officers and chief financial
officers of publicly held companies to certify the accuracy of
financial reports and holds them liable if they knowingly deceive the
public with such reports. Furthermore, the measure also mandates that
chief executive officers and chief financial officers of publicly held
companies must return bonuses received within one year of any company
report that requires a correction because of misconduct.
Additionally, it is important to note that this conference report
further addresses corporate executive impropriety by including a
provision known as the Federal Account for Investor Restitution (FAIR),
which was initiated by the distinguished gentleman from Louisiana (Mr.
Baker). The FAIR provision requires that funds be returned from these
fraudulent corporate executives to investors who have lost money in the
markets as a result of corporate executive malfeasance.
5. enhanced corporate disclosures for investors
Finally, in order to keep investors fully apprised of the activities
of a publicly held corporation, a provision in the conference report
requires companies to make real-time disclosures of financial
information that is important to investors, such as material changes in
a company's financial condition. This provision is an initiative of the
House and this Member is pleased that the Senate agreed that this was
an important provision to include in this measure.
Mr. Speaker, on a different note, it should be noted that this Member
is a cosponsor of H.R. 5147, which was introduced by the distinguished
gentlelady from California (Ms. Bono) and the distinguished gentleman
from Nebraska's 2nd Congressional District (Mr. Terry). This
legislation would require that the value of stock options granted by a
public corporation to an officer or employee must be recorded as an
expense in a corporation's financial statement. However, this Member
believes that it is very unfortunate that the concept behind H.R. 5147
is not included in the conference report of H.R. 3763.
This Member also believes that it is necessary to count stock options
as corporate expenses. Publicly held companies currently are able to
hide billions of dollars of costs and thus inflate profits through the
loophole of not counting the cost of stock options as an expense. A
distinguished Nebraskan, Mr. Warren Buffet, has been a strong advocate
of counting stock options as expenses. In fact, he serves on the
corporate boards of Coca-Cola and the Washington Post, both of which,
on their own initiative, have decided to count their stock options as
expenses. This Member would encourage other corporations to follow
their example and would also encourage his distinguish colleagues (Mr.
Terry and Ms. Bono) to continue their pursuit of H.R. 5147's passage
into law.
Mr. Speaker, in conclusion, this Member would note that the
conference report for H.R. 3763 is a giant step forward in providing
further protection for investors of publicly held corporations in the
future. In addition, this Member firmly hopes that the corporate
executives at Enron, Arthur Andersen, and WorldCom are punished in the
proper manner for their grossly irresponsible, probably illegal,
corporate behavior.
In closing, this Member urges his colleagues to support the
conference report for H.R. 3763.
Mr. LUTHER. Mr. Speaker, today represents what this Congress can
accomplish when we work together in a bipartisan manner. Today this
Congress is poised to pass legislation that will go a long way toward
restoring the integrity of the equity markets and, consequently,
investor confidence in those markets.
It took us far too long to get here. In late April, this House passed
a bill that represented a start, but was still wholly inadequate in
addressing the deficiencies that currently plague corporate auditing
and securities regulations. Those deficiencies have now largely been
addressed in this Conference Report. By creating a truly independent
accounting oversight board, mandating true auditor independence,
requiring CEO certification of the accuracy of financial statements,
imposing stiff criminal penalties for fraud, and initiating a
rulemaking procedure for the conflicts of interest of stock analysts,
this Conference Report represents a promising legislative response to
jittery investors who understandably have lost faith in the financial
information on which they rely.
Most importantly, this legislation substantively addresses the type
of massive and egregious corporate fraud that has hurt so many ordinary
Americans. Thousands of hard working employees have been mercilessly
punished for the deeds of rich executives who enriched themselves by
pushing the envelope on accounting standards, sometimes to the point of
criminal culpability. If there is one outcome to this bill that we can
all be particularly proud of, it is the knowledge that we are
protecting millions of hard-working Americans--their jobs, their
investments and their pensions--from unethical corporate behavior. This
impact on the lives of ordinary citizens cannot be understated, and I
am very pleased that we have finally come together as a Congress to
address their needs and not the needs of entrenched corporate interest
groups that too often dominate the political deliberations of this
Congress.
