[Congressional Record (Bound Edition), Volume 148 (2002), Part 9]
[Senate]
[Pages 12490-12527]
[From the U.S. Government Publishing Office, www.gpo.gov]




  PUBLIC COMPANY ACCOUNTING REFORM AND INVESTOR PROTECTION ACT OF 2002

  The PRESIDING OFFICER. Under the previous order, the Senate will 
resume consideration of S. 2673, which the clerk will report by title.
  The assistant legislative clerk read as follows:

       A bill (S. 2673) to improve quality and transparency in 
     financial reporting and independent audits and accounting 
     services for public companies, to create a Public Company 
     Accounting Oversight Board, to enhance the standard setting 
     process for accounting practices, to strengthen the 
     independence of firms that audit public companies, to 
     increase corporate responsibility and the usefulness of 
     corporate financial disclosure, to protect the objectivity 
     and independence of securities analysts, to improve 
     Securities and Exchange Commission resources and oversight, 
     and for other purposes.

  Pending:

       Daschle (for Leahy) amendment No. 4174, to provide for 
     criminal prosecution of persons who alter or destroy evidence 
     in certain Federal investigations or defraud investors of 
     publicly traded securities.
       Gramm (for McConnell) amendment No. 4175 (to amendment No. 
     4174), to provide for certification of financial reports by 
     labor organizations to improve quality and transparency in 
     financial reporting and independent audits and accounting 
     services for labor organizations.
       Miller amendment 4176, to amend the Internal Revenue Code 
     of 1986 to require the signing of corporate tax returns by 
     the chief executive officer of the corporation.

  The PRESIDING OFFICER. The Senator from Minnesota.

[[Page 12491]]


  Mr. WELLSTONE. Mr. President, I ask unanimous consent to be added as 
a cosponsor of the Leahy amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. WELLSTONE. Mr. President, I wanted to come out here on the floor 
and thank Senator Sarbanes for his leadership in putting together a 
piece of legislation that deals with structural reform of corporate 
governance and auditing independence.
  I also think what the chairman didn't do is very important. Senator 
Sarbanes didn't just call for a roundup of the usual suspects but for 
the prosecution of the worst offenders who deliberately have enriched 
themselves at the expense of the employees, investors, and creditors, 
and then try to claim that it is the end of the matter. This bill does 
hold bad actors accountable for their fraud and deception. And it is 
probably going to be stronger by the time it leaves the Senate Chamber.
  The legislation goes much further, and it should because the problem 
goes much deeper. We are faced with much more than just the wrongdoing 
of individual executives. We are faced with a crisis in confidence in 
America's capital markets and in American business.
  These corporate insider scandals are threatening the economic 
security of families all across Minnesota, North Dakota, New Jersey, 
Maryland, and all across the country. It is heartbreaking. You have 
people who have taken their savings and put them into stock. This is 
what was going to be their resources to help send their kids to college 
or to meet other family needs. The value of that has eroded.
  Other people have 401(k) plans and are counting on that for 
retirement security. The value of that has eroded.
  But I think the other big issue is really important, which is above 
and beyond hundreds of billions of dollars wiped out. That is what has 
happened already. You do not have investor confidence. Without investor 
confidence, we will not have the economic recovery that we need. Jobs 
aren't being created. Frankly, this affects all of us.
  It is this last problem on which I want to focus. I see my colleague 
from New Jersey who knows much more about finance than I do.
  There is a business cycle. Some years are good and some years are 
bad. Sometimes companies do well and sometimes companies don't do well. 
Sometimes people invest more and sometimes they invest less. That is 
the risk they take.
  If the only problem was that executives at Enron were corrupt and 
their business failed--all of which is true--or WorldCom officers were 
fudging the books and the company really wasn't all that profitable--
which is true--and that a lot of businesses, such as Global Crossing--
what they were doing, to be blunt, was just fake--which is true--even 
with all of that, I don't think we would be out here on the floor with 
this legislation.
  In other words, if the story was only that a bunch of companies did 
badly, lost money, went bankrupt, and a whole lot of other people were 
hurt, frankly, I still don't think we would feel this sense of urgency. 
But that is not the end of the story.
  The reason we need this legislation goes way beyond Enron and 
WorldCom. It is not just because of Global Crossing. It is not just 
because of MicroStrategy. We need this legislation, and it ought not be 
cluttered with extraneous amendments, or with delay, because the 
American investing public has lost its confidence in this corporate 
system.
  I want to emphasize this point because I think some colleagues--some, 
not all of my colleagues--on the other side of the aisle don't seem to 
get it. I hate to say it, but I don't think the President or the 
administration gets what this is really about.
  Again, the President yesterday basically focused on a handful of 
corporate executives who deliberately misled investors. He talked about 
a few bad apples. It goes much deeper than that.
  Listen to the words of some other members of the administration, such 
as Donald Evans, Secretary of Commerce, who 2 days ago said:

       The system has not failed us, but a few have failed the 
     system.

  The President said the same thing yesterday.
  Treasury Secretary O'Neil said last year that Enron's collapse was 
``capitalism working.'' Now, if these individuals didn't have 
substantial responsibility for the economy, then their comments would 
be comical. I guess if we asked these guys about Watergate, they would 
say it was just a burglary. But we are dealing with more structural and 
deeper issues.
  The crisis is a crisis in faith. Investors who thought that if a 
corporation was doing badly and making poor decisions it would show up 
on their financial reports now have found out that is not the case. By 
the way, we should not be shocked by this. In fact, this should be old 
news to us.
  Almost 2 years ago, the then-Chairman of the SEC, Arthur Levitt, 
approached many of us--I remember the discussion with him in my 
office--and he said: ``Paul, we are on the brink of a crisis in 
accounting.''
  What Levitt was saying is, I want to put into effect a rule which is 
basically going to say that the Andersens of this world cannot be 
pulling in all these luxurious contracts and money for their internal 
auditing and all the rest, because once they get all the money, they 
are going to be reluctant to bite the hand that feeds them. Secondly, 
they will be put in a position of auditing their own auditing. That is 
a conflict of interest, and the consequences of it could be tragic for 
a lot of innocent people.
  Arthur Levitt was right. Of the decisions I have made in the Senate, 
one of the best decisions I ever made was 2 years ago in writing a 
strong letter of support for the then-Chair of the SEC for what he was 
trying to do. The auditors haven't done a good job because they have 
been too close to the firms that they were supposed to be auditing. 
That is what Arthur Levitt was talking about. He fought for greater 
auditor independence. His solution looked a lot like what is in this 
bill.
  I am glad I supported his reform. That was a pretty lonely position 
back then for Chairman Levitt. I am glad the Sarbanes bill is going to 
get a lot more support. I believe it is going to pass overwhelmingly.
  The Sarbanes bill does a number of different things. No. 1, at the 
core of this crisis is the need to have auditor independence. That is 
part of what the Sarbanes bill is all about. One hundred years ago, we 
had politicians and business leaders who were willing to take on 
entrenched corporate interests that were stifling competition--sound 
familiar--that were bilking customers and bilking consumers and that 
basically were enslaving their workers. We are dealing with similar 
kinds of issues now.
  We are now in a new century. This is going to be a real interesting 
case study--I was a political science teacher--as to whether or not the 
Senate and the Congress and this administration will, in fact, be there 
for strong reform.
  The other part of this legislation which is also important is to hold 
the corporate insiders accountable for their abusive actions. That is 
why I am so supportive of the Leahy amendment.
  If you ask people in any coffee shop in Minnesota, should there be 
criminal penalties for altering the documents, such as a 10-year 
felony, they will say, absolutely. If you ask people in Minnesota, 
should there be whistleblower protection for employees of public 
companies who actually blow the whistle on these kinds of abuses of 
power and corruption, people in Minnesota say, absolutely. If you ask, 
should there be criminal penalties for securities fraud, create a new 
10-year felony for defrauding shareholders of a publicly traded 
company, people in Minnesota will answer, absolutely.
  The President spoke yesterday, and the problem is, he did not call 
for enough resources. He has a lot of tough rhetoric, but then when you 
look at what is behind the rhetoric you don't see the resources the SEC 
needs for the oversight. You don't see an oversight board that is set 
up, as the Sarbanes bill does, with authority and independence. Most 
importantly, from the President we don't get any proposals that insist 
on auditor independence.

[[Page 12492]]

  If we have learned one thing, it is that Chairman Levitt was right. 
Two years ago, Arthur Levitt tried to warn all of us. All of these big 
companies, accounting companies and all these other people who are tied 
into this finance, some of the biggest investors, frankly, in politics 
in the country--I know of no other way to say it--all lobbied hard. 
Arthur Levitt was clobbered by a whole bunch of people, but he was 
right. Now we have a chance to do the right thing.
  If you were to go back over the last decade, we have passed too much 
legislation that has taken away some of the individual investor rights, 
that has made it harder for us to have Government oversight, that 
refused to look at these blatant conflict of interest situations. As a 
result of that, we have these corporate insider scandals.
  I will say one more time, it is heartbreaking, hundreds of billions 
of dollars have been lost. It is heartbreaking to see what this has 
done to people's savings who invested in stock. It is heartbreaking to 
see what it has done to 401(k) plans, heartbreaking to see the ways in 
which families are terrified in Minnesota and around the country. Most 
fundamental of all is, we don't have investor confidence any longer.
  I say to my colleague from Maryland, the best thing he did, above and 
beyond this bill, is he didn't just say, let's go after a few bad 
apples. He didn't just say that. That would be the end of it. He has 
dealt with the underlying structural issues so we can prevent this from 
happening again.
  I am extremely proud to support this bill. I can think of some zinger 
amendments. When I think of these guys who got the golden parachutes, I 
am amazed. Look at WorldCom.
  Mr. SARBANES. Will the Senator yield for a moment?
  Mr. WELLSTONE. I will just finish one quick point.
  With WorldCom, you are looking at a situation where at the very 
time--the same old story--they are getting employees to do away with 
defined benefit packages and then they put their employees in 401(k)s, 
cheerleading the 401(k)s, while they are doing that, they are dumping 
their stock. They got out with golden parachutes, all this money. It is 
outrageous what has happened at the individual abuse level.
  It is much deeper than the wrongdoing of these individual corporate 
chieftains and governance. It gets to the structural issues. That is 
what is so important about this bill.
  Mr. SARBANES. If the Senator will yield, I thank him for that 
observation because he is absolutely on point. The bad apples ought to 
be punished. There is no question about it. They ought to be punished 
severely. But it is very clear, as this issue has unfolded, that we 
need to make structural changes. We need to change the system so that 
the so-called gatekeepers are doing the job they are supposed to be 
doing. That has not been happening. That is why we need to remove these 
conflicts of interest on the part of auditors who are also consultants 
for the same company, collecting huge fees. And they are supposed to 
come in as outside auditors and be very tough on the company, which at 
the same time is giving them large fees for consultancy.
  The Senator is absolutely on point. We have to put in place a 
framework, a system which tightens up and begins to screen out these 
things.
  Furthermore, if you go after the bad apples, fine; but the damage has 
already been done, as the Senator just observed, for instance, WorldCom 
and the collapse of the whole pension program and pension provisions.
  Punishing a bad apple may have something of a deterrent effect, but 
there is nothing like putting a system into place that gives a 
heightened assurance that you are going to be accountable. That is what 
investors are looking for.
  Mr. WELLSTONE. One more minute. What I said earlier, the problem with 
rounding up the usual suspects is quite often you then say that is the 
end of the matter. That is why the President's proposals yesterday come 
in for strong constructive criticism.
  The story in the Post today in the business section is another 
outrageous example of what happened. WorldCom swallows MCI and tells 
the MCI employees they don't have a defined benefit any longer and puts 
them on the 401(k), cheerleads them on to put the investment into the 
company, cooks the books, and doesn't give them any accurate 
information on what happened to them. Now what happens to all these MCI 
employees? They don't have any of the savings any longer.
  So do you know what. We have to hold these people accountable, 
absolutely, but at the same time don't let anybody--people in 
Minnesota--get away with saying it is a few bad apples and that is all 
we are going to deal with. No. We are going to deal with the conflict 
of interest and we are going to have structural reforms. We are going 
to have oversight. We are going to protect consumers, the little 
people, and give the business community more confidence so they do the 
investing in the economy. That is what is at stake with this 
legislation.
  I yield the floor.
  Mr. SARBANES. Mr. President, I ask unanimous consent that following 
Senator McCain, who will speak later, Senator Corzine be recognized to 
speak for up to 15 minutes.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.


