[Congressional Record (Bound Edition), Volume 148 (2002), Part 10]
[Extensions of Remarks]
[Page 14401]
[From the U.S. Government Publishing Office, www.gpo.gov]


THE FINANCIAL MARKETS, SECURITIES AND ACCOUNTING INDUSTRIES HAVE CAUSED 
    AMERICAN TAXPAYERS AND INVESTORS TO LOSE $4 TRILLION SINCE 2000

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                          HON. DANNY K. DAVIS

                              of illinois

                    in the house of representatives

                         Tuesday, July 23, 2002

  Mr. DAVIS of Illinois. Mr. Speaker, before Enron Corporation's 
bankruptcy filing in December 2001, the firm was widely regarded as one 
of the most innovative, fastest growing, and best managed businesses in 
the United States. With the swift collapse, shareholders, including 
thousands of Enron workers who held company stock in their 401(k) 
retirement accounts, lost tens of billions of dollars. It now appears 
that Enron was in terrible financial shape as early as 2000, burdened 
with debt and money-losing businesses, but manipulated its accounting 
statements to hide these problems. Now, WorldCom, the nation's second-
largest long distance telephone company has been charged with fraud by 
the Securities and Exchange Commission. Reports have revealed that 
WorldCom defrauded investors by improper accounting practices for $3.9 
billion in expenses during 2001.
  We are discovering that publicly traded companies have contributed to 
bilking the American investors and taxpayers out of about $4 trillion 
since 2000 due to unaccountable financial filings, accounting errors, 
misinformation, and mismanagement of funds that has caused the 
financial markets to become unstable. Where are our watchdogs? They 
were nowhere to be found when it comes to integrity.
  In order to ensure corporate accountability, we need to establish 
under the jurisdiction of the Securities Exchange Commission (SEC) ways 
to regulate accounting firms that audit SEC registrants (publicly trade 
firms). This type of structure could be empowered to charge registrants 
with annual fees to pay for the cost of staff to carry out the 
suggested plan of surveillance of auditors. This concept would 
intervene between a registrant and it's auditor before, during and at 
the end of an audit, it would be more effective than the current 
regulatory system in achieving:
  An early warning of potential financial disasters such as Enron and 
WorldCom;
  Requiring a change in auditors when the SEC deems it appropriate;
  Require pre-approval of consulting engagements for a registrant to be 
conducted by its auditor;
  And, improve the format and content of financial and the auditor 
reports by including information about labor relations, research and 
development, marketing programs, and new products.
  These are the kinds of things that must be done. Therefore, I have 
introduced today a bill to establish an Office of Audit Review within 
the Securities and Exchange Commission to ensure the audits of certain 
public companies.

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