Thank you, Mr. Speaker, and I yield back the balance of my time.
Mr. SHOWS. Mr. Speaker, today I rise in favor of the bipartisan
conference report on Corporate Accountability that provides necessary
reform and the appropriate reaction to the current business climate of
scandal and fraud.
Although many honest corporate officers and executives abide by sound
business principles, we now have the framework in place to prevent
wrongdoing and punish those who refuse to play by the rules.
Consumers, employees, and investors affected by the recent revelation
of widespread financial misrepresentation and fraud deserve both
answers and solutions so that confidence in accounting independence,
objectivity, and integrity is restored.
In my district, the work of honest, hard-working employees and the
reputation of a home grown Mississippi company has been infected by
corporate greed, as executives cooked the books, deceiving the
investing public and company employees.
In fact, in the few days since this conference began, WorldCom, the
second largest long distance provider in the U.S. and the only Fortune
500 company in Mississippi filed for bankruptcy.
I was disappointed that the Shows-Leahy provision, which would have
increased the amount of severance pay that WorldCom employees would
receive under the bankruptcy filing, was not included in the conference
report. Unfortunately, although House Republicans accepted almost all
of the tough, Senate Democratic provisions, they refused to accept this
important worker protection provision. WorldCom employees faced
unexpected job loss through no fault of their own. They deserve fair
treatment and due severance. As the Congressman who represents
WorldCom's headquarters and the many employees and investors who have
suffered from the revelation of accounting improprieties at WorldCom, I
will continue to push this issue and to call on my colleagues in
Congress to support commonsense worker protection.
Investors and employees charged the conference committee to look at
the systemic issues that have encouraged executives in the corporate
world to ignore sound business principles.
We have answered this call and delivered a strong bill. This reform
package establishes a new independent, regulatory body--the Public
Accounting Oversight Board--that will oversee the auditing of publicly-
traded companies. Under these reform provisions, CEOs will be required
to certify the accuracy of company financial reports. Company loans to
corporate officers will be prohibited, and auditors will be required to
maintain true independence from
[[Page H5477]]
the company under review. The bill also requires the forfeiture of
bonuses and other incentives in the event of an accounting restatement
and serious misconduct by an executive officer.
Victims whose savings and retirement was lost at the hands of greedy
corporate executives should be compensated. The Corporate
Accountability package requires the Securities and Exchange Commission
to establish the ``FAIR'' fund. This fund would be used to compensate
victims who lost money because of corporate wrongdoing. Funds for FAIR
would come from civil penalties collected from corporate executives
through administrative or judicial fines.
I appreciate the opportunity to serve as a member of the Conference
Committee. I am proud of the product reached through bipartisan
negotiations. I fully support the strong measures in the Public Company
Accounting Reform and Investor Protection Act because, although we
cannot legislate corporate morality, provisions in this bill will deter
and severely penalize those who lie, cheat, and steal by falsifying a
company's financial statements to pad executives' pockets on the backs
of its employees and shareholders. U.S. investors and employees deserve
no less.
Mr. CHAMBLISS. Mr. Speaker, I rise today in support of H.R. 3763, the
Corporate Accountability Act of 2002. I congratulate my good friends
Congressman Oxley and Congressman Baker not only for their leadership
on this legislation but for the leadership they have provided to this
body in passing real reforms for corporate accountability.
Whether it is Global Crossing, Arthur Anderson, WorldCom, Enron, Tyco
or Adelphia the story is the same. Some executives are cooking the
books and employees and public stock holders are left holding the bag.
Mr. Speaker, a crook is a crook, and it doesn't matter if you use a 38
special or a golden pen if you steal you should go to jail.
I urge my colleagues to support this legislation, so when I go home
to Georgia next week I will be able to look folks in the eye knowing
that we passed legislation today which will, provide stiffer penalties
and greater oversight, so corporate crooks will no longer be able to
prey on hardworking Georgians who play by the rules.
Mr. ROYCE. Mr. Speaker, thank you for this opportunity to voice my
support for this important legislation. Last Friday, during the first
hearing called for this conference committee, I stated my belief that
the similarities between the House and Senate versions of this bill
were greater than the differences between them. My belief has been
vindicated here today, proven by the speedy conclusion reached between
the House and the Senate on this conference report.