                           Amendment No. 4175

  The PRESIDING OFFICER (Mr. Reed). Under the previous order, the 
Senator from Kentucky is recognized for up to 30 minutes.
  Mr. McCONNELL. Mr. President, I wish to take the opportunity now to 
describe in detail the amendment currently pending before us, that 
which I was unable to do yesterday.
  There are two fundamental points to the amendment. What it seeks to 
do is require independent audits of union funds which, of course, are 
raised from union members in the vast majority of our States. You don't 
have a choice; you must belong to a union, and those dues are taken. So 
we have mandatory auditing of those funds to ensure they are being 
accurately accounted for, civil penalties for violating those auditing 
requirements, and, third--this is all the amendment is about, these 
three points--the president and the secretary of the union must certify 
as to the accuracy of the audit.
  We are talking about guaranteeing the integrity of the funds raised 
from union members. The reason we require corporations to file 
financial statements is so corporate shareholders know how their money 
is being spent. As a second layer of protection for shareholders, we 
also require those financial statements to be independently audited. 
Why? So investors know that information filed is actually correct, so 
they know it is not just the creative writing of a crooked bookkeeper 
or a corrupt executive.
  We take this independent audit requirement, or this second layer, 
very seriously--so seriously, in fact, that we are creating a third 
layer in the Sarbanes bill, an entirely new audit oversight board to 
better police these required audits for the benefit of corporate 
shareholders.
  This third layer is a good idea, especially given today's stories of 
corporate fraud, deception, and outright theft that we all cite as the 
real motivation behind the underlying bill. My colleagues have cited 
the well-publicized financial failures and the endless corporate 
scandals and the need to hold corporate crooks accountable. I could not 
agree more. But we also have union corruption, union greed, union 
scandals.
  My amendment will give American workers the assurances that their 
labor unions' books have been independently audited--the same second 
layer of protection we have given to corporate shareholders since 1933.
  Unions already have to file financial statements. They do so with the 
Department of Labor on a form called the LM-2. Why? For the same reason 
corporations do: So American workers, the card-carrying, dues-paying 
union workers can see where their money goes. But we don't currently 
require independent audits of union financial statements. Unlike the 
corporate shareholder, the rank-and-file American worker has no earthly 
idea if the

[[Page 12493]]

financial information they rely on is correct--no idea at all. So why 
shouldn't the American steelworker or longshoreman be entitled to the 
same assurances as the corporate shareholder who has recklessly 
overinvested in a bundle of Internet stocks? Isn't the workers' money 
just as hard earned and deserving of protection--maybe even more so?
  I cannot imagine that anyone in this body would argue that American 
workers do not suffer from the same type of greed and corruption that 
plagues our corporate and accounting culture, nor can I imagine that as 
a result of these scandals anybody in this body believes that American 
workers do not deserve the very same assurances that their unions' 
financial statements are correct.
  But just in case, let me read for my colleagues a few recent accounts 
of union corruption. I am going to read quite a few, and I will do so 
for a specific reason--so nobody can stand up and say that greed and 
corruption only affects corporate shareholders, so no one can say the 
only stories here are Enron and WorldCom, and so no one can stand up 
and say we are wasting time by trying to protect the American workers 
from being cheated out of their money.
  We have all heard of Arthur Andersen, but has anybody heard of Thomas 
Havey? That is the accounting firm where a partner confessed last month 
to helping a bookkeeper conceal her embezzlement of hundreds of 
thousands of dollars from a worker training fund of the International 
Association of Iron Workers.
  Yesterday, a colleague of mine said that the problem at Global 
Crossing had nothing to do with labor unions. Maybe he hasn't heard of 
ULLICO. That is the multibillion-dollar insurance company owned 
primarily by unions and their members' pension funds that invested $7.6 
million in Global Crossing. Apparently, ULLICO directors received a 
sweetheart stock investment deal that allowed them to make millions on 
the sale of the stock. All the while, union pension funds, however, 
suffered the fate of Global Crossing.
  There is plenty more, beginning with a couple of stories I briefly 
mentioned yesterday. An accountant with the National Association of 
Letter Carriers embezzled more than $3.2 million from union funds over 
an 8-year period to buy 8 cars, 2 boats, 3 jet skis, a riding mower, 
and 105 collectible dolls.
  A former official of the Laborers' Union District Council in Oregon, 
Idaho, and Wyoming is in jail for accepting hundreds of thousands of 
dollars in kickbacks for directing money into a Ponzi-like investment 
scheme that defrauded Oregon labor unions of $355 million.
  A former business manager and financial secretary of the 
International Association of Heat and Frost Insulators and Asbestos 
Workers Local 87 was indicted by the U.S. attorney for the Western 
District of Texas for embezzling tens of thousands of dollars in union 
funds.
  Mr. President, a comptroller of the American Federation of State, 
County and Municipal Employees, Council 71 of New Jersey, was sentenced 
to 13 months in prison and fined for embezzling tens of thousands of 
dollars from the union.
  A trustee of Glass, Molders, Pottery, Plastics & Allied Workers 
International Union Local 63B, headquartered in Minneapolis, was 
charged with forgery and embezzlement in connection with the theft of 
thousands of dollars from the union.
  Fourteen officers and members of Local 91 of the Laborers 
International Union in Niagara Falls were arrested on charges of labor 
racketeering, extortion, assault, vandalism, and bombing a dissenting 
union member's home and stabbing a worker.
  A former business manager of IBEW Local 16 in Evansville, IN, was 
indicted for diverting union dues checks to his personal bank account.
  A Federal grand jury recently indicted an ex-business manager of the 
United Association of Plumbers and Pipefitters Local 15 in Minneapolis 
in connection with the theft of tens of thousands of dollars from the 
union.
  A former officer of United Food and Commercial Workers Local 1288, in 
Fresno, CA, was sentenced to 18 months in prison for embezzling almost 
$300,000 from the union's credit union.
  An ex-business manager and financial secretary of the United Union of 
Roofers, Waterproofers and Allied Workers Local 86, in Columbus, OH, 
was sentenced to 21 months in prison for embezzling $130,000 from the 
union to pay his gambling debts.
  An ex-president of the American Postal Workers Union Local 1616, in 
Roanoke Rapids, NC, was indicted for embezzling thousands in union 
funds and making false entries in union records.
  Laborers International Union of North America Local 2, in Chicago, 
which recently came out of Federal trusteeship imposed because of its 
close ties to organized crime, failed an oversight audit and is again 
having significant accounting and bookkeeping problems.
  An ex-secretary-treasurer of the American Postal Workers Union Local 
761 in Las Vegas and ex-treasurer of the Postal Workers Nevada State 
Association pled guilty to embezzling $200,000 in union funds.
  Two former officers of Steelworkers Local 9339 in Virginia and a 
former administrator of the local union's disaster relief fund were 
indicted for conspiracy to embezzle union funds and make false 
recordkeeping entries.
  A grand jury is investigating claims that a local United Auto Workers 
Union ended an 87-day strike against General Motors only after union 
officials received phony overtime payments and jobs for their 
relatives. Union members have also filed civil suits to recover over 
half a billion dollars--half a billion dollars--from alleged self-
dealers.
  My good friend, the senior Senator from Texas, always says you cannot 
argue about facts. Facts are a powerful thing. These are the cold hard 
facts of union corruption. Just like Enron, just like WorldCom, just 
like Global Crossing, these are the cold hard facts, and there are 
plenty more of these facts.
  I have a stack of papers filled with what is called a union 
corruption update. If you look at this stack, this is just for the year 
2002. This stack is just for the year 2002--this whole stack--and 2002 
is only half over. It is compiled by the National Legal Policy Center. 
The Department of Labor's Office of Labor Management Standards reports 
12 new indictments and 11 convictions of union fraud per month over the 
last 4 years.
  Let's go over that one more time. DOL's Office of Labor Management 
Standards reports 12 new indictments and 11 convictions of union fraud 
per month over the last 4 years. This is a serious problem, and the 
Senate should not let whatever allegiance some Members may have to the 
leaders of organized labor affect their concern about the workers 
themselves, and that is what this amendment is about: Providing the 
same protection for union members that we insist on providing for 
investors in corporations.
  We have a choice before us. Who should bear the cost of union 
corruption against the rank-and-file, dues-paying American workers? The 
unions, the perpetrators of much of this fraud, by bearing an 
incremental cost of an audit that will help prevent future workers from 
being cheated out of their money? Or the workers, whose money will 
continue to be embezzled, concealed? And if we do not provide them with 
minimal assurances of an independent audit, it will go on and on.
  To me, this choice is identical--absolutely identical--to the choice 
in the Sarbanes bill. Who should bear the cost of the corporate and 
accounting corruption against shareholders, the corporations and 
accountants, obviously, through improved oversight, enforcement, and 
corporate responsibility or the investing public whose stock holdings 
will continue to be embezzled, concealed, if we do not provide them a 
new accounting oversight board?
  Choosing the unions over the workers in this case is no different 
than siding with the accountants and corporate executives who quietly 
oppose the Sarbanes bill.

[[Page 12494]]

  Mr. President, about the complaints I have heard of the burdens and 
costs associated with this bill. It would not surprise me if the 
leaders of organized labor have been on the phone calling particularly 
our Democratic colleagues over the last 24 hours concerned about the 
burdens and costs associated with this bill.
  First of all, I find it absolutely astounding, given the 
pervasiveness of union corruption, that some of our colleagues are 
worried about the incremental cost of stopping that corruption, the 
cost of giving union workers the same quality assurance answers that we 
are prepared to give corporate shareholders in the underlying bill.
  I do not hear any complaints about the cost of a new accounting 
oversight board or the cost of corporate responsibility or enhanced 
disclosure requirements in the Sarbanes bill. Why not? Because the 
accountants and executives are the ones responsible for the fraud and 
deception of investors. But for some reason, when it comes to unions, 
some of our colleagues speak less about the cost to the workers being 
ripped off and more about the burdens this amendment will place on 
unions whose officials are responsible for the greed and corruption 
documented in the binder I just held up a few minutes ago which 
represented only half of the year 2002.
  We hear that unions are saddled with too many requirements on their 
financial statements. I am not concerned with the quantity of 
disclosure requirements. I am only concerned about the quality of that 
disclosure, specifically whether the information is accurate and 
certified as such for the benefit of the dues-paying American union 
workers.
  We hear that we do not need audits. Some have said we do not need 
audits because the Department of Labor can conduct enforcement audits, 
if necessary. Well, let's play with that logic a little. If that is the 
case, we do not need public corporations to be audited either. Let's 
get the SEC to conduct enforcement audits. Could you imagine the uproar 
if someone suggested that? And no one has.
  Think about the message this would send to American workers that it 
is not worth requiring your union to assure you that your money is 
going where they say it is; just take a number and hope the Department 
conducts an audit of your union.
  At any rate, the Department, as most Federal agencies, needs more 
money to conduct the few enforcement audits that they conduct. The 
Deputy Secretary of the Department of Labor testified recently that the 
number of departmental audits has fallen from 1,583 in 1984 to a mere 
238 last year, and the President has requested an additional $3.4 
million and 40 new staff positions to combat union fraud.
  We hear that audits will be too expensive. Here is an easy tip for 
union officials to save money: Stop stealing it. That is a good way to 
save money. My amendment only requires audits to any union that already 
bears the cost of filing financial disclosure statements. In other 
words, this would apply only to unions that already have to file 
financial disclosure statements. That is unions with receipts topping 
$200,000 annually. It goes to my original point. If you have to file an 
annual report, it ought to be verified as accurate.
  We hear that smaller unions will be hit hardest by having to conduct 
an audit. Well, there is no national one-rate plan for audits of which 
I am aware. As any professional service, the rates are proportional to 
the size and scope of the client. Obviously, a union with $500,000 is 
not going to pay in audit fees what a $60 million corporation pays for 
an audit.
  Let me close this part of my remarks with a simple suggestion for my 
colleagues who have been tricked into worrying about the cost this 
amendment would impose on unions. Just imagine this: the cost to 
American workers of not requiring audits. Let us think about the cost 
to American workers of not requiring audits: More embezzlement, more 
crooked bookkeeping, more abuse and concealment of workers' hard-earned 
money.
  We do not need more embezzlement, more crooked bookkeeping, and more 
concealment of workers' hard-earned money. We have a choice. We can 
extend to American workers the same financial protection afforded 
corporate shareholders, or we can extend to unions the ability to 
continue to pilfer and profit off the workers' money. That is the 
choice.
  How much time do I have remaining?
  The PRESIDING OFFICER. The Senator from Kentucky has 8 minutes 30 
seconds remaining.
  Mr. McCONNELL. I know the Senator from Arizona has been waiting 
patiently. I would like to reserve my 8 minutes because I am not clear 
how long this debate is going to go on. We do not have a time agreement 
yet for a vote. Is that correct? I guess I am asking my friend from 
Maryland what his plans are for the disposition of the McConnell 
amendment.
  Mr. SARBANES. If the Senator will yield, we have people lined up to 
speak once the Senator has concluded, Senator McCain and then Senator 
Corzine. After that, I anticipate then dealing with the McConnell 
amendment.
  Mr. McCONNELL. So is it the plan of the Senator from Maryland to have 
a vote sometime in the next hour or so?
  Mr. SARBANES. I would anticipate a vote in relation to the McConnell 
amendment--well, we have 30 minutes.
  Mr. McCONNELL. Could we do this, then? I ask unanimous consent that I 
have 2 minutes prior to the vote to sum up what I think this amendment 
is about.
  Mr. SARBANES. I certainly think that could be done. I intend to speak 
to it for a few minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. McCONNELL. Therefore, I yield the floor.


                           Amendment No. 4174

  The PRESIDING OFFICER. Under the previous order, the Senator from 
Arizona is recognized for up to 15 minutes.
  The Senator from Arizona.
  Mr. McCAIN. Mr. President, for the benefit of the managers, I do not 
intend to consume all 15 minutes.
  I rise in strong support of the underlying Leahy amendment, and I 
hope we can dispose of that amendment within a reasonable length of 
time and move on to other changes that need to be made to this very 
important legislation.
  Our publicly owned companies are an essential component to the 
economic health of our country. As we have seen over the past few 
months, the continued lapses of our corporate leaders, whether they are 
ethical, criminal or just plain ignorant, have a significant, sometimes 
crippling, effect on the welfare of our nation. We must make some 
fundamental changes in the current system of corporate oversight to 
protect Americans from avarice, greed, ignorance and criminal behavior. 
Now is the time for Congress to restore investor confidence and take 
the necessary action to protect the interests of the public 
shareholders and place those interests above the personal interests of 
those entrusted with managing and advising those companies. The 
deterioration of the checks and balances that safeguard the public 
against corporate abuses must be reversed.
  We have to address the shortcomings in Federal law and send the 
message that prosecutors now have the tools to incarcerate persons who 
defraud investors or alter or destroy evidence in certain Federal 
investigations. This amendment is a step in the right direction. It 
creates two new criminal states that would clarify current criminal 
laws relating to the destruction or fabrication of evidence and the 
preservation of financial and audit records. The Enron debacle clearly 
indicated that there were gaping holes in the current framework. There 
will be a 10 year criminal penalty for the destruction or creation of 
evidence with the intent to obstruct a federal investigation. There 
will be a new 5 year criminal penalty for the willful failure to 
preserve, for a minimum of five years, audit papers of companies that 
issue securities.
  The amendment also provides for the review and enhancement of 
criminal penalties in cases involving obstruction of justice and 
serious fraud cases.

