[Congressional Record (Bound Edition), Volume 148 (2002), Part 9]
[Senate]
[Pages 12032-12033]
[From the U.S. Government Publishing Office, www.gpo.gov]




 ACCOUNTING REFORM AND INVESTOR PROTECTION WILL BE THE FIRST ORDER OF 
                        BUSINESS WHEN WE RETURN

  Mr. DASCHLE. Madam President, our form of government rests on two 
pillars. One is democracy. The other is free enterprise. We are the 
strongest, most successful nation in the world because we have 
maintained the strength of both of those pillars.
  We are the most durable democracy in the world because our system is 
constantly refreshed by new leaders and new ideas. If leaders fail, 
they can be voted out of office. If ideas fail, they can be either 
discarded or improved.
  The strength of the system rests on the fact that--while not 
perfect--our Government is open and accountable.
  We have the strongest economy in the world, because our commitment to 
free enterprise is strengthened by a system of open markets. Those 
markets--fed by free-flowing, reliable financial information--channel 
investment into new ideas and new enterprises. Working at its best, our 
free enterprise system has generated durable economic growth, wealth, 
and opportunity that are the envy of the world.
  The corruption of one of these pillars threatens the other. The 
weakening of either threatens our Nation.
  This week's news from MCI WorldCom was the latest in a series of 
disclosures that have shaken confidence in American business.
  Recently, we have seen Enron collapse under the weight of inflated 
earnings and hidden debt. We have seen Halliburton face charges of 
improperly recording revenue. We've seen Tyco accused of falsifying 
merger information, and its CEO indicted. Arthur Andersen has been 
convicted of obstructing justice.
  The list goes on: CMS Energy, Computer Associates, Dynegy, Global 
Crossing, ImClone, Kmart, Lucent, MicroStrategy, Network Associates, 
PNC Financial Services, Qwest, Reliant Resources, and Xerox are all 
facing serious questions about their business practices.
  This string of disclosures threatens our economy to its core. They 
undermine investor confidence, scare off foreign investment, and slow 
an already shaky recovery.
  And the impact is much more than some economic abstraction. Thousands 
of honest, hardworking people have lost their jobs. Millions more have 
seen their savings, their nest eggs, and their retirements gutted.
  When corporate fraud leads to corporate failure, people get hurt.
  I am not arguing that the corruption we have seen is systemic. 
America has some of the world's most innovative executives, people of 
tremendous energy, skill, and integrity.
  They are the vast majority of corporate executives, and they should 
be the most outraged about the recent news. In my own discussions with 
corporate leaders, that is actually the case. They are the most 
outraged. They resent the notion that the corruption is systemic, that 
the deception is pervasive, and that ``everyone is doing it.''
  I know--and most Americans know--that everyone is not doing it.
  But the growing list of corporations under question makes clear that 
we aren't just talking about one or two isolated cases, or rogue 
executives.
  The problem, instead, is a ``climate''--a deregulatory, permissive 
atmosphere that has relied too much on corporate America to police 
itself. It is as if the line between right and wrong, legal and 
illegal, acceptable and unacceptable was so little enforced that it 
became blurred. Bringing it back into focus--as Enron's collapse did--
revealed more than a few businesses standing on the wrong side.

[[Page 12033]]

  The evidence rolling in is now unambiguous. Self-policing is no 
replacement for a vigilant cop on the beat. It is time to reform and 
strengthen the system.
  Unfortunately, the desire for reform is not to be found in the 
approaches taken by the White House, the House, and the SEC.
  This game of corporate dominoes we are watching is a wake up call. It 
is time to abandon this laissez-faire attitude and take action.
  For starters, we need to made sure that the laws currently on the 
books are enforced. The SEC and Justice Department need to do more to 
aggressively and consistently investigate and prosecute cases of 
corporate fraud.
  But enforcement alone isn't enough. We are now seeing cases where the 
law itself doesn't stand in the way of these egregious actions.
  It is time for us to reform our system of accounting and do more to 
protect investors.
  That is exactly what the Sarbanes bill does. And that is why it will 
be our first order of business when we return from recess. The Sarbanes 
bill makes six key improvements over our current system.
  First, it creates an independent audit oversight board with the 
authority to set standards, conduct investigations, and impose 
punishment if those standards aren't met.
  Second, it restricts the nonaudit services that an accounting firm 
can provide to public companies it audits. In other words, it keeps 
auditors out of the business of being a company's consultant or tax 
advisors in addition to being its auditor--the roles that can lead to 
conflicts of interest.
  Third, it holds CEOs and CFOs responsible for the accuracy of 
operating and financial reports. If it turns out that an earnings 
report is deliberately misstated, those executives would forfeit 
profits and bonuses earned after that information was released.
  Fourth, if corporate insiders sell stock, those sales must be 
reported to the SEC within 2 days.
  Fifth, it would make sure that investment banking firms that also 
provide investment analysis don't mix those two functions. It also 
protects analysts from retaliation if they make unfavorable stock 
recommendations.
  Sixth and finally, this bill includes expanded resources for the SEC. 
This will help them become more thorough investigators and enforcers. I 
have called the SEC a toothless tiger. This bill gives the agency some 
teeth.
  In a message to Congress calling for the creation of the Securities 
and Exchange Commission, President Roosevelt said he sought to ``give 
impetus to honest dealing in securities and thereby bring back public 
confidence.''
  It is time for us to again, ``give impetus to honest dealing, and 
bring back public confidence.''
  That is what this bill does. It strengthens both our democracy and 
our system of free enterprise.
  Senator Sarbanes has done a masterful job in moving it through 
committee with broad bipartisan support.
  For the sake of America's economy, America's workers, and the two 
pillars on which our nation's greatness rests, I look forward to 
debating it when we return.

                          ____________________