Last Friday, I also spoke of my desire to work with my colleagues
from the other body, and from the other side of the aisle, to send
President Bush the strongest, most sensible bill possible so that we
could restore investor trust in the fairness of our capital markets. I
believe that this legislation does precisely that, and I would like to
compliment Chairman Oxley and Chairman Sarbanes for their hard work,
dedication and willingness to compromise to reach a quick conclusion on
this bill on behalf of the American people. The American investors who
have lost their hard-earned savings, and those hard-working employees
who have lost their jobs because of corporate malfeasance deserve quick
and decisive action from their elected officials. Today, we have risen
above partisanship and helped to restore confidence in the American
capitalist system.
Last week I described the bi-partisan, anti-fraud sentiment that I
believe is motivating each of us to reform American corporate
governance and auditing standards by passing this legislation. Many of
us here recognized a shortcoming in our legal system--the reticence to
treat corporate criminal behavior as seriously as we treat common
criminal behavior--and resolved that this bill should reflect the true
seriousness of white-collar crime.
I believe that that this legislation accomplishes this task. By
including the House-passed language to increase the criminal penalties
for securities fraud, document-shredding and mail and wire fraud, I
believe that we have acted wisely and swiftly to prevent other Enrons,
WorldComs and Global Crossings from happening. By including Chairman
Baker's FAIR language, we have ensured that wronged shareholders whose
hard-earned savings are stolen from them by pinstriped crooks have
those funds returned to their retirement accounts, and not used to
build a $100 million retirement mansion in Bermuda for an expatriate
executive. By ensuring that companies disclose material changes to
their financial condition to the public on a rapid and current basis,
we have ensured that everyone, not just corporate insiders, has access
to it.
I would like to congratulate all of my colleagues here today on their
excellent work in producing this legislation, and I look forward to
seeing President Bush sign it into law. The American people deserve
nothing less.
Ms. ESHOO. Mr. Speaker, I rise in strong support of this Conference
Report. Our markets have traditionally been the deepest, broadest and
most transparent in the world. This transparency has given Americans
confidence in those markets. Today, tragically that confidence has been
shaken to the core. Innocent investors and employees have been
decimated because of the collapse of once Fortune 500 companies.
This legislation will take a major step toward restoring confidence
in corporate America, confidence in our markets, and confidence in our
government's ability to protect investors from fraudulent activity.
This bill gives the SEC the tools it needs to prevent future Enrons,
Worldcoms, and other corporate scandals.
The bill we're voting on today: requires the SEC to appoint a full-
time board to oversee and discipline if necessary auditors of publicly
traded companies; prevents audit firms from providing consulting
services to companies they audit, putting a stop to what was a major
conflicts of interest; require CEOs and CFOs of public companies to
certify the accuracy of financial reports and be held liable for
knowingly deceiving the public; and greatly increases the prison
sentences for fraudulent activity. We've witnessed daily one corporate
scandal after another so we know corporate self-governance has failed.
This bill responds to that failure with tough measure that ensure
U.S. corporations, their executives, and the companies that audit them
are fully accountable for the financial information they provide to
investors.
I salute the work of Senator Paul Sarbanes, who's tireless effort led
to this strong and solid bill. No matter what the criticisms have been
to roll back or roll over, he stayed the course and now we will finally
have the largest reforms to the SEC since the Great Depression.
Decent Americans deserve these protections. I urge my colleagues to
support this measure.
Mr. BLUMENAUER. Mr. Speaker, today Congress will approve the Public
Company Accounting Reform and Investor Protection Act of 2002
Conference Report, which will likely be signed into law by the end of
this week. Like families nationwide who have seen investment savings
deteriorate and have lost confidence in our markets and business
leaders, I have been concerned with revelations about inaccurate
corporate accounting and inappropriate and in some cases illegal
corporate practices. Recent events have had tragic consequences in my
district where employees of Portland General Electric had little
control over the company's association with Enron.