[[Page 12495]]

All of these actions are necessary to deter future criminal action. 
Until somebody responsible goes to jail for a significant amount of 
time, I am not sure that these people are going to get the message. 
Defrauding the shareholder has to carry a meaningful penalty. Corporate 
decision-makers can make millions, tens of millions, even hundreds of 
millions of dollars by cheating investors. A relatively small fine or 
short prison term is not a deterrent; it's a slap on the wrist. The 
threat of real time in jail is a deterrent that will make people pay 
attention.
  This amendment also creates a new securities fraud offense. The 
provision makes it easier, in a limited class of cases, to prove 
securities fraud. Currently prosecutors are forced to resort to a 
patchwork of technical offenses and regulations that criminalize 
particular violations of securities law, or to treat the cases as 
generic mail or wire fraud that results in a five-year maximum penalty. 
This new provision would criminalize any scheme or artifice to defraud 
persons in connection with securities of publicly traded companies or 
to obtain their money or property. This new ten-year felony is 
comparable to existing bank and health care fraud statutes. To those 
who would say that it's hard to define a scheme or artifice to defraud, 
I would say that full and honest disclosure of material dealings and 
accounting treatments is the best way for the officers who run 
America's corporations to protect themselves and those who invest in 
their companies. There are plenty of felony laws on the books that 
provide long prison terms for crimes that cause less damage than the 
losses to shareholders in Enron or WorldCom.
  It is important to emphasize that when criminal charges are pursued, 
it is not necessarily the firm that should be charged but the 
individuals at the helm of the corporate ship who should be prosecuted. 
If they are the ones making the decisions out of self-interest, they 
are the ones that should be held accountable. I also believe that we 
must protect the ``corporate whistleblower'' from being punished for 
having the moral courage to break the corporate code of silence. This 
amendment does that.
  This amendment also extends the current statute of limitations for 
matters concerning securities fraud, deceit or manipulation. The 
current statute of limitations for securities fraud cases is short 
given the complexity of many of these matters, and defrauded investors 
may be wrongly stopped short in their attempts to recoup their losses 
under current law. The existing statute of limitations for most 
securities fraud cases is one year after he fraud was discovered but no 
more than three years from the date of the fraud regardless of when it 
was discovered. Because this statute of limitations is so short, the 
worst offenders may avoid accountability and be rewarded if they can 
successfully cover up their misconduct for merely three years. The more 
complex the case, the easier it will be for these wrongdoers to get 
away with fraud. According to at least one state Attorney General, the 
current short statute of limitations has forced some states to forgo 
claims against Enron based on alleged securities fraud in 1997 and 
1998.
  This situation essentially encourages offenders to attempt to cover 
up their misdeeds however they can, including by using questionable 
accounting procedures and financial shell games. Furthermore, in some 
cases, the facts of a case simply do not come to light until years 
after the fraud. If a person does not and cannot know they have been 
defrauded, it is unfair to bar them from the courthouse. We need to 
recognize the sophistication and complexity of modern-day schemes 
designed to defraud investors. The Leahy amendment does this.
  Finally, this provision amends the federal bankruptcy code to prevent 
the corporate wrongdoer, the CEO or CFO, from sheltering their assets 
under the umbrella of bankruptcy and protecting them from judgments and 
settlements arising from federal and state securities law violations. 
Too many of these highly paid corporate officers are using bankruptcy 
laws to protect their assets while maintaining their high-rise 
penthouses and ski chalets. It is time to force accountability and 
punish the person, not the institution, who is not willing to abide by 
the moral and legal codes that accompany leadership and public trust.
  I hope we will have an early and overwhelming vote in favor of the 
Leahy amendment.
  I yield the floor.
  Mr. SARBANES. Mr. President, so Members may have a sense of what the 
program is in the short term, I will propound a unanimous consent 
request and I hope it will be accepted and then we can move forward.
  I ask unanimous consent that following Senator Corzine, there be 15 
minutes allotted to Senator Gramm, 5 minutes allotted to Senator 
McConnell, 10 minutes to myself as the manager of the bill--or up to 
these amounts of time; hopefully, they won't all be used--and at the 
conclusion thereof, there be a vote on or in relation to the McConnell 
amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Under the previous order, the Senator from New Jersey is recognized 
for up to 10 minutes.
  Mr. CORZINE. Mr. President, today I rise to speak on both the 
amendment proposed by Senator Leahy and also to the underlying bill 
which I feel quite strongly about.
  I am quite pleased to support Senator Leahy's amendment. It creates 
tough new securities fraud penalties and punishes corporate wrongdoers 
we have just heard the Senator from Arizona speak to. It is a 
meaningful and appropriate response to the kind of corruption we have 
seen and makes sure that punishment meets the nature of the act. It 
also protects corporate whistleblowers, prohibits corporate executives 
who violate securities laws from hiding behind the bankruptcy code.
  In summary, this is more than mere lip service with regard to 
enforcement and punishment of corporate fraud. It is real reform. It is 
real response as a methodology to deter criminal conduct. It will go a 
long way toward providing incentives that are necessary to protect 
investors and pensioners and others who operate in the marketplace, in 
contrast to strong rhetoric from some with regard to what we need to do 
about punishment but not putting reality into place to deal with the 
issues. I am proud to cosponsor the Leahy amendment, and I urge all 
colleagues to do so as well.
  Mr. President, we need to speak clearly and directly in the Senate 
about restoring and sustaining the trust in America's capital markets, 
trust in America's economic security going forward. For several days 
leading up to yesterday morning's Presidential speech on Wall Street, 
there was a buzz of anticipation that we would see a real embracing of 
change. Some went so far as to suggest the President's speech might 
lead to a Roosevelt moment, an embrace, a change in policy, a change in 
direction, maybe counterintuitive to the history of the man because it 
was in the Nation's best interests.
  In retrospect, it is safe to say, while the President's speech was 
good with respect to rhetoric, it was hardly Rooseveltian or a Ruthian 
moment in the home of the New York Yankees. Unfortunately, it was far 
from a home run, in my view, and did emphasize rhetoric as a substitute 
for reform. Its lack of specifics or detail I found unfortunate.
  It is not to say that the President's speech did not include some 
important themes, or, by the way, embrace an initiative that is quite 
important; that is, the corporate fraud task force in the Justice 
Department which will be a strong step in carrying out pursuit of 
wrongdoers.
  However, stating the commitment of his administration pursuing these 
folks, while an important message, needs to be more substantive. We 
need specific undertakings to protect investors and shareholders. It 
was what the President did not say in terms of offering specifics, 
particularly specifics with regard to structural changes that will 
solve the problems, deal with the problems, provide checks and balances 
to the problems that we have seen from the Enrons, WorldComs, Global 
Crossings, et cetera. That is why the speech fell short of what many 
expected.

[[Page 12496]]

  The best way, in my view, the President could have accomplished that 
simple important message would have been to acknowledge the 
comprehensive structural reform that needs to be put in place and is 
expressed most clearly, most effectively, by the legislation we are 
considering on this floor right now, the Public Company Accounting 
Reform and Investor Protection Act.
  The Sarbanes bill, the bill we are talking about on this floor, 
comprehensively reforms our accounting profession. It is detailed, it 
is specific, and it is quite a strong element with regard to accounting 
professionals' responsibilities. It enhances corporate accountability, 
improves transparency of corporate financial statements, truly 
strengthens the ability of the SEC to operate as an enforcement agency, 
and as a regulatory agency to a significant degree. In combination, all 
those factors together will go a long way to restore investor 
confidence in American capital markets and, more importantly, restore 
faith in our economic system.
  I think this is the direction it should take. But before I discuss 
the merits of the legislation in specific, I take a moment to pay 
tribute to the leadership of the distinguished chairman of the Banking 
Committee, Senator Sarbanes. In shepherding this bipartisan legislation 
to the floor of the Senate, he has really done an outstanding job of 
bringing together a lot of disparate views on a very difficult and 
complex problem, synthesized into a terrific response to a real 
problem.
  I see Senator Enzi in the Chamber. I also congratulate him for his 
help in making sure we have a bipartisan effort in this process. His 
contributions have been enormous. There are a number of people on staff 
who I think have done a terrific job to make sure this happens.
  But Paul Sarbanes, chairman of the Banking Committee, has done an 
incredible job, a thorough job, making sure we have measured, balanced, 
deliberate steps to be taken to meet a crisis of confidence. I think 
the American people will be grateful that we have responded in a proper 
way. It has been a privilege for me to work with all my colleagues in 
the Banking Committee, but particularly the chairman. Particularly as a 
freshman, I learned so much of how this legislative process works.
  I must say, after 30 years in business, working my way up, the 10 
days of hearings we had with respect to this particular subject, with 
exhaustive testimony, thoughtful testimony provided from a large range 
of perspectives, was one of the best graduate seminars I have ever had 
in business. I hope actually somebody will take the time to try to 
publish these, and they will be used as an example both of how the 
legislative process should work but also how the structure and nature 
of public policy debates with regard to business policy will occur. It 
is extraordinary. I think it forms an enormously positive foundation 
for the kind of thoughtful legislation the chairman has brought to 
bear.
  With that as backdrop, we all know that there are serious problems in 
our system. The list of companies involved is way too long and way too 
important--many of them supposed models of the new economy. But I want 
to move a little bit away from just some of the simple concepts we talk 
about, the most headlined, the name concepts or companies, to focus on 
the fact that we are going to have almost 300 restatements of earnings 
this year, this year in our economy--300 restatements. There have been 
almost 1,100 restatements since 1997 of company earnings reports. This 
is a problem.
  It is not just the individual headline companies, it is the fact that 
this is going on every day in our marketplace. It is no wonder that 
investors--institutional, retail, foreign, pensioners--do not have a 
sense of where we should be or how they should make their commitments 
to markets. That is because they cannot trust the numbers. There have 
been broken retirement dreams, lost jobs, and companies shut down. This 
really needs to change.
  Roughly 10 percent of major companies--of the 12,000 actively traded 
companies, almost 10 percent of them have had statements of change in 
the last 4 years. That is just bad. That is why investors worldwide 
have developed some skepticism about our markets. Some might even say 
that is why our dollar has depreciated as sharply as it has in the last 
2 or 3 months. Confidence is shaken--it is real.
  American financial markets have been a tremendous engine for economic 
growth. We have had a highly efficient capital market, and that has 
fueled our economy. We need to act.
  While the depth and breadth of efficiency of our markets is still 
substantial, if we continue to have this kind of erosion of confidence, 
we are going to be missing one of the important drivers of America's 
great success in leadership in the world. While I will not go through 
every detail of this bill, if we do not come up with a strong oversight 
of our accounting industry, make sure the information that people make 
their decisions and take their decisions to the marketplace with is 
sound and secure, then we will not have those strong capital markets 
and strong economy. I think we can all agree upon that, in the nature 
of a bipartisan initiative, to make sure we are moving in the right 
direction.
  I hope we can focus on the reality that some of the conflicts of 
interest that exist in our practices in the accounting world have been 
part of the cause and the focus. Some of the conflicts of interest in 
the investment banking business, the world I came from, with regard to 
our analysts, have undermined our security with regard to how people 
analyze and understand where companies fit.
  Other issues that need to be dealt with are the ``revolving doors''--
executives from accounting firms going to companies they worked for--
and the lack of independence of audit committees. All of these factors 
underlie a growing public distrust in the corporate financial 
information. It really needs to be acted upon.
  While these things are real, I think we need structural response. We 
cannot just identify a few bad apples. This is more than that. 
Remember: 1,100 corporate restatements in the last 4 years. There is a 
structural problem, a systemic problem that is undermining the health 
security of our economy. I hope people will realize that in the context 
of the kind of debates we are going to have with regard to this bill--
but maybe even more important, when we get into a conference and try to 
put it together with the House response, and get it to the President.
  Unfortunately, I think the other elements of proposals on the table 
just do not meet the kind of standards that the Sarbanes proposal, the 
Banking Committee proposal, brings to bear. I hope we will be able to 
deal with that going forward.
  I would be happy to talk about the specifics as we go forward. I know 
others need to get into this aspect. Other than we need to have a real 
reform of the accounting industry, we need a strong oversight board. We 
need to really deal with the corporate accountability issues, which I 
think the Leahy amendment goes a long way to strengthen in this bill. 
There are many elements inside it.
  We need to give the SEC the kinds of resources so it can actually do 
the job it is expected to do. The President talked about giving them 
$100 million additional resources. Even the House has talked about $300 
million increments. We do not provide for pay parity. There are just so 
many weaknesses in some of the proposals that are watered down relative 
to what we have on the table before the Senate.
  I can only say I hope we can keep this bipartisan effort together 
because I think what we need is a final product that will deal with the 
reality of the undermining of confidence we have across the board, in a 
whole host of ways with regard to our financial markets, with regard to 
our accounting statements and with regard to the economy itself. This 
is too important to make a political issue. This is one to make sure we 
move forward in a way that we secure America's economic future.
  The continued vitality of America's markets is at stake. We need to 
make

[[Page 12497]]

