[Congressional Record Volume 149, Number 57 (Wednesday, April 9, 2003)]
[Senate]
[Pages S5068-S5069]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY:
  S. 832. A bill to provide that bonuses and other extraordinary or 
excessive compensation of corporate insiders and wrongdoers may be 
included in the bankruptcy estate; to the Committee on the Judiciary.
  Mr. GRASSLEY. Mr. President, I rise today to introduce the 
``Corporate Accountability in Bankruptcy Act.'' This bill would clarify 
that the bonuses and other excessive compensation of corporate 
directors and wrongdoers can be brought back into a bankruptcy estate 
when a company goes bankrupt. It is only fair that corporate officers 
and employees who have engaged in wrongdoing and violated the 
securities and accounting laws should not be able to make money off of 
a company which has gone bankrupt, while company employees, 
shareholders and creditors are left carrying the burden of the 
bankruptcy. Moreover, corporate officers and insiders should not be 
allowed to keep their bonuses and loans when a company has done so 
poorly to go bankrupt.
  Currently, the Bankruptcy Code permits a trustee to recover assets 
which a debtor has previously distributed to

[[Page S5069]]

creditors within a certain time period prior to the filing of a 
bankruptcy petition. This allows a trustee to increase a debtor's 
assets for the fair treatment and equitable distribution of assets 
among all creditors, as well as to help shore up a debtor's assets 
during a reorganization.
  Section 547 of the Bankruptcy Code currently allows a trustee to 
recover assets from an insider made within a year of the filing of a 
bankruptcy petition. Section 548 of the Bankruptcy Code allows a 
trustee to recover transfers of assets, made within one year, where 
there has been a fraudulent transaction or where a debtor has received 
less than what is reasonably equivalent in value. However, the 
Bankruptcy Code is not clear as to whether these sections would include 
the bonuses and other extraordinary or excessive compensation of 
officers, directors or other company employees. That needs to change.
  The Corporate Accountability in Bankruptcy Act clarifies section 547 
of the Bankruptcy Code to provide that a trustee may recover bonuses, 
loans, nonqualified deferred compensation, and any other extraordinary 
or excessive compensation as determined by the court, made to an 
insider, officer or director and made within one year before the date 
of the filing of the bankruptcy petition.
  In addition, the bill amends section 548 of the Bankruptcy Code to 
provide that a trustee may recover bonuses, loans, nonqualified 
deferred compensation, and any other extraordinary or excessive 
compensation, as determined by the court, paid to an officer, director 
or employee who has committed securities or accounting violations, 
within 4 years of the filing of the bankruptcy petition. The reason 
that the bill extends the present one year reach-back period for 
fraudulent transfers to four years is because a majority of States have 
adopted a four year time period or the Uniform Fraudulent Transfer Act, 
(which allows for 4 years).
  The plain fact is that corporate officers and employees who have 
violated the law, as well as corporate officials who have not done a 
good job in managing a company, should not be allowed to benefit where 
their actions have contributed to the downfall of the company. 
Corporate mismanagement and irresponsibility should not be rewarded, 
and the bad guys need to be held accountable. The changes to the 
Bankruptcy Code contained in this bill are tied to excessiveness and 
wrongdoing and are fair. We need to do something about bringing more 
accountability and fairness to the system, and the Corporate 
Accountability in Bankruptcy Act does that.
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