I support this legislation that will provide funding and regulations
that will improve the integrity of the corporate world and help
alleviate the anxieties of employees and investors. I trust that this
is an incremental step in the process to bring about accurate financial
statements and independent relationships among corporate management,
auditors, and investment analysts. The marketplace or Congress will
need to address the issue of stock options to ensure meaningful
reporting and eliminate perverse incentives, while not preventing
companies from offering this important incentive to compensate
employees and give them ownership opportunities
While reforms are absolutely necessary, witness the 270 public
companies that restated their financial statements in 2001, I'm also
concerned that Congress does not turn this into a witch hunt or pass
ill-conceived legislation. I will continue to work to ensure that we do
not overreach our objective of a sound economy, ethical management and
arms-length transactions. We will not be helping families and the
economy be implementing unnecessarily stringent regulations that are
costly and burdensome.
This legislation begins the process of putting in place the reforms
needed to prevent future tragedies that are so devastating to the
savings and lives of American workers and families. As we move forward,
I urge my colleagues to continue to develop fair provisions that will
both protect investors and employees while allowing the economy to
thrive.
Mr. CONYERS. Mr. Speaker, I am very pleased that the conferees have
reached an agreement on accounting reform, and I want to congratulate
Chairman Sarbanes and Chairman Oxley for their work on this issue. I
also want to thank Chairman Leahy and Ranking Member LaFalce for their
stellar leadership in the area of corporate fraud.
The proposed agreement includes nearly all of the important
safeguards from the legislation Senator Leahy introduced in the Senate
and that I introduced in the House in April. Among other things, the
agreement includes language lengthening the statue of limitations for
securities fraud, mandating document retention for auditors, civil
whistle blower protection, and sentencing enhancements for document
shredding. Some made no secret of the fact that they would have
preferred to gut
[[Page H5478]]
these safeguards. But in the end, Senate Democrats stood their ground,
and this legislation represents a major win for the American public.
I wish House Republicans would have been able to agree to these
critical reforms earlier, but in the end I believe we have strong
legislation that will provide defrauded investors with a greater
ability to recoup lost assets, afford prosecutors with increased tools
to pursue corporate wrongdoers and impose harsher penalties for those
accused of committing securities fraud.
As good as this bill is, it's important to note that the agreement is
just a first step toward protecting American investors and workers. We
still need to fix the many, many giveaways enacted by Congress in the
1995 Securities Litigation bill. For example, we need to restore civil
liability against those that aid and abet securities fraud violators,
and make sure that civil RICO applies in full to securities fraud.
Measures such as this will make it abundantly clear that we will not
tolerate future Enron or Worldcom situations.
With nearly 80 million citizens either directly or indirectly
invested in the stock market, it's incumbent upon us, as Members of
Congress, to provide hardworking Americans with the necessary
protections to safeguard the money they'll depend on in their
retirement. Hopefully, the actions taken today will be the first step,
of many, toward achieving this goal.
Mr. FORD. Mr. Speaker, I rise in strong support of the conference
report on H.R. 3763. This agreement is a great victory for investors,
and for our economy.
Ofr course, it will take much more than legislation to restore the
confidence in the markets that has been lost. But this bill puts in
place a framework to restore confidence and ensure the integrity of the
markets.
I salute Chairman Oxley for his willingness to compromise on such
important issues, and Ranking Member LaFalce for his steady leadership.
this legislation will crown his legacy in Congress and on the financial
services Committee.
I am pleased that the conference report includes every substantive
provision of the comprehensive reform bill written by Senator Sarbanes.
These include: establishing a strong and independent oversight board
for the accounting industry to enforce high standards for auditors of
public companies; ensuring that the independence of public auditors
isn't compromised by consulting fees from their clients; separating
Wall Street research form investment banking--so that small investors
have access to the same unbiased research as insiders; imposing tougher
criminal penalties for corporate fraud--while at the same time
establishing a victims' restitution fund to disgorge the ill-gotten
gains of corporate executives. white-collar thieves should not be
allowed to walk off with the money they have stolen from investors and
employees; disclosing insider stock transactions in real-time; not days
after the fact; and at long last providing the SEC with the resources
it needs to do its job. It may not give Commissioner Pitt the raise or
the new limousine he has asked for. But it will allow the SEC to
upgrade its computer systems and hire new investigators.