this a priority. We need to move quickly. We need to understand it is 
systemic, it is not just anecdotal, it is not just a few bad apples. I 
think the bill we have on this floor will go a long way. Some of the 
amendments that are brought forward can strengthen it.
  We need real reform. We need it now. We do not need rhetoric. We need 
to be able to restore the confidence the American people want to see, 
move away from the era of Enron and WorldCom, and get to an era where 
we have markets that are balanced and fair, where they have the checks 
and balances in them to give people the confidence that when they make 
an investment, that investment is what they thought it was when they 
entered into it.
  I thank the chairman for an extraordinary effort in bringing together 
an exceptional bill. I am proud to be part of this effort. I look 
forward to continued debate and hopefully bringing it to the 
President's desk as soon as possible.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. SARBANES. Mr. President, I ask unanimous consent to speak for 30 
seconds.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SARBANES. Mr. President, I thank the able Senator for his very 
kind comments.
  I underscore, as I said last night on the floor when Senator Dodd was 
here, my deep appreciation for the very positive and constructive 
contribution which Senator Dodd and Senator Corzine have made to this 
legislation. Early on, they introduced S. 2004, the Dodd-Corzine bill 
that formed the basis of a great deal of what is now before the Senate. 
I really appreciate the tremendous effort on the part of the two 
Senators.
  I think it is very important that I make it very clear how much I 
appreciate the Senator's continuing, very strong contributions in the 
committee and now as we consider this legislation.
  The PRESIDING OFFICER. Who yields time?
  Mr. SARBANES. Mr. President, I think under the agreement there are 15 
minutes allotted to Senator Gramm, 5 minutes to Senator McConnell, and 
I have reserved 10 minutes before we go to a vote on or in relation to 
the McConnell amendment.
  Mr. LEAHY. Mr. President, I ask unanimous consent to proceed for 30 
seconds without taking the time reserved for my colleagues.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  The Senator from Vermont is recognized.
  Mr. LEAHY. Mr. President, I thank the distinguished Senator from 
Arizona, Mr. McCain, for his kind words earlier this morning. He is the 
supporter of the Leahy-McCain-Daschle, et al., amendment pending before 
the body. I will speak further at an appropriate time when I am not 
imposing on the time reserved by our colleagues. I wanted to thank 
Senator McCain for his support of the amendment and for his kind 
remarks.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Kentucky.
  Mr. McCONNELL. Mr. President, I believe the Senator from Texas is on 
the way. He is not here yet, so I will go ahead with my closing 
remarks.
  Let me describe again what the McConnell amendment does. It is really 
quite simple. I think the first thing to remember is that it doesn't 
change in any way the Leahy proposal. It doesn't change in any way the 
Sarbanes proposal. It does not alter either of those. This is an 
addition to the underlying Sarbanes bill, and to the Leahy amendment, 
which I assume is going to be adopted sometime today. This doesn't in 
any way detract from the efforts underway to get greater accountability 
in corporate America.
  The McConnell amendment is about adding to that union accountability 
so that rank-and-file union members can be assured--just as 
shareholders will now be assured in the underlying bill--that 
independent audits are being done. They can be assured that there will 
be civil penalties for violating these new auditing standards. They 
will be further assured by the fact that the president and the 
secretary-treasurers of the unions will have to certify as to the 
accuracy of the financial reports for unions just as we are requiring 
that for corporate CEOs and CFOs for publicly traded corporations.
  We are simply completing the circle of protection for Americans, 
whether they be investors in corporations or union members whose dues 
are being paid every payday and who have a right to expect that those 
funds are going to be treated carefully and correctly.
  It has been suggested--I expect it will be suggested again--that this 
is going to be expensive for the unions. My amendment has been 
carefully crafted to ensure that it does not impose any egregious new 
costs, especially on labor. And it only applies to unions with annual 
receipts over $200,000.
  Why did I pick that number for unions that already file financial 
information with the Department of Labor? They are already having to 
file. This amendment simply requires that labor organizations with over 
$200,000 in annual receipts incur the incremental costs of running 
their financial statement and pass an independent audit, and abide by 
generally accepted accounting principles. This is a cost borne by any 
public company with as little as $1 million in total assets.
  The additional costs here only apply to the larger unions that 
already have to file with the Department of Labor in any event.
  I want to say again that this is the union corruption update. This 
massive stack is just for the first half of 2002. There are numerous 
examples of the problems about which I have been talking. This stack 
here represents just the first half of 2002.
  Some will suggest that the examples I have given show how well DOL is 
catching and prosecuting union fraud. Unfortunately, that is not the 
case. The Department of Labor auditing of unions accounts for just 9 
percent of all embezzlement cases. The other 91 percent of embezzlement 
comes from other sources. Without a required audit, union officials do 
not have to contend with the threat of an annual independent audit 
hanging over their heads.
  The stories speak for themselves. Union corruption is rampant. It is 
absolutely rampant on the local, national, and pension fund levels all 
across our country. In the last 2 years, there has been a union 
embezzlement or closely related case in 40 out of our 50 States. This 
is a huge problem.
  With regard to the financial information already required to be 
filed, it is not verified by an independent auditor. The current union 
filings are not verified by an independent auditor. The independent 
audits required in the McConnell amendment will help verify that the 
information is indeed accurate. Unions in many instances have not been 
complying with the filing requirement.
  The PRESIDING OFFICER. The Senator has used 5 minutes.
  Mr. McCONNELL. I ask unanimous consent for a couple of more minutes 
of Senator Gramm's time.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. McCONNELL. Unions have not been complying with the filing 
requirements. Up to 40 percent of unions required to file LM-2 reports 
filed late or not at all. The Department of Labor, under current law, 
can't even fine these organizations for noncompliance. My amendment 
would at least give them the ability to fine these organizations for 
noncompliance.
  Let me summarize what this is about. We have decided in the Sarbanes 
bill and in the Leahy amendment that we want accountability in 
corporate America. We want to hold the CEOs and the CFOs responsible. 
We want the auditing done accurately. If it is not done accurately, 
somebody needs to be held responsible.
  Why are we doing that? We are doing that because we want to reassure 
the shareholders that somebody is not cooking the books, that we don't 
have

[[Page 12498]]

more WorldComs and Enrons and Global Crossings and the like.
  The McConnell amendment seeks to provide those very same protections 
to rank-and-file citizens who may or may not be big enough to invest in 
the market. But they are investing their dues every week in the 
majority of our States where they do not have a choice to not pay their 
dues. And they have every right to expect independent audits of their 
funds to make sure they are not being stolen and not being misused. 
They have every right to expect the presidents of those unions and the 
secretary-treasurers of those unions to certify as to the accuracy of 
those audits.
  That is what this amendment is about. It is about providing the same 
fairness to the union member as we provide to the shareholder. Simple 
justice. I urge that the McConnell amendment be adopted.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Johnson). Who yields time?
  The Senator from Texas.
  Mr. GRAMM. Mr. President, how much time do I have?
  The PRESIDING OFFICER. Thirteen minutes.
  Mr. GRAMM. Mr. President, first, I thank Senator McConnell. I do not 
think anybody who listened to Senator McConnell is going to believe the 
assertion that somehow this amendment has nothing to do with the logic 
of this bill. You can take a view that business is for real and that 
standards should apply there, but organized labor is a different kind 
of institution and they should not apply there; but if you are making 
that argument, you have to argue it on the basis of politics. You 
cannot argue it on the basis of logic. You cannot argue it on the basis 
of justice or fairness.
  What Senator McConnell has done, it seems to me--and I think it is a 
service to the process that he has done it--is that his amendment in no 
way changes Senator Leahy's amendment. So whether you are for or 
against the Leahy amendment is not a relevant factor in whether you are 
for or against Senator McConnell's amendment because he does not change 
the Leahy amendment. He simply says, at that moment in history where we 
are trying to enhance the quality of financial reporting in corporate 
America, to protect the investor and to strengthen the economy, that we 
should make the same changes with regard to financial reporting by 
labor unions.
  There have been several arguments made against this amendment, but I 
do not believe any of them hold water, at least in terms of my ability 
to understand the amendment and the arguments.
  The first argument that has been made is: There are already 
requirements that apply to unions, that they have this vast array of 
reporting requirements.
  The same thing is true with corporate America. If you accept that 
argument that there already is a body of law, and if that means that it 
should not be improved or strengthened, then what are we doing here?
  There are differences over this bill, differences about how the board 
should be structured, differences about what the board should decide 
and what Congress should decide, but there is no difference over the 
issue that we need higher standards in accounting. There is no 
difference over the issue that people who knowingly violate the law 
ought to be held accountable.
  So to say that unions are subject to requirements is not an argument 
that we should not have better requirements, because if it were an 
argument, that would be an argument against the bill; and not one 
Member of the Senate has bought that argument or made it or believes 
it.
  The fact that there are requirements today does not mean, in a time 
when we are enhancing transparency and efficiency and honesty in 
reporting, that we should not improve it for both corporate America and 
for organized labor.
  The second argument that is made is: Companies are public and unions 
are private. Not only is that argument invalid, but unions are more 
public than private investments, more public than public companies. 
Nobody made anybody invest in WorldCom. Nobody made them do that. But 
in some 40 States of the Union you have to pay union dues in order to 
work.
  I do not think that is right. I think that is fundamentally wrong. I 
thank God every day that in Texas we have right-to-work laws that say I 
do not have to join a union to earn a livelihood. But in some 40 States 
you do.
  I think the case is even stronger than the Senator from Kentucky made 
because nobody made anybody buy WorldCom, but in some 40 States you 
have to pay union dues. Surely, there is a public interest, in a 
mandatory institution, in seeing that it keeps straight books.
  So this argument that we are talking about, public companies and 
private unions, what is private about a union that I have to join in 
order to have a job? Nothing is private about that union. It is as 
public as something can be public.
  It seems to me--and Senator McConnell made the point--nobody made 
people invest in WorldCom, but people are forced every day to pay union 
dues. Every day they are forced to pay them. So they are as public as 
public companies are, I would argue more public, and we have a stronger 
interest in protecting that money which was involuntarily taken, it 
seems to me, or just as strong an interest in protecting that money 
that was involuntarily taken versus money that was voluntarily 
invested.
  The strongest argument of this amendment--and something that is 
absolutely breathtaking to me--is that the annual report that is 
required of unions does not have to be certified and prepared by a CPA.
  We are going to great lengths in every bill that has been proposed to 
set up an independent body to proctor high standards in accounting for 
CPAs. Shouldn't a union that is handling my money that they took from 
me involuntarily have its books audited by a CPA?
  Why is that important? In fact, why do we care about accounting 
ethics? We care about them because there is no way the Government has 
enough resources to spot audit every company in America. So we have to 
rely on the integrity of the CPA. And it is the problem we have with 
that today that brings us to the floor of the Senate.
  While we are enhancing that integrity through this oversight board, 
shouldn't we require organized labor that is taking people's money 
involuntarily to have their annual report certified and prepared by a 
certified public accountant? How can anybody--how can anybody--argue 
against requiring a CPA to do these audits?
  You could say the Labor Department ought to go out and audit every 
one of these unions. Clearly, they do not have the resources to do it. 
The President has asked for more money to do it. I would guess this 
Congress will not provide that money. I will be watching the 
appropriations to see if they do. But even if they provide it, it is 
not enough money to audit every union in America.
  What we have to do to bring honesty to union financial reports, as we 
bring honesty to corporate reports, is to require a CPA to do the 
audit. I can see no logic whatsoever to opposing requiring a CPA to 
certify.
  Finally, we have gone to great lengths--and I think appropriately--to 
require the guy who is drawing the big check, the head man or head 
woman, to sign this annual financial statement to put their credibility 
on the line and give them nobody to hide behind. Should we not require 
the president of the union sign this audited report? And shouldn't the 
annual report be done by a certified public accountant?
  Now, it is astounding to me--and, boy, it shows you the different 
level of enforcement of the law. If anybody does not believe that 
politics play a part in law enforcement in America, look at the fact 
that was given to us by the Senator from Kentucky, that 34 percent of 
unions are out of compliance in terms of filing these reports. Some of 
them just don't file the report.

[[Page 12499]]

  It seems to me if 34 percent of the companies in America didn't file 
reports, we would be outraged, and rightly so. In fact, you couldn't 
trade your stock on the New York Stock Exchange or the American Stock 
Exchange or the Nasdaq because of the enforcement that exists in 
private entities.
  The McConnell requirement that the reports be filed is 
straightforward and reasonable.
  I reserve the remainder of my time by simply saying, what harm can 
come from requiring unions to have CPAs do these reports? I see good 
can come. I can see no possible harm that could come.
  Secondly, why not have the union president certify the veracity of 
that report just as the corporate president does? Some people say this 
is punitive. Some people say this is political. If this were being used 
to try to kill the Leahy amendment, you might be able to make that 
argument. But this amendment in no way takes away any part of the Leahy 
amendment. It simply adds to it that the high standards we set for 
corporate America should apply likewise to unions.
  I reserve the remainder of my time.
  The PRESIDING OFFICER. Who yields time? The Senator from Maryland.
  Mr. SARBANES. Could I ask what the time situation is?
  The PRESIDING OFFICER. The Senator from Maryland has 10 minutes.
  Mr. SARBANES. And how much time is left to the Senator from Texas?
  The PRESIDING OFFICER. The Senator from Texas has a minute and a 
half.
  Mr. SARBANES. Mr. President, it is important, in considering this 
amendment, to realize there exists now, under the labor management 
reporting and disclosure procedure, extensive and intensive provisions 
for reporting by labor organizations, officers, and employees of labor 
organizations.
  If all of these provisions are not being carried out fully, the 
responsibility rests with the Secretary of Labor. The Secretary of 
Labor ought to be doing her job. If the Congress is not providing 
sufficient resources for that, that is an issue for the Congress. We 
ought to address that issue.
  This supposed parallelism that is being argued completely misses the 
mark in the sense that there is already an existing statutory scheme 
covering reporting and disclosure by labor organizations.
  I want to go through some of those provisions so Members appreciate 
how extensive they are and the amount of review and oversight that now 
exists.
  I am now reading from the statute:

       Every labor organization shall file annually with the 
     secretary a financial report signed by its president and 
     treasurer--

  So much for this argument about they ought to sign, put their 
signature on the report--

     or corresponding principal officers containing the following 
     information in such detail as may be necessary accurately to 
     disclose its financial condition and operations for its 
     preceding fiscal year.

  Listen to what they have to set out: Assets and liabilities at the 
beginning and end of the fiscal year; receipts of any kind and the 
sources thereof; salaries, allowances, and other direct or indirect 
disbursements, including reimbursed expenses to each officer and also 
to each employee who, during the fiscal year, received more than 
$10,000 in the aggregate from such labor organization and any other 
labor organization.
  Ten thousand dollars? Ken Lay of Enron got $177 million. Twenty 
executives of Enron got over $3 million in salary. Here we are talking 
about a $10,000 figure which they have to report.
  I am reading from the statute that governs labor organizations on 
their reporting and disclosure: Direct and indirect loans made to any 
officer, employee, or member which aggregated more than $250 during the 
fiscal year, together with a statement of the purpose, security, if 
any, and arrangement for repayment. A $250 loan, $250. Bernard Ebbers 
of WorldCom got a $366 million loan. This is just to underscore in a 
sense the tightness of this framework governing the labor 
organizations--a $250 loan. WorldCom executive Ebbers, $366 million? 
The Adelphia situation with the Rigas family, $3 billion in loans.
  Let's look at the power of the Secretary of Labor to enforce these 
requirements: Any person who willfully violates this subchapter shall 
be fined not more than $10,000 or imprisoned for not more than 1 year. 
Any person who makes a false statement or representation of a material 
fact or who knowingly fails to disclose a material fact in any 
document, report required under the provisions of this subchapter shall 
be fined not more than $10,000 or imprisoned for not more than 1 year. 
Any person who makes a false entry or willfully conceals, withholds or 
destroys books, records, reports shall be fined not more than $10,000 
or imprisoned for not more than 1 year.
  ``Personal responsibility of individuals required to sign report,'' I 
earlier said the president and the treasurer of the labor organization 
had to sign the reports. Listen to this:

       Each individual required to sign reports under sections 431 
     and 433 of this title shall be personally responsible for the 
     filing of such reports and for any statement contained 
     therein which he knows to be false.

  Of course, we have just noted from the previous provisions, that is a 
fine and possible imprisonment for up to 1 year. So we have a statutory 
scheme in place to control the labor organizations. If it is not fully 
adequate, it needs to be addressed in that context. But clearly, it 
goes well beyond many of the provisions that apply to corporate 
officers. It has been carefully worked out over the years. The Labor-
Management Reporting and Disclosure Act dates from 1959 originally, 
with subsequent modifications and adjustments, as we have proceeded.
  There is a system in place to govern labor organizations. It has been 
asserted: well, the Labor Department has not been able to do everything 
it needs to do. That burden is on the Labor Department. In a sense, 
what has been raised represents a challenge to the Secretary of Labor.
  If, in fact, the Congress hasn't given her adequate resources, that 
point needs to be made to the Congress and we need to address that.
  But we have established a well-thought-out, comprehensive scheme with 
respect to the reporting and disclosure of the labor organizations, and 
if they are falling short of the statutory requirements, that needs to 
be addressed in the context of the statute.
  The Labor Department has enormous authority over the labor 
organizations. Make no mistake about it, the powers and the authorities 
that reside in the Secretary of Labor and the Department are quite 
extensive to deal with the labor organizations. I mentioned only some 
of them, including these imprisonment for 1-year provisions.
  So I am in opposition to the amendment. I think any shortcomings that 
one might perceive need to be addressed in the context of the reporting 
and disclosure provisions applicable to labor organizations; and I must 
say to you--and the Senator from Kentucky has outlined some of the 
problems--the Department needs to come to grips with them and come to 
the Congress, if it deems that necessary, to seek an appropriate 
congressional response in order to deal with them.
  I very much hope my colleagues, when the time comes, will not be 
supportive of this amendment. When all time is used, I am prepared to 
make a motion with respect to the amendment.
  Mr. SPECTER. Mr. President, I am voting against the McConnell 
amendment because existing law already accomplishes what he seeks to 
do. There exists now under the Labor Management Reporting and 
Disclosure Act of 1959 extensive and intensive provisions for reporting 
by the President and Treasurer of labor organizations.
  Furthermore, the audit requirements of this amendment, which apply to 
union filers with receipts of $200,000 or more, impose under regulation 
of small entities. Public corporations subject to the SEC typically 
have many more assets with initial public offerings are customarily in 
the range of $40 million. The annual costs of compliance might exceed 
the annual receipts of many filers who would be subjected to these 
requirements. To require audits of all unions regardless of size or 
complexity

[[Page 12500]]

of financial reports would cause an unreasonable burden on many smaller 
locals who already must file LM-2 reports. Unions with annual receipts 
of $200,000 or more covered by the McConnell amendment come in an 
extremely wide range of types, sizes, and of performing services. Of 
the more than 5,000 labor organizations that currently meet this 
criterion and file LM-2 reports, only about 70 are national or 
international unions. The rest are locals--largely voluntary 
organizations, many with no or few full-time employees. The current 
Department of Labor reporting requirements take this ``no one-size-
fits-all'' approach into account and build in some flexibility that the 
McConnell amendment does not allow. For example, many smaller locals do 
not need to retain outside CPAs because their financial statements are 
very simple and consistent from year to year.
  The amendment's certification requirements are also redundant. For 
more than 40 years, union officers have been required to sign annual 
financial reports under penalty of perjury, attesting that the report's 
information accurately describes the union's financial condition and 
operations.
  The PRESIDING OFFICER. The Senator from Texas is recognized.
  Mr. GRAMM. Mr. President, let me paraphrase our colleague from 
Maryland. The SEC already has power. Let them do their job. We are not 
saying that. We are saying they need more power and they need help 
doing their job because the job is not getting done.
  The same is true for unions. The Senator from Maryland said there is 
already a regulatory scheme. There is already a regulatory scheme for 
corporate America, but we are saying it is not good enough, not tough 
enough, it is not working, and we need to improve it.
  The same is true for unions. The president of a corporation already 
has to sign an annual report. We are trying to expand that in this 
bill. Why not require the president--not other officers, but the 
president--to sign the report? I submit that illegality, whether it is 
$100 million or $10,000, is still theft. The President has asked us to 
bar loans.
  The issue here is, should we have the same integrity standards for 
unions? I believe the answer is yes.
  I yield the remainder of my time.
  The PRESIDING OFFICER. The Senator from Texas has 17 seconds and the 
Senator from Maryland has 50 seconds.
  Mr. McCONNELL. Mr. President, it is true that unions file a lot of 
papers. The problem is that accuracy is not required. This requires 
certified records--certified by a CPA--and it requires the presidents 
and secretaries of their treasuries to certify that the records are 
accurate.
  Union corruption is a serious problem. This will help correct it. I 
urge colleagues to support the amendment.
  Mr. SARBANES. Mr. President, I only observe that if they file a false 
statement of representation, they can be fined and sent to jail for up 
to 1 year. That is a pretty heavy remedy if you stop and think about 
it.
  Mr. President, I yield back the remainder of my time.
  Mr. GRAMM. Mr. President, is any time remaining?
  The PRESIDING OFFICER. No time remains.
  Mr. SARBANES. Mr. President, I move to table the McConnell amendment, 
and I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The question is on agreeing to the motion. The clerk will call the 
roll.
  The assistant legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from North Carolina (Mr. 
Helms) and the Senator from Ohio (Mr. Voinovich), are necessarily 
absent.
  I further announce that if present and voting the Senator from North 
Carolina (Mr. Helms) would vote ``nay.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 55, nays 43, as follows:

                      [Rollcall Vote No. 168 Leg.]

                                YEAS--55

     Akaka
     Baucus
     Bayh
     Biden
     Bingaman
     Boxer
     Breaux
     Byrd
     Cantwell
     Carnahan
     Carper
     Chafee
     Cleland
     Clinton
     Conrad
     Corzine
     Daschle
     Dayton
     Dodd
     Dorgan
     Durbin
     Edwards
     Feingold
     Feinstein
     Graham
     Harkin
     Hollings
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Landrieu
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Miller
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Reed
     Reid
     Rockefeller
     Sarbanes
     Schumer
     Smith (OR)
     Specter
     Stabenow
     Torricelli
     Wellstone
     Wyden

                                NAYS--43

     Allard
     Allen
     Bennett
     Bond
     Brownback
     Bunning
     Burns
     Campbell
     Cochran
     Collins
     Craig
     Crapo
     DeWine
     Domenici
     Ensign
     Enzi
     Fitzgerald
     Frist
     Gramm
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchinson
     Hutchison
     Inhofe
     Kyl
     Lott
     Lugar
     McCain
     McConnell
     Nickles
     Roberts
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Snowe
     Stevens
     Thomas
     Thompson
     Thurmond
     Warner

                             NOT VOTING--2

     Helms
     Voinovich
       
  The motion was agreed to.
  Mr. SARBANES. I move to reconsider the vote.
  Mr. GRAMM. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                       Division of Amendment 4174

  Mr. GRAMM. Mr. President, I ask for a division of the amendment with 
sections 801, 802, and 803 in division 1, section 804 in division 2, 
and the remainder of the amendment in division 3.
  The PRESIDING OFFICER (Mrs. Carnahan). The amendment is divisible and 
is so divided.
  Mr. GRAMM. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. SARBANES. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SARBANES. Madam President, I would like to put forward a couple 
of inquiries. Could the Senator outline what his division of the 
amendment does?
  Mr. GRAMM. The amendment was divisible, and my division divided it 
into three amendments. The amendment having to do with statute of 
limitations in filing a lawsuit is now division 2. So division 1 would 
be the pending business, as I understand it. Then division 2, and then 
division 3, seriatim, unless there was some other agreement that took 
us to another order or other amendments.
  Mr. SARBANES. What does division 3 provide for?
  Mr. GRAMM. I sent the division to the desk. Basically, division 1 was 
everything up to section 804. Then division 2 is 804. And then division 
3 is 805 through the end of the bill.
  Mr. SARBANES. Did the Senator consider dividing it only for section 
804?
  Mr. GRAMM. The way it was done, the easiest division was to do it in 
three parts.
  Mr. SARBANES. It is that division you want a separate vote on, I take 
it?
  Mr. GRAMM. It is that division on which I want an opportunity for the 
Senate to work its will, as well as the others.
  Mr. LEAHY. Madam President, if the Senator will yield, there is 
another way, of course, for the Senate to work its will. The reason I 
mention it, this is a critical part of the legislation. It is nice to 
say, and we should say, my cosponsor of the Sarbanes bill, which I 
think is superb--we should say we should have better accounting 
methods, we should say we should have more accountability, but we have 
a lot of these executives who have proven by their past behavior they 
are not going to do squat unless they think they are going to go to 
jail for what they do.
  The Leahy-McCain, et al., amendment makes it very clear that these 
people are going to face jail terms if they loot the pension funds, if 
they defraud their investors, if they defraud

[[Page 12501]]

the people of their own company. And I might suggest if the Senator 
from Texas agrees, there ought to be real penalties; let's vote on 
Leahy-McCain. Let's vote on it, not divide it up. If he believes there 
is something he may want to do better--such as shield some of these 
people with a shorter statute of limitations or with a more restrictive 
statute of limitations--he has every right to do whatever he wants to 
shield these people. But bring it up as a separate amendment and let 
the Senate vote up or down on that.
  When I look at places such as Washington State alone where the 
pension funds of firefighters and police lost $50 million because of 
the fraud of the leaders of Enron, I don't feel too sympathetic. We 
already have a very short statute of limitations in here anyway. We 
ought to at least have that so people might be able to recover some of 
the money they have lost, if it is at all possible, instead of just a 
few executives going up and building their $50 million mansions and 
hiding it there.
  There ought to be some way for the people who lost their pensions, 
lost their live savings, to get it back. We ought to have criminal 
penalties for those who did this in the first place so they end up in 
the slammer.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Madam President, a wonderful speech, and it might be 
appropriate for another occasion, but what has happened is that a 
comprehensive bill has been offered as an amendment to the pending 
bill. All I asked for, which every Senator has the right to ask for, 
was a division of the question so that the Senate could work its will 
on individual parts.
  I know of no living person, at least anyone who is in the Senate or 
the executive branch of Government--I don't know about the judicial 
branch of Government--who is not for the provision related to putting 
people in jail for knowing and willful behavior where they violate the 
law.
  This bill which has been offered, however, has many different 
sections. The part I am concerned about has to do with statute of 
limitations and the security reform legislation we adopted in 1995.
  I remind my colleagues that in 1995 we had these massive strike 
lawsuits. One firm filed 80 percent of them. Almost all were settled 
out of court. It created an abuse that generated a bipartisan consensus 
that something should be done about it.
  We passed a law, and then, incredibly, with Democrat support, we 
overrode President Clinton's veto of the bill. The only veto override 
of the Clinton administration was on this issue.
  One of the reforms had to do with shortening the statute of 
limitations. I remind my colleagues, this has nothing to do with the 
SEC or the Justice Department. We are not shortening their statute of 
limitations. In 1995, when we passed this bill with a strong bipartisan 
vote, we said: If I want to sue Senator Sarbanes, I have to file the 
suit within a year of discovering that I believe I have been wronged, 
or I have to file it within 3 years of when I was wronged. That was the 
decision we made then.
  Now, hidden away in this bill, which has been offered as an 
amendment, is a provision that effectively extends that to 5 years.
  All my division of the amendment did was to say this ought to be 
dealt with separately so that those who are for mandatory prison 
sentences for knowing and willful behavior that violates the law can be 
for that without being for repealing our Private Securities Litigation 
Reform Act. The reason behind the rules of the Senate that give Members 
the ability to divide bills goes to exactly the heart of this point; 
that is, if someone could take a bill--if someone could take----
  Mr. SARBANES. Will the Senator yield on that point?
  Mr. GRAMM. Let me just finish my point and I will be happy to yield, 
as I try to always do.
  Someone could take the securities bill of 1933 and they could put in 
it all kinds of things that the vast majority of Members of the Senate 
are for, and then they could put one little provision in one line in 
that virtually nobody is for, and they could send it as an amendment to 
the desk and then we would have no recourse except to vote against all 
the things that we are for in order to vote against the one little 
thing that we are against.
  It seems to me there is nothing worse in public life than to have 
someone attack you for voting against a great big old bill and say: 
Well, you were against. It says here motherhood and the flag and 
Christmas and Easter--you were against that because you voted against a 
bill that busted the budget and bankrupt the public.
  So in writing the rules of the Senate, we wrote the rules in such a 
way that when someone offered such a bill as an amendment that had 
different parts, any Member could ask for a division so it could be 
dealt with separately. All I have done is exercise that right.
  We now have three amendments pending before the Senate--I guess four, 
counting the Miller amendment--but that is all I have done. Two of 
these amendments I am supportive of, one of them I am not supportive 
of, but that is where we are.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Madam President, let me say, first of all, the Senator 
is obviously within his rights to divide the amendment. The Senator 
could have offered an amendment striking section 804, which is the 
section to which he objects. As I understand it, he approves of the 
remainder of the bill. By dividing it, he gains a one-vote advantage 
because if he moved to strike and we had a tie vote, he would lose. By 
dividing the bill, if there is a tie vote on section 804 the proponents 
of that provision lose. So by the division the Senator from Texas has 
gained a one-vote step up. I recognize that. That is permitted under 
the rules. I am not complaining about it.
  I think it is inaccurate to use an example of the whole bill and say 
I either have to vote for all of the amendment or none of it because 
certainly he hasn't been in that position.
  He could have offered an amendment to strike the section--am I right; 
804 is the section on which the Senator is focused?
  I make the following suggestion in order to try to move matters 
forward, if I could have the attention of my colleague.
  Why don't we proceed and adopt the two divisions other than 804 right 
now and get those taken care of. Then we can address 804, which is the 
division to which the Senator objects. We can have an appropriate 
debate with respect to that division.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Madam President, we do have someone who wishes to speak. I 
am not sure whether it is on one of these sections or not. I am not 
ready to do that right now. We may reach a point where I will be ready 
to do that, but I am not ready to do that at this point.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Madam President, given that the Senator has indicated 
he is supportive of the Leahy amendment--I think he said that on more 
than one occasion--except for section 804, what is it that would have 
to transpire?
  Mr. LEAHY. Madam President, if I might step in for just a moment, if 
the Senator from Maryland will not mind?
  The PRESIDING OFFICER. The Senator from Vermont.
  Mr. LEAHY. I keep hearing this discussion by the senior Senator from 
Texas that my bill somehow changed the Securities Litigation Reform 
Act. It does not. It does not do that at all. It changes no provision 
in it at all.
  The PSLRA did not establish the current statute of limitations. It 
did not deal with that issue at all. The Leahy bill does not impact on 
these provisions. It was a 5-to-4 Supreme Court case that overturned 
years of established law to set the current limitation periods in Lampf 
v. Gilbertson.
  In fact, interestingly enough, former Secretary General Kenneth Starr 
and I take the same position on these statutes of limitations. In the 
dissent in