Mr. Speaker, more than half of all Americans are invest in the stock
market. they have entrusted public companies with their retirement
savings and their children's college funds. And too often, they have
been betrayed by those in positions of leadership and responsibility.
With this legislation, we cannot ensure the honesty and integrity of
every individual, but we go a long way in strengthening the honesty and
integrity of our system.
Mr. TIAHRT. Mr. Speaker, I rise in strong support of the accounting
reform and corporate accountability conference report before us today.
I commend my colleague, Chairman Oxley, for the outstanding work he has
done in crafting a final bill which will fully prosecute those who have
violated the law and restore confidence in America's financial markets.
Like all Americans, I have been outraged at the revelations which
have come to light in recent months concerning the practices of a
number of public companies such as Enron and WorldCom, as well as the
auditing practices of companies such as Arthur Andersen. While the list
of affected companies pales in comparison to the more than 11,000
publicly traded U.S. companies, even a few transgressions are too many.
The bill before us would increase the maximum jail terms for mail and
wire fraud from five years to 20 years, and create a new 25-year
maximum jail sentence for securities fraud. Under the bill, securities
fraud is defined as intentionally defrauding an individual in
connection with a security or obtaining money from the purchase or sale
of a security based on false pretenses. Additionally, the Conference
Report strengthens laws which criminalize document shredding and other
forms of obstruction of justice by providing a maximum penalty of
twenty years for such a violation. Criminal penalties for pension law
violations would be increased from a fine of $5,000 to $100,000 and
from maximum jail time of one year to ten years.
As the recent improprieties have shown, corporate leaders, including
CEOs, have been implicated in wrongdoing. Those who have the privilege
of leading America's corporations have a responsibility to their
investors, employees, and the public, to set ethical standards under
which their companies operate. This legislation requires top corporate
executives to certify that the financial statements of the company
fairly and accurately represent the financial condition of the company
and calls for penalties of up to ten years in prison and/or a $1
million fine. In general, willful and criminal violations of securities
laws would carry a new maximum fine of $5 million--up from $1 million--
and a new maximum prison-term of 20 years, up from ten years. If the
violator is not an American citizen, the fine would increase to $25
million. Any attempts to retaliate against informants would carry a
maximum ten-year prison term and/or fines under SEC laws.
One important area which this bill does not address is the issue of
returning ill-gotten corporate gains to investors. I believe Congress
must act to ensure that investors are able to reclaim their losses
which are due to corporate fraud. And after the corrupt executives
return the hard earned money of employees and investors, they need to
get out of their mansions and yachts, and get into a jail cell.
Corporate officers who steal the retirement savings of hard-working
Americans are no better than common purse snatchers on the street. In
fact, they are worse given the position of trust and responsibility
with which they are entrusted. If they ``cook the books'' in order to
show a better bottom line, there will be a heavy price to pay.
I believe this bill sends a strong message to corporations throughout
America that those who break the law will be severely punished. By
dramatically increasing maximum prison terms and strengthening
accountability and oversight, we have begun working toward the goal of
reforming corporate America in a way which will enable citizens to have
confidence in our financial markets.
I urge my colleagues to pass the Sarbanes-Oxley Conference Report.
Ms. JACKSON-LEE of Texas. Mr. Speaker, this has been a year when the
faith of ordinary Americans has been badly shaken. The restatements of
corporate earnings have been followed by accusations of corporate
wrongdoing at some of the country's largest and most touted
corporations, including Enron, Global Crossing, Bristol Myers Squibb,
Tyco International, and WorldCom Inc. The billions of dollars in losses
in shareholder equity are mounting every day.
The string of recent corporate disclosures undermines investor
confidence, scares off foreign investment, and slows down an already
shaky recovery. To me, it is not enough to talk about accountability,
you have to act to ensure it. Innocent investors have been betrayed by
the abuses of creative accounting practices and financial disclosure or
more appropriately non-disclosure. I am appalled at what has happened
to them as a result of this tragic event.