[[Page 12502]]

that case, two of the dissenters, Justices Kennedy and O'Connor, said 
the one in three statute of limitation makes the possibility of injured 
investors recovering basically a dead letter.
  Here are some numbers. Florida lost $335 million because of Enron; 
the University of California, $144 million--all the way down to 
Vermont; we lost millions of dollars. These are people who would like, 
in these kinds of cases, at least to have a statute of limitations such 
that we can go after them.
  We are not suggesting changing in any way--I want everybody to be 
clear on this--we are not suggesting changing the basic standards of 
the law on a statute of limitation. We are talking about extending the 
time. We are talking about extending the time so it will not be, as the 
Supreme Court said, with a short statute of limitations, a dead letter. 
We are saying we want enough of a statute of limitation--still very 
short but a long enough one so people can recover. We are perfectly 
willing to have exactly the same words as the law says now, with the 
exception the statute is slightly longer.
  I cannot speak for an activist Supreme Court that seems to be 
meddling in most of our laws, but their case law, their stare decisis 
impacts on every single Federal court in this country--district level, 
court of appeals level. So there, with the exact same law, the stare 
decisis is Lampf v. Gilbertson. That would be controlling except it 
would be a longer statute of limitations.
  The Senator from Texas, or anybody else, if they think that statute 
of limitations is too long, fine, vote against it. But I am here to try 
to protect people and give them an opportunity--when there has been 
such enormous fraud and all the pension funds have been lost, and all 
the people who have lost their life savings--give them at least some 
chance to recover something, especially as the executives of these 
companies walk off with tens of millions of dollars. We go two-five 
instead of one-three.
  It makes sense to me. That was negotiated and voted on in the 
Judiciary Committee, and the final bill was passed unanimously.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Madam President, I want to resume my discussion with 
the Senator from Texas. I am not going to engage in a substantive 
debate with respect to section 804 of the Leahy amendment, which is 
division 1 of the divisions the Senator has made.
  I want to go back to the prospects of getting division 1 and division 
3 accepted, to which the Senator has repeatedly indicated he has no 
objection. In fact, as I understand it, he is supportive of it.
  I renew my inquiry as to whether we could move ahead and accomplish 
that, since in our previous discussions the Senator has indicated 
concurrence with the notion that we need to move this legislation 
along. I don't understand what the objection would be to doing that. 
The Senator has divided the amendments. He has improved his holding 
position by doing so with respect to section 804. He has accomplished 
that objective under the rules. But as I understood it, he does not 
object to all of the matters in division 1 and division 3. I think it 
would help move the work along if we could adopt those two divisions, 
and then we could address division 2.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Madam President, first of all, let me say as the ranking 
member of the committee that I have yet to have an opportunity to offer 
an amendment. I only have two amendments I want to offer. No one is 
more eager to get this bill to conference where we might come up with 
something for which there would be virtually unanimous support. But I 
assume at some point during the deliberations we will have votes on 
division 1 and division 3. But I would like to have an opportunity to 
offer amendments myself.
  All I want to do is follow the rules of the Senate.
  Let me say that I am concerned, as I listen to colleagues on both 
sides of the aisle, that we are going to have a literal blizzard of 
amendments not directly related to this bill. I continue to believe 
that at some point, in order to finish the bill, we are going to have 
to file cloture.
  I intend, as I said at the beginning of the debate, to support that 
cloture motion. I think someone would have a hard time portraying me as 
someone who is slowing down the process when I am ready to vote to 
bring debate on this bill to an end and force amendments to be germane 
to the bill itself.
  My proposal is that we simply go on with the business of the Senate. 
I am ready to offer an amendment. I am ready to deal with the amendment 
of the Senator from Georgia. That amendment is amendable. All of these 
amendments are amendable. I suggest we simply proceed, let Members be 
recognized, and have those Members move forward.
  In light of that, I send an amendment to the desk in the form of a 
second-degree amendment to division 1. It is a very short amendment. I 
think the best thing to do is to have it read.
  Madam President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Madam President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Madam President, I have spoken to the manager of the bill. 
He has indicated he has no problem with someone speaking on the bill as 
long as there is no effort to do anything in a parliamentary fashion 
because there are negotiations pending at the present time. We 
understand that. I ask unanimous consent that the Senator from Illinois 
be recognized to speak for purposes of debate only.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Following his remarks, the quorum call will be 
reinstituted.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Illinois.
  Mr. DURBIN. I thank my colleague from Nevada as well as the Senator 
from Wyoming for allowing me to speak to the bill.
  I am happy to be an original cosponsor of this amendment with 
Senators Leahy and Daschle. The Public Company Accounting Reform and 
Investor Protection Act is a long title, but what it basically seeks to 
do is to address what most Americans view as one of the most dangerous 
developments in our Nation's economy in the last several years, if not 
longer.
  When you ask the average American what they think of all this 
corporate corruption, all of the disclosures about corporations that 
have literally lied to the public, to their shareholders, to their 
employees, and to pensioners, people across America say it does not 
give them much hope for recovery for our economy. It does not give them 
much confidence in terms of investing in the stock market. And it makes 
them feel very sad and worried about their own pension and retirement.
  We were proud to announce several years ago that almost half of 
Americans owned stock. We had developed to that point where the average 
person thought owning stock was a normal thing to do.
  I grew up in a family with a mother and father who never once 
purchased a share of stock until my mother in her later years decided 
``to gamble,'' as she called it. But it was unthinkable in their 
working years to buy stock. They were working people. They worked for a 
railroad. Workers didn't buy stock.
  That has changed. More and more people across America buy mutual 
funds and stocks, 401(k)s, retirement plans. And why wouldn't they? 
Look at what happened over the last 10 years. If you were smart enough 
to buy yourself a dart board and put the Wall Street Journal up on it 
and throw the dart, just about any stock you hit was going to give you 
more money.
  People came to realize that. They bought their mutual funds and 
stocks and sat back and relaxed and said: This is easy. I will be able 
to retire a lot sooner than I ever dreamed, and we have more financial 
security in our family than ever before.

[[Page 12503]]

  Boy, have things changed in the last 2 or 3 years. We have seen a 
recession, the economy slow down, and then we watch as day after 
painful day reports come of the Dow Jones and the Nasdaq, all the rest 
of them, hitting new lows every single day.
  It has to do with the state of the economy, the recession, but it has 
to do as much with consumer confidence, the belief that you just can't 
trust the corporate big boys.
  There are too many instances where they decided to cash in with big 
stock options and walk away with millions--sometimes hundreds of 
millions--of dollars and leave a floundering corporation. They call it 
``restatement.'' When I went to grade school, if I tried to tell the 
nuns I wanted to restate something I had said, I never got by with it. 
I got slapped on the back of the hand with a ruler. They knew it was an 
admission that you lied, misrepresented something. Now that is 
commonplace when you deal with corporations across America. Every week, 
there is some new disclosure.
  Senator Leahy, Senator Daschle, and I sat down to say we have to get 
to the heart of this issue and try to resolve it, in terms of making 
certain there are penalties in place for those who are deceitful, 
misleading, lying to the American people about the status of 
corporations. From Wall Street to Main Street, confidence has been 
shaken. It started off with Enron, the poster child of runaway 
corporate greed. Isn't it curious that today, as we debate corporate 
corruption, and isn't it an oddity that there is an actress in 
Hollywood who is facing possible jail time for shoplifting and she is 
facing more time in jail than any officer of the Enron Corporation? 
What is wrong with this picture? Somebody who shoplifts might go to 
jail, but not the first person has been indicted at Enron, the seventh 
largest corporation in America, which goes bankrupt.
  We had a series of hearings, and everybody on Capitol Hill was 
wringing their hands and calling in the cameras, saying we have to do 
something about it. Yet the Department of Justice has yet to indict the 
first person at Enron.
  So what we are saying with this amendment is that we want to 
establish standards and practices so that those who violate the law, 
who are guilty of corporate corruption, will pay a price for it, not 
just a fine that may be ignored or paid off by the corporation but 
more.
  In our criminal code, we establish mandatory minimum sentences for 
people who are caught with a thimbleful of cocaine. We will put them in 
jail, and we won't give the judge any flexibility. They go to jail for 
x number of years, no ifs, ands, or buts. But if a person is engaged in 
ripping off stockholders of a major corporation, lying about their 
books, causing tens of thousands of people to lose their jobs, 
jeopardizing the retirement plans of millions of Americans, then, 
frankly, we say to them that yours is going to be a much easier 
punishment.
  What is wrong with this picture? Where are the scales of justice? We 
should have known, when you have executives and board members who stand 
to gain millions of dollars from acting on insider information in the 
corporations they serve, that many would be tempted to do exactly 
that--especially when they knew there weren't any cops on the beat to 
keep an eye on them--no auditors, accountants, or government agencies.
  In the Gingrich revolution that occurred a few years ago, we passed 
something called the ``Contract on America.'' One of its provisions 
said, we are going to take away the power of individuals to sue 
corporations when there has been securities fraud. The argument was 
made that there were too many litigious people and greedy lawyers who 
were meddling in the corporate business and that we had to really close 
the door to that opportunity. Well, that law was enacted. I voted 
against it because it took away one more safeguard, one more protection 
for the public.
  Isn't it coincidental that now we stand here and talk about the 
disintegration of corporate confidence? There were fewer people 
watching then, and some of these corporate leaders were reaching into 
the cookie jar and pulling out with both hands. It happened over and 
over again. We should have known that when you condition the salary of 
executives on potential gains from how the company's stock prices will 
rise--known as options--that would be a temptation to raise the stock 
prices artificially, especially when those on the inside knew that, as 
the prices would fall, they would already have their money.
  We should have known that when you have auditors and accountants 
shifting numbers to come up with the right set of bottom-line figures 
they need to produce for Wall Street, they would be tempted to do that 
even when the audited numbers didn't add up. We should have known that 
when you have the smartest lawyers and bankers in the country scheming 
all night to come up with borderline legal ways to avoid paying taxes 
through a maze of fictitious straw companies, they would be tempted to 
do just that, especially when they knew Congress wrote the laws with 
plenty of loopholes for which their lobbyists paid.
  We stand in the Senate and reflect upon the sad state of business in 
America, and we have to wonder who is really at fault.
  Let me add that the vast majority of business leaders in America are 
honest, hard-working people who have taken a risk in our free 
enterprise system to produce goods and services of value to our country 
and to the world, to create jobs and wealth. They deserve our 
admiration and respect. But, clearly, day after day, week after week, 
month after month, we read on the front pages of our major newspapers 
about the exceptions to what I just said.
  Is it the executives who are responsible as the bad actors, or their 
accountants, their auditors, their bankers? The answer is all of the 
above. Every one of these must face up to their responsibilities.
  In due course, I hope we will enact stricter rules for these 
corporate players. But we have to accept our responsibility; Government 
and Congress has a responsibility.
  I salute Senator Sarbanes of Maryland for what he has done with 
Senator Enzi in bringing this bill to the floor. There is an effort to 
divide up this bill in the hopes of changing a statute of limitations.
  Why is a statute of limitations of importance in this debate? It 
really defines the reach of the law. If you tell me there is a statute 
of limitations that limits the liability of these corporate bad actors, 
I can tell you some people are going to get off the hook. The Leahy 
amendment to Senator Sarbanes' bill broadens the statute of limitations 
so that more wrongdoers will be held accountable; those who have lied, 
cheated, and stolen will be held accountable.
  The opponents of this approach are now suggesting we need to shorten 
the statute of limitations, limit the inquiry and investigation of the 
Government, and limit the liability of the bad actors. This is an 
answer to the prayers of many corporate big wigs who have ripped off 
their stockholders, employees, and pensioners across America.
  This suggestion that we would lessen and shorten the statute of 
limitations is what they want to hear. Some will now be able to retire 
to their mansions, and they will be able to live in the lap of luxury 
with the hundreds of millions of dollars they have taken from these 
corporations and never be called to answer for their violations of the 
law. That is what happens when you shorten a statute of limitations. It 
is an answer to the prayer of the corporate big wigs' defense 
attorneys. Why in the world would we be doing that?
  Why do we want to insulate from liability the very people who are 
guilty of wrongdoing? Why would we not support Senator Leahy's 
amendment to say that those who have violated the public trust, those 
who have lied, misled, and been deceitful should be held accountable 
both on a criminal and civil standard?
  So I certainly hope that at the end of this debate the Senate, on a 
bipartisan basis, will stand by Senator Sarbanes and his bill. I also 
hope that when it is all said and done, the underlying

[[Page 12504]]

amendment I have offered with Senator Leahy and Senator Daschle will be 
accepted.
  Let me tell you what the amendment does, in brief. It punishes 
corporate criminals and creates a 10-year securities fraud felony for 
any ``scheme or artifice'' to defraud shareholders, and directs the 
U.S. Sentencing Commission to raise penalties in obstruction of justice 
cases.
  Two, it preserves evidence of fraud, establishes a new felony for 
destroying evidence when records are under subpoena. It requires key 
financial audit documents to be retained for 5 years, and it creates a 
new 5-year felony for intentional destruction of documents.
  Do you know what happened? As soon as Enron got in trouble, they 
called some of their buddies at Arthur Andersen, and the next thing you 
know, the documents are being shredded, evidence is disappearing. This 
underlying amendment, the Leahy-Daschle-Durbin amendment, addresses 
that specifically.
  The third thing is that it protects victims. It creates protections 
for corporate whistleblowers. We need them. If insiders don't come 
forward, many times you don't know what is happening in large 
corporations. It lengthens the statute of limitations to 5 years from 
the date of fraud and 2 years from the date of discovery for victims to 
bring claims against the corporations. It prevents securities laws 
violators from using bankruptcy to shield debts based on fraud 
judgments.
  What they are trying to do--I see Senator Leahy in the Chamber; he is 
the major sponsor of this amendment--is to gut the provision that 
extends the statute of limitations and say that these people will not 
have to be held accountable for their wrongdoing.
  I urge my colleagues in the Senate to resist this effort. We have to 
hold these corporate wrongdoers accountable. We should not be party to 
any kind of effort to reduce their liability; otherwise, what message 
are we sending? Mandatory minimum sentences for a thimbleful of 
cocaine, but allowing those guilty of corporate wrongdoing to get off 
the hook. What is wrong with this picture of justice?
  I urge my colleagues to resist the change in the statute of 
limitations, and I yield the floor.
  Mr. GRAMM addressed the Chair.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. SARBANES. Madam President, I suggest the absence of a quorum.
  Mr. GRAMM. Madam President, was I recognized?
  The PRESIDING OFFICER. The Senator from Texas was recognized.
  Mr. GRAMM. Madam President, let me answer what has just been said and 
straighten out the facts. In 1995, we had a major problem in America in 
that we had strike lawsuits being filed against high-tech industries 
where one firm filed 80 percent of the cases and settled almost all the 
cases out of court.
  We had a bipartisan consensus that this represented abuse. So under 
the leadership of Senator Dodd, Senator Domenici, and others, we passed 
a bill which President Clinton vetoed. We then overrode the veto. An 
important part of that reform was to say--and let me make it clear, 
this does not have anything to do with committing a crime where you can 
be put in jail. It has nothing to do with the SEC's jurisdiction. It 
has nothing to do with the Justice Department's jurisdiction. It simply 
has to do with my right to file a lawsuit against you and anybody 
else's right to file a lawsuit against anybody else.
  We had a lot of reforms in that bill. You had to actually have a 
client. The lawyer who was the lead lawyer in 80 percent of these cases 
said he loved these type lawsuits because he did not have to fool with 
a client. In essence, he was suing on behalf of himself. Virtually a 
huge percent of the money went to the lawyer filing the suit, not to 
the people who supposedly had been harmed.
  Part of the reform was to set a statute of limitation that if you 
believe I have done something wrong, and you want to sue me for it, you 
have 1 year from the time you find it out, or 3 years from when it 
happens to file a lawsuit.
  When the Senator was talking about letting people off the hook, 
surely everybody understands that our system has no ex post facto laws. 
So if the provision raising that statute of limitation to 5 years 
became law, it would have no effect on anybody who has committed one of 
these violations about which we are talking.


         Amendment No. 4184 to Division 1 of Amendment No. 4174

  Mr. GRAMM. Mr. President, having straightened that out, that is not 
even the subject about which we are talking. We now have three 
amendments pending, and I send a second-degree amendment to the first 
amendment and ask for its immediate consideration.
  This is a very short amendment and I ask it be read because the 
language of it is so clear that a lot of times we have an amendment, 
and what we say does not have much to do with the amendment. I want 
people to read the language.
  The PRESIDING OFFICER (Mr. Carper). The clerk will report.
  The legislative clerk read as follows:

       The Senator from Texas [Mr. Gramm], for himself and Mr. 
     Santorum, proposes an amendment numbered 4184 to division 1 
     of amendment No. 4174:

(Purpose: To provide the Board with appropriate flexibility in applying 
          non-audit services restrictions to small businesses)

       At the end of the division, insert the following new 
     section:

     ``SEC.   . EXEMPTION AUTHORITY.

       ``(1) Case-by-Case Waivers.--Notwithstanding section 201(b) 
     of this Act. The Board may, on a case by case basis, exempt 
     any person, issuer, public accounting firm, or transaction 
     from the prohibition on the provision of services under 
     section 10A(g) of the Securities Exchange Act of 1934 (as 
     added by this section), to the extent that such exemption is 
     necessary or appropriate in the public interest and is 
     consistent with the protection of investors, and subject to 
     review by the Commission in the same manner as for rules of 
     the Board under section 107.
       ``(2) Small Business Exemption.--The Board may, by rule 
     exempt any person, issuer or public accounting firm (or 
     classes of such persons, issuers or public accounting firms) 
     from the prohibition on the provision of services under 
     section 10A(g) of the Securities Exchange Act of 1934 (as 
     added by this section), based upon the small business nature 
     of such person, issuer or public accounting firm, taking into 
     consideration applicable factors such as total asset size, 
     availability and cost of retaining multiple service 
     providers, number of public company audits performed, and 
     such other factors and conditions as the Board deems 
     appropriate consistent with the purposes of this Act.''.

  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. REID. Mr. President, I ask unanimous consent that I be allowed to 
yield to the Senator from Georgia.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator from Georgia.


                      Amendment No. 4176 Withdrawn

  Mr. MILLER. Mr. President, I ask unanimous consent that the Miller 
amendment be withdrawn.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The senior assistant bill clerk proceeded to call the roll.
  Mr. DASCHLE. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


               Division 1 of Amendment No. 4174 Withdrawn

  Mr. DASCHLE. Mr. President, I withdraw Division 1 of the amendment.
  The PRESIDING OFFICER. The division is withdrawn.


               Division 2 of Amendment No. 4174 Withdrawn

  Mr. DASCHLE. I withdraw Division 2 of the amendment.
  The PRESIDING OFFICER. The division is withdrawn.


               Division 3 of Amendment No. 4174 Withdrawn

  Mr. DASCHLE. I withdraw Division 3 of the amendment.
  The PRESIDING OFFICER. The division is withdrawn.


                           Amendment No. 4185

 (Purpose: To provide for criminal prosecution of persons who alter or 
destroy evidence in certain Federal investigations or defraud investors 
        of publicly traded securities, and for other purposes.)

  Mr. DASCHLE. Mr. President, I send an amendment to the desk.

[[Page 12505]]

  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from South Dakota [Mr. Daschle], for Mr. Leahy, 
     for himself, Mr. McCain, Mr. Daschle, Mr. Durbin, Mr. Harkin, 
     Mr. Cleland, Mr. Levin, Mr. Kennedy, Mr. Biden, Mr. Feingold, 
     Mr. Miller, Mr. Edwards, Mrs. Boxer, Mr. Corzine, and Mr. 
     Kerry, proposes an amendment numbered 4185.

  Mr. DASCHLE. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  Mr. DASCHLE. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. DASCHLE. Mr. President, I ask unanimous consent the order for the 
quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DASCHLE. Mr. President, first, let me say that we have had a very 
productive period over the last several minutes, and I think we now are 
in a position to move to a vote on the Leahy amendment.
  Mr. President, I ask unanimous consent that a vote occur on the Leahy 
amendment at 3:15 this afternoon, and that there be no amendments 
offered prior to the vote.
  The PRESIDING OFFICER. Is there objection?
  The Chair hears none, and it is so ordered.
  Mr. DASCHLE. I thank the Chair.
  Mr. LEAHY. Mr. President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Mr. President, first, let me say, I am pleased we have 
reached an agreement on the Leahy amendment. This is one of these 
little technical things that does not mean much to many people, and it 
is one where, in fact, there is a dispute, but we have reached an 
agreement that will allow the Leahy amendment to go forward with 
certainty on our part that the 2-year statute of limitation is a real 
statute of limitation, that we simply change the number and that in the 
process, by the way we do it, we do not do anything that would 
challenge the current court ruling.
  Mr. REID. Will my friend yield for a unanimous consent request?
  Mr. GRAMM. I am happy to yield.
  Mr. REID. Mr. President, I ask unanimous consent that the time from 
now until 3:15 be divided equally between the two managers of the bill.
  The PRESIDING OFFICER. Is there objection?
  The Chair hears none, and it is so ordered.
  Mr. GRAMM. Mr. President, I thank the majority leader for helping us 
work this out. I think this will give us the ability now to move 
forward. As part of this agreement, we will have cloture filed on the 
bill. While that cloture is ripening, we will continue to consider 
amendments.
  I think this agreement guarantees we will have an opportunity, if not 
to finish the bill this week, the opportunity to assure that it would 
be finished early next week.
  Let me also say, for the record, I would not object to a unanimous 
consent request to have the cloture vote today or tomorrow. From my 
point of view, we do not need to wait until Friday to have the cloture 
vote. I would be willing to ask unanimous consent that it be moved up, 
if that were appropriate. I think that is up to the majority leader, 
obviously. But from my point of view, we are ready to move and head to 
conference with this bill.
  This one small part of the Leahy amendment I do not think is prudent 
policy, but there is greater certainty about what it means in terms of 
the statute of limitations. So I am more satisfied at least in terms of 
certainty.
  I thank Senator Leahy for working this out. There is no doubt about 
the fact that he had the votes if we could have brought it all to a 
vote, but I think what we are doing, by working out this simple 
compromise, is guaranteeing that we are going to pass this bill in 
short order.
  I am hopeful in conference we will be able to bring in the changes 
the President has proposed. I understand the Republican leader will 
offer them as an amendment. I will support them. I hope they are 
adopted unanimously.
  But in any case, I think this agreement paves the way to guarantee we 
will pass this bill, hopefully, this week if not early next week.
  Let me say to my colleagues on the Republican side of the aisle, I 
intend to vote for cloture. I think this is an important piece of 
legislation. I would do important parts of it differently than Senator 
Sarbanes, but he is chairman and I am ranking member; and we have been 
in the different positions. There is a difference between the two, but 
we cannot get a bill which I want unless we go to conference.
  The House bill is very different. I think we have an opportunity to 
work out a compromise, just as we did on financial services 
modernization. Senator Sarbanes opposed it when we dealt with it on the 
floor of the Senate, but by the time we came back from conference, we 
got 90 votes. My guess is, we will do as well or better on this bill 
after going to conference.
  So I think we have taken a major step toward moving on. I think it is 
important. I think the American people want this bill passed. If we 
were willing to move up the cloture vote, which I am willing to do, we 
could pass it this week. If not, we will pass it next week.
  The PRESIDING OFFICER. Who yields time?
  Mr. LEAHY. Mr. President, would the distinguished senior Senator from 
Maryland yield me, say, 5 minutes?
  Mr. SARBANES. Would the Senator mind if I made a very short 
statement?
  Mr. LEAHY. I would be delighted if the distinguished chairman did.
  Mr. SARBANES. Mr. President, I rise to commend the distinguished 
Senator from Vermont for the excellent work that he and the Committee 
on the Judiciary did with respect to the amendment that is now pending 
at the desk.
  This amendment will create tough new penalties to punish corporate 
fraud. It has very important provisions to protect corporate 
whistleblowers. Previously, they have been acting under wire and mail 
fraud provisions. And those are not adequate to deal with securities 
fraud. The committee recognized that and dealt directly with that 
question.
  The President is talking about doubling the penalties for wire and 
mail fraud, as I understand it, but did not have a proposal to actually 
have a securities fraud offense. And that is very important because it 
would have been very difficult under those other statutes because they 
are not directly focused on securities fraud.
  I think the committee has stepped into what was clearly a vacuum and 
has filled it in an exceedingly effective and craftsmanlike way.
  There are also important provisions in this amendment to prohibit 
individuals from destroying documents or falsifying records with the 
intent to obstruct or influence a Federal investigation or a matter in 
bankruptcy. That is also very important. We have some provisions of 
that sort but, once again, they are not fully developed or fully 
focused. The committee, again, has applied itself in order to do that 
and obviously made a very substantial contribution in that regard.
  I also want to touch, very briefly, on the provisions for 
whistleblower protection for employees of public companies. The 
legislation, as reported out of the Banking Committee, requires audit 
committees to have in place procedures to receive and address 
complaints regarding accounting and internal control or auditing issues 
and to establish procedures for employees' anonymous submissions of 
concerns regarding accounting or auditing matters. That was a provision 
championed by Senator Stabenow. We were very pleased to adopt it.
  But Senator Leahy and his colleagues on the Judiciary Committee have 
moved ahead to provide additional protections and remedies for

[[Page 12506]]

corporate whistleblowers that I think will help to ensure that 
employees will not be punished for taking steps to prevent corporate 
malfeasance.
  There are a number of other very important provisions in this 
legislation of which I am very strongly supportive, but I, in deference 
to the limitation on time, will withhold with respect to those.
  But, again, I thank the able chairman of the Judiciary Committee and 
his colleagues for this very important contribution to the legislation 
we are trying to develop.
  Let me simply say it is a pleasure, once again, as we did back in the 
fall when we did money laundering, to be able to work closely with the 
committee in furthering the public interest.
  I yield the remainder of my time to the Senator from Vermont.
  The PRESIDING OFFICER. Thirteen minutes remain for the majority. The 
Senator from Vermont.
  Mr. LEAHY. I thank the distinguished Senator from Maryland. I 
appreciate his comments also about last fall after the tragedies of 
September 11. He and I and our committees worked closely on the 
terrorism legislation. Realizing it was more than simply having a 
penalty against terrorism, we had to have the tools against terrorism, 
and the distinguished senior Senator from Maryland was very helpful in 
putting together the money-laundering legislation so we could come out 
with a counterterrorism package on which the Senate could vote for 99-
1.
  That is what we are trying to do today. I am a proud cosponsor of 
Senator Sarbanes' legislation before the body. After years of 
experience in this body, I know how helpful it is if you have bills 
where the jurisdiction of various aspects may be in different 
committees. And considering having turf battles, when you work 
together, as we have in the Banking and Judiciary Committees, and 
others worked, you usually end up with a better package for the Senate.
  The final product becomes better and more complete because of our 
joint work. Having served here for a quarter of a century with the 
Senator from Maryland, I know such things can be done.
  With the members of his committee, he has had to craft a very 
complex, worthwhile bill on the issue of how do you account, how do you 
keep records, of all the various things to come under the SEC, to come 
under the jurisdiction of his committee.
  What I am concerned about, from the Judiciary Committee, is, if you 
get these people, you get them; that if you have somebody who has gone 
and spent all their efforts to defraud their own company and the 
pension holders in their company and the investors in their company, 
that they not walk off scot-free with their mansions in protected 
States and their offshore money.
  When you look at what has happened, when you look at the out-and-out 
fraud of some of these executives as they have ruined their own 
company, actually damaged their own country as well, at the same time 
lining their pockets as if anybody could even have pockets as huge as 
the amounts of money they have put in, and they walk away scot-free and 
they say: This is such a tragedy. I hate to see my company collapse 
like that and tens of thousands of people out of work and all those 
pensioners gone and all those States defrauded. And I am just going to 
have to comfort myself for the rest of my life with my $100 or $200 or 
$300 million I have absconded with.
  Their comfort might be a little bit less if they find that those same 
pension holders and stockholders have the ability to go after the money 
they are walking away with, and their comfort might be a little bit 
less if instead of a very large mansion they are in a 12-by-12 cell 
behind steel doors. Instead of a complacent board of directors, they 
may have to be dealing with their fellow inmates who may not take very 
kindly to them.
  Why do we have to have that kind of a tough law, and why do we have 
to have the statute of limitations? Just take a look at this chart. 
This is what Enron did. Does this look like a company that wants to be 
transparent in their dealings? Does this look like a company that wants 
to be on the up and up? These are their off-the-book transactions, 
hidden debt, fake profits, inflated stock.
  What were some of the companies they were hiding this behind? Here is 
one named Ponderosa. If you look at that, you do not know it belongs to 
Enron. Or Jedi Capital or Big Doe--that is not D-O-U-G-H--or Sundance 
or Little River or Yosemite or OB-1 Holdings or Peregrine or Kenobe. I 
guess Kenobe is a different company than OB-1. And we have Braveheart 
and Mojave and Chewco and Condor. It seems the only time they had free 
between trying to hide the money was going to movies, when you look at 
some of the secret partnerships they created here, Jedi II, OB-1, 
Kenobe.
  My point is, do you think if anybody stumbled across one of these 
companies they would think for even 1 minute that it belonged to Enron? 
Of course not. If you were the person who was to protect the pension 
rights of the employees, do you think if you found Ospry or Zenith or 
Egret or Cactus or Big River or Raptor you would think the money that 
was being tucked away and hidden in there could actually belong to the 
employees of Enron?
  But Kenneth Lay comes up here, sidles up to the table where he is 
going to be called to testify and says: I wish you could know the whole 
story, but not from me. I am taking the fifth.
  Well, he has that constitutional right. But he doesn't have a 
constitutional right to steal and defraud, and other people like him 
don't have the constitutional right to steal and defraud and hide the 
money.
  This isn't a question of whether they walk away with only $100 
million instead of $200 million. It is a question of a middle-age 
couple reaching retirement time and having virtually all their 
retirement save Social Security tied up in a pension fund such as this 
and seeing it wiped out that day. They are not facing a question of 
whether they will have $200 million or $100 million. They are going to 
face the question of whether they can even keep their home, whether 
they will have the money to visit their grandchildren, or have the 
money to take care of their medical needs in their old age. That is 
what we are talking about. Or the people who work so hard, show up for 
work every single day, help make the fortune for the Ken Lays of the 
world, but they suddenly find they can't make the mortgage payment, 
they can't make the car payment, they can't pay for their children's 
braces. They can't do any of these other things because the big guys 
have walked off with all the money.
  That is why I wrote the legislation I did. I wrote legislation that 
is going to punish criminals. I wrote legislation that will preserve 
the evidence of fraud and protect victims.
  As one who has prosecuted people, I know nothing focuses their 
attention more than knowing they will not go to jail. Suddenly that 
overlooked ethics course when they were getting their MBA, or that 
overlooked ethics course in the accounting school or law school, they 
are going to start looking at it again. If they think, because they can 
walk away from this, they will go to jail, they are going to go to 
jail. It is not going to be a complacent board of directors they will 
deal with. It will be a criminal in the cell next door. That is what 
they have to worry about.
  These people deserve to go to jail. They have ruined the lives of 
thousands of people, good people, hard-working people, honest people. 
They have destroyed much of the confidence in Wall Street. They have 
destroyed the confidence in people who should be investing.
  I am proud to be an American and proud to be in a country such as 
ours where you can invest, where people can grow companies, where they 
can make money if they do the right thing. But I am not proud of these 
kinds of people who destroy that sort of American dream.
  The President says he is outraged. I suspect he is. But I am also 
outraged. I would hope the President's outrage will go to the point of 
supporting this kind of legislation, this kind of legislation which 
doesn't just say it is wrong for