In today's economy, there is an emerging crisis of a lack of
universal confidence in our markets. What has failed is nothing more
than the system of overseeing our capital markets. We have an
opportunity and obligation to repair the trust of investors. It's
tempting to brush aside business ethics as a nebulous, well-intentioned
subject suitable for business school, with little practical value in
the real world. That is a big mistake. A 2000 survey by the Ethics
Resource Center found that 43 percent of respondents believed their
supervisors don't set good examples of integrity. The same percentage
felt pressured to compromise their organization's ethics on the job.
that's a startling number, two years before Enron imploded.
The Enron debacle stands as a corporate wrong. The Enron fiasco has
established beyond a shadow of a doubt that white collar fraud can be
incredibly damaging and costs innocent Americans billions of dollars of
their hard earned money. Enron employees worked hard to build Enron
into one of America's largest and most profitable corporations, and
they should not be punished for what their corporate managers did.
Employees are fearful of losing their jobs. Investors are worried
whether they should continue to hold stocks in these failing
corporations and the stock market. Retirees are concerned about the
safety of their pensions. All these concerns undermine confidence in
our financial markets and have the potential to derail our economic
recovery. Because of all the corporate scandals that we have seen,
thousands of workers have been hurt, and millions of investors and
retirees have seen their 401(k)s gutted. I have introduced a bill that
protects workers, protects shareholders, and protects pensions, H.R.
5110, the Omnibus Corporate Reform and Restoration Act of 2002.
[[Page H5479]]
H.R. 5510 priorities employees by allowing them to make claims on the
corporation, after the corporation has filed for bankruptcy protection,
for wages or severance of up to $15,000. This is important because
workers have worked hard to build profitable corporations, and should
not be penalized by the fraudulent behavior of their corporate
managers.
Moreover, H.R. 5510 provides oversight of Boards of Directors, and
prohibits loans to company officers and directors, and creates criminal
penalties for destroying or altering documents. H.R. 5110 punishes
those who destroy or manipulate evidence of fraud. It provides
prosecutors with better tools to effectively prosecute and punish those
who defraud investors and provides for tough criminal penalties to make
them think twice before defrauding the public.
The conference report, H.R. 3763, Corporate Accountability Conference
Report, hoping to restore confidence in the scandal-tainted corporate
world, has agreed to new regulation of corporation and their auditors.
The conference report also establishes stiffer penalties for those
corporate managers who commit financial fraud. The report holds
corporate executives criminally liable for cooking their books if they
knowingly and willfully certify them.
The Conference report establishes a new broad to oversee the auditors
of companies traded on the stock markets. The conferees limited
accounting firms' ability to profit as both auditors and consultants to
the companies they audit. The conferees also gave shareholders more
time to sue companies that mislead them. The conference committee also
increases the maximum fines and jail sentences for corporate managers
who violate new and existing corporate laws.
The report also says that CEOs and CFOs must certify the accuracy of
financial statements and disclosures, and it requires those CEOs and
CFOs who certify their corporate statements are accurate, they must
relinquish bonuses and other incentive-based compensation and profit on
stock sales in the event of an accounting restatement resulting from
fraud. To ensure that these new laws are effectively regulated, the
conference report increases the funding of the SEC to $776 million.
The Federal Reserve Chairman, Alan Greenspan, pointed out, in his
testimony to the Senate Banking Committee on July 17th, that a
corporate culture blighted by infectious greed was the cause of the
breakdown in confidence among investors. Chairman Greenspan, who has
been an advocate of deregulation and reliance on market forces to
police good business practices, acknowledged that he had been mistaken
in initially opposing government involvement in oversight of auditing.
``My view was always that accountants knew or had to know that the
market value of their companies rested on the integrity of their
operations'' and that government regulation of accounting was therefore
``unnecessary and indeed most inappropriate, but I was wrong''.
If the Chairman of the Federal Reserve says that his opinion was
wrong concerning oversight of auditors, then change is needed. We must
restore confidence in our financial markets by establishing sound
guidelines for corporate governance and auditing that investors can
trust and feel confident with their investments.
We stand at the brink of the most significant financial regulations
in more than 60 years. We must do all that we can to help the thousands
of employees and retirees, who have suffered greatly by these events,
feel that will not be punished for the fraudulent behavior of their
corporate managers. Therefore, I rise to support the conference report
on corporate accountability, H.R. 3763.
Mr. MALONEY of Connecticut. Mr. Speaker, I want to thank Senator
Sarbanes and Chairman Oxley, and their staffs, for all of their work in
bringing this important bill to the floor. I especially want to thank
Ranking Member LaFalce for his work on this important bill, and note
that he will be sorely missed.
Over the past few months investors have indicated, as reflected by
the events on Wall Street, that they lack the confidence to continue
investing in the U.S. capital markets. Corporations such as Enron and
WorldCom have submitted fraudulent financial statements to
intentionally mislead investors. Other corporations such as Stanley
Works are attempting to abuse the tax code to evade their fair share of
taxes. This Congress must make a strong statement that corporations and
top executives have a responsibility to their communities to behave
honestly and in keeping with the public trust. The legislation we pass
today will send a strong message that corporations and their leadership
have responsibilities to their investors and our nation that they
cannot fail to fulfill.
The Congress has a duty to help restore the public's confidence in
the marketplace and take steps to eliminate the ability of individuals
or corporations to manipulate the information that investors need to
make informed decisions. This bill puts corporate executives and
auditors on notice. If you commit corporate malfeasance, defraud
investors, take advantage of workers, or abuse the public's trust, you
will spend time in jail. We also need to take the next step and stop
corporate expatriates by shutting down the tax-haven loophole. Today's
bill is not the final word, but it does well begin a process of reform
that is urgently needed.
The accounting and corporate management issues before us are
complicated. They are, however, critical to the proper function of our
markets. As we all know, the availability of timely, accurate, and
truthful data are the linchpins that allow for the free flow of
capital. Unfortunately, events have highlighted that the existing
structure of our Nation's accounting regime is vulnerable to
manipulation and fraud. This legislation will go a long way to
addressing those problems. But now we also need to make sure that this
new legislation is properly enforced. Corporate wrongdoers must be held
accountable for their actions. If they make money from their
malfeasance, that money should be recovered for the investors. If they
commit fraud, they should go to prison. Our legislation today makes
strong enforcement possible.
Our next step in restoring corporate accountability should be to
close the Bermuda loophole in our tax code and stop corporate
expatriates. The tax code should be reformed to prohibit this scheme.
And we must not allow companies who abandon their corporate
responsibilities to our country to continue to be awarded federal
contracts. Corporate expatriates benefit from over $2 billion in
lucrative government contracts, from large consulting deals with U.S.
government agencies, to equipping airport screeners, to providing tools
and equipment to the Department of Defense. Corporate expatriates turn
their backs on America at the same time that they reach their hands out
for the hard-earned money of American taxpayer. Mr. Speaker, this is
outrageous, and we must stop it! I introduced legislation, along with
Congressman Neal of Massachusetts, that would do just that.
Today, Mr. Speaker, I urge my colleagues to support this bill, and
help restore investor confidence in our nation's capital markets. Later
in this session, I will be asking for your support of the Neal-Maloney
legislation to take the next step in restoring corporate
accountability.
Mr. KIND. Mr. Speaker, I rise in strong support of the conference
report on H.R. 3763, the Public Company Accounting Reform and Investor
Protection Act. This measure is an important first-step in restoring
public trust and consumer confidence in our domestic economy.
The measure's passage comes none too soon; as we all know, as
investors have become more and more disenchanted with stock equities
and the market continues to suffer vicious sell-offs. The NASDAQ and
Standard & Poor's 500-stock index are back to 1997 levels, wiping out
$7 trillion in value from the market's peak. The Dow Jones Industrial
Average has dropped to the lows reached immediately following the
September 11, 2001 terrorist attacks.
The free market system that has made our nation great still works. It
is, however, based on trust. That trust is only as reliable as the
information that is available to the public. When that information is
fraudulent, the trust in our economic system collapses. Until that
trust is restored our economy will not grow. Corporate officials have a
responsibility to restore that trust but so do Congress and the
President.
Therefore, as legislators, we must remember that the mere passage of
this one bill will not cure the ills that currently plague our economy.
Complete reform will also require the cooperation of the corporate
community, working with Congress to reverse the resounding effects of
the actions of shady executives and unresponsive auditors.
However, as I mentioned earlier, this bill is a good beginning, and I
am pleased that the measure before us establishes a new, five-member
independent oversight board with the power to establish and enforce
auditing independence and to establish higher corporate ethical
responsibilities. The independent board will have subpoena authority as
well as disciplinary and standard-setting authority. The measure also
places broad statutory restrictions on auditors, including on the
nonauditing or consulting services that accounting firms currently
provide to publicly traded companies.
Importantly, the bill attempts to improve the ethical standards of
top corporate officers. Chief Executive Officers and Chief Financial
Officers must certify the accuracy of their corporation's financial
reports. If executives do not comply, they face stiff criminal
penalties, including as many as 20 years in prison.
Again, let us remember, this bill is just the first step. In order to
restore the public's trust, Congress, upon our return from the August
recess, must consider and pass legislation that protects workers'
retirement savings and
[[Page H5480]]
strengthens investor rights. Until we do this, the American public will
not be adequately protected.
For our capitalist economy to function successfully, corporate
responsibility must remain paramount. In its absence, capitalism and
the free market system ultimately fail.
The SPEAKER pro tempore (Mr. Sweeney). All time has expired.
Without objection, the previous question is ordered on the conference
report.
There was no objection.
The SPEAKER pro tempore. The question is on the conference report.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. OXLEY. Mr. Speaker, I object to the vote on the ground that a
quorum is not present and make the point of order that a quorum is not
present.
The SPEAKER pro tempore. Evidently a quorum is not present.
The Sergeant at Arms will notify absent Members.
The vote was taken by electronic device, and there were--yeas 423,
nays 3, not voting 8, as follows:
[Roll No. 348]
YEAS--423
Abercrombie
Ackerman
Aderholt
Akin
Allen
Armey
Baca
Bachus
Baird
Baker
Baldacci
Baldwin
Ballenger
Barcia
Barr
Barrett
Bartlett
Barton
Bass
Becerra
Bentsen
Bereuter
Berkley
Berman
Berry
Biggert
Bilirakis
Bishop
Blagojevich
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonior
Bono
Boozman
Borski
Boswell
Boucher
Boyd
Brady (PA)
Brady (TX)
Brown (FL)
Brown (OH)
Brown (SC)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Cannon
Cantor
Capito
Capps
Capuano
Cardin
Carson (IN)
Carson (OK)
Castle
Chabot
Chambliss
Clayton
Clement
Clyburn
Coble
Combest
Condit
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
Fletcher
Foley
Forbes
Ford
Fossella
Frank
Frelinghuysen
Frost
Gallegly
Ganske
Gekas
Gephardt
Gibbons
Gilchrest
Gillmor
Gilman
Gonzalez
Goode
Goodlatte
Goss
Graham
Granger
Graves
Green (TX)
Green (WI)
Greenwood
Grucci
Gutierrez
Gutknecht
Hall (OH)
Hall (TX)
Hansen
Harman
Hart
Hastert
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill
Hilleary
Hilliard
Hinchey
Hinojosa
Hobson
Hoeffel
Hoekstra
Holden
Holt
Honda
Hooley
Horn
Hostettler
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
Meek (FL)
Meeks (NY)
Menendez
Mica
Millender-McDonald
Miller, Dan
Miller, Gary
Miller, George
Mink
Mollohan
Moore
Moran (KS)
Moran (VA)
Morella
Murtha
Myrick
Nadler
Napolitano
Neal
Nethercutt
Ney
Northup
Norwood
Nussle
Oberstar
Obey
Olver
Ortiz
Osborne
Ose
Otter
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
Simpson
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
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 (AK)
Young (FL)
NAYS--3
Collins
Flake
Paul
NOT VOTING--8
Andrews
Clay
Gordon
Knollenberg
Meehan
Miller, Jeff
Stearns
Watkins (OK)
{time} 1209
Mr. DOOLITTLE changed his vote from ``nay'' to ``yea.''
So the conference report was agreed to.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
Stated for:
Mr. JEFF MILLER of Florida. Mr. Speaker, on rollcall No. 348, I was
detained from returning for the vote.
Had I been present, would have voted ``Yea.''
Mr. CLAY. Mr. Speaker, on rollcall No. 348, I was unavoidably
detained. Had I been present, I would have voted ``Yea.''
____________________