[[Page 12507]]

you to do that, but if you do it, you are going to go to jail. Those 
iron bars are going to close.
  We have worked hard on this legislation. That is why I compliment the 
distinguished senior Senator from Maryland. He and the members of his 
committee worked very hard. The people of my staff, including Ed 
Pagano, Steve Dettelbach, Jessica Berry, and Bruce Cohen worked so 
hard. They brought in people from across the political spectrum, 
Republicans and Democrats alike, to join us. I think all of those who 
joined it joined in one basic thing. They set aside their philosophical 
or partisan differences. They set aside their feelings of party and 
said they were overwhelmed with feelings of outrage.
  Even in my own little State of Vermont, pension funds were damaged 
because of the excesses of Enron. And then we see WorldCom and Tyco and 
Xerox, and we say we had better look back 5 years.
  That is not the American way. That is the way of some of the most 
arrogant, self-centered, spoiled criminals. That is what they are; they 
are criminals. They cooked the books in California during an energy 
crisis, so millions of people in California paid more for their 
electricity. Their arrogance was such that they did not care because 
all of those offshore corporations were hiding the money. Lord knows 
how much money is still there. You are not going to find out from these 
executives because they will take the fifth. They have the 
constitutional right to do that, and I will defend that right, as I 
will the rights of everybody else. But let us not shed tears for them. 
Just as Democrats and Republicans will join in voting for this, I call 
on the President and the Attorney General to step forward and say they 
support it. And I call on our Justice Department to go forward and find 
some of these people not just to say maybe we will find a corporation 
guilty of a crime; let's send some of these people to jail for what 
they have done. Let's send them to jail, and let's do everything we can 
to let the people defrauded by them recover some of their ill-gotten 
gains.
  I see the Senator from Michigan has taken over the chair. Madam 
President, I reserve the remainder of my time.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. LEAHY. I note that the Senator from Michigan is a cosponsor of 
this amendment.
  The PRESIDING OFFICER. The Senator from Texas is recognized.
  Mr. GRAMM. Madam President, I think all time has expired on the 
majority side. I think I have about 13 minutes. I have said all I 
intended to say. I think we have cleared the way for this bill to be 
passed. I want to reiterate that when cloture is filed in a few 
minutes, I will be supportive of having that cloture vote earlier than 
Friday, which would be the normal time it would ripen. Maybe others 
would not be supportive of having the vote, and they are perfectly 
within their rights. I think the agreement we worked out has guaranteed 
we are going to pass this bill either this week or very early next 
week.
  The net result is that we can go to conference with the House, and we 
will have an opportunity, I believe, to come back with a strong 
bipartisan bill. I have to say that I think we have sort of reached the 
point where a lot of debate on this issue is more about the next 
election than it is about corporate integrity. I wonder if the debate 
has not reached the point where we are hurting equity values by making 
people fear not only the disease, but the absurd prescription of the 
doctor that might come from the Government.
  I think the sooner we can finish this bill and go to conference and 
come out with a final product so that people know with certainty what 
the new rules are and how we are going to go about them, everybody will 
benefit. I think the only thing that will be lost by invoking cloture 
is that we will have fewer speeches, we will have fewer opportunities 
to denounce evil, however we define it, and we will be less likely to 
get on the 6 o'clock news; but we will also be less likely to spook the 
markets and more likely to get our job done; we will be more likely to 
produce a good bill we can all be proud of, not just when we read the 
editorial in the Washington Post, but when we submit it all to the 
front-porch-of-the-nursing-home test, as to how we feel about it 
someday when we are sitting on the front porch of the nursing home.
  Mr. HARKIN. Mr. President, our economic system is based on 
transparency. Investors need accurate financial information about a 
company so that they can make informed investment decisions. They need 
information they can trust. Getting honest information requires 
accountability and honesty from three entities: corporate executives, 
stock brokers, and public auditors. Clearly, we are seeing breakdowns, 
if not outright criminality, at all three levels. And it requires 
additional accountability at all three levels in order to restore 
investor confidence.
  First, we must expect that corporations present an honest portrait of 
the companies economic health and well-being. Corporate executives who 
cooks the books are no different than used car salesmen who roll back 
the car odometers, both are engaged in a fraud. They must be held 
accountable for their actions and severely punished.
  Second, we must expect brokers provide their investors with honest, 
accurate, and unbiased advice. I stress unbiased. Unfortunately, many 
brokerage firms have a conflict of interest because they bring in 
businesses and increase their own profits by pushing bad stocks. One 
recent report indicated that 94 percent of Wall Street firms continued 
to recommend stocks for companies that went bankrupt this year up to 
the very day that companies filed for Chapter 11.
  Third, we have to expect that public accounting firms are acting as 
watchdogs over corporate financial statements. Yet many of the auditing 
firms, not just Arthur Andersen, have had major failures.
  Accounting firms gave a clean bill of health to over 93 percent of 
publicly traded companies that were subsequently involved in accounting 
problems within the year. And 42 percent of publicly traded companies 
that filed for bankruptcy were given a clean bill of health. Clearly, 
we need fundamental reform at all three levels to restore investor 
confidence and punish criminal behavior. Some say may say that Enron, 
Worldcom and the others are a few bad apples. That ignores the much 
wider, systemic problems that now plague corporate America.
  Advocating half measures or saying that we do not need to strengthen 
the law is like saying that bank robbery should not be severely 
punished and banks should not have vaults because most people do not 
rob banks. Well, some people do rob banks. And some corporate 
executives rip off investors. But they are both criminals and both 
should be punished accordingly.
  I commend Chairman Sarbanes for his accounting reform bill, S. 2673, 
which is an excellent start at providing for stronger rules regarding 
accounting procedures. I am also pleased to be an original cosponsor of 
Senator Leahy's ``Corporate and Criminal Fraud Accountability Act,'' 
that is now being offered as an amendment. Will some key executives go 
to jail if this amendment passes? If they are guilty of fraud or 
destroying evidence of wrong doing, I certainly hope so.
  First, the amendment creates a new crime for security fraud and helps 
prosecutors punish corporate criminality. This amendment is a lot like 
the ``Go to Jail'' card in the board game ``Monopoly.'' It says to 
corporate criminals ``go to jail, do not pass go and do not collect 
$200.'' The amendment also increases penalties for obstruction of 
justice. The people who would shred documents to cover up criminal 
behavior are not better than the ``wheel man'' in a robbery. They may 
not have pulled the robbery, but the crook cannot getaway without them. 
This amendment would make sure the shredders are held accountable as 
well.
  Incidentally, the amendment also lengthens the statute of limitations 
on these crimes and protects corporate whistleblowers. Corporate 
criminals should not be allowed to run out the clock and avoid 
prosecution. And workers who discover corporate fraud

[[Page 12508]]

should be protected just as we protect government whistleblowers. I 
believe this amendment will go a long way toward preventing corporate 
crime and prosecuting those who would rip off their stock holders and 
employees. Restoring confidence and punishing criminal behavior is in 
everyone's best interest--honest corporate executives, their employees, 
investors, and the public at large. I urge adoption of the amendment 
and look forward to seeing it become law.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. SARBANES. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Ms. Stabenow). Without objection, it is so 
ordered.
  Under the previous order, the question is on agreeing to amendment 
No. 4185. The yeas and nays have been ordered. The clerk will call the 
roll.
  The legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from North Carolina (Mr. 
Helms), the Senator from Ohio (Mr. Voinovich), and the Senator from 
Idaho (Mr. Crapo), are necessarily absent.
  I further announce that if present and voting the Senator from North 
Carolina (Mr. Helms) would vote ``yea.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 97, nays 0, as follows:

                      [Rollcall Vote No. 169 Leg.]

                                YEAS--97

     Akaka
     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bunning
     Burns
     Byrd
     Campbell
     Cantwell
     Carnahan
     Carper
     Chafee
     Cleland
     Clinton
     Cochran
     Collins
     Conrad
     Corzine
     Craig
     Daschle
     Dayton
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Edwards
     Ensign
     Enzi
     Feingold
     Feinstein
     Fitzgerald
     Frist
     Graham
     Gramm
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Hollings
     Hutchinson
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Kyl
     Landrieu
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     McCain
     McConnell
     Mikulski
     Miller
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Nickles
     Reed
     Reid
     Roberts
     Rockefeller
     Santorum
     Sarbanes
     Schumer
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stabenow
     Stevens
     Thomas
     Thompson
     Thurmond
     Torricelli
     Warner
     Wellstone
     Wyden

                             NOT VOTING--3

     Crapo
     Helms
     Voinovich
  The amendment (No. 4185) was agreed to.
  Mr. DASCHLE. Madam President, I move to reconsider the vote.
  Mr. SARBANES. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 4186

  Mr. DASCHLE. Madam President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from South Dakota [Mr. Daschle], for Mr. Biden 
     and Mr. Hatch, proposes an amendment numbered 4186.

  Mr. DASCHLE. Madam President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To increase criminal penalties relating to conspiracy, mail 
    fraud, wire fraud, and certain ERISA violations, and for other 
                               purposes)

       At the end, add the following:

          TITLE VIII--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS

     SEC. 801 SHORT TITLE.

       This title may be cited as the ``White-Collar Crime Penalty 
     Enhancement Act of 2002''.

     SEC. 802. CRIMINAL PENALTIES FOR CONSPIRACY TO COMMIT OFFENSE 
                   OR TO DEFRAUD THE UNITED STATES.

       Section 371 of title 18, United States Code, is amended by 
     striking ``If two or more'' and all that follows through 
     ``If, however,'' and inserting the following:
       ``(a) In General.--If 2 or more persons--
       ``(1) conspire to commit any offense against the United 
     States, in any manner or for any purpose, and 1 or more of 
     such persons do any act to effect the object of the 
     conspiracy, each person shall be fined or imprisoned, or 
     both, as set forth in the specific substantive offense which 
     was the object of the conspiracy; or
       ``(2) conspire to defraud the United States, or any agency 
     thereof in any manner or for any purpose, and 1 or more of 
     such persons do any act to effect the object of the 
     conspiracy, each person shall be fined under this title, or 
     imprisoned not more than 10 years, or both.
       ``(b) Misdemeanor Offense.--If, however,''.

     SEC. 803. CRIMINAL PENALTIES FOR MAIL AND WIRE FRAUD.

       (a) Mail Fraud.--Section 1341 of title 18, United States 
     Code, is amended by striking ``five years'' and inserting 
     ``10 years''.
       (b) Wire Fraud.--Section 1343 of title 18, United States 
     Code, is amended by striking ``five years'' and inserting 
     ``10 years''.

     SEC. 804. CRIMINAL PENALTIES FOR VIOLATIONS OF THE EMPLOYEE 
                   RETIREMENT INCOME SECURITY ACT OF 1974.

       Section 501 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1131) is amended--
       (1) by striking ``$5,000'' and inserting ``$100,000'';
       (2) by striking ``one year'' and inserting ``10 years''; 
     and
       (3) by striking ``$100,000'' and inserting ``$500,000''.

     SEC. 805. AMENDMENT TO SENTENCING GUIDELINES RELATING TO 
                   CERTAIN WHITE-COLLAR OFFENSES.

       (a) Directive to the United States Sentencing Commission.--
     Pursuant to its authority under section 994(p) of title 18, 
     United States Code, and in accordance with this section, the 
     United States Sentencing Commission shall review and, as 
     appropriate, amend the Federal Sentencing Guidelines and 
     related policy statements to implement the provisions of this 
     title.
       (b) Requirements.--In carrying out this section, the 
     Sentencing Commission shall--
       (1) ensure that the sentencing guidelines and policy 
     statements reflect the serious nature of the offenses and the 
     penalties set forth in this title, the growing incidence of 
     serious fraud offenses which are identified above, and the 
     need to modify the sentencing guidelines and policy 
     statements to deter, prevent, and punish such offenses;
       (2) consider the extent to which the guidelines and policy 
     statements adequately address--
       (A) whether the guideline offense levels and enhancements 
     for violations of the sections amended by this title are 
     sufficient to deter and punish such offenses, and 
     specifically, are adequate in view of the statutory increases 
     in penalties contained in this title; and
       (B) whether a specific offense characteristic should be 
     added in United States Sentencing Guideline section 2B1.1 in 
     order to provide for stronger penalties for fraud when the 
     crime is committed by a corporate officer or director;
       (3) assure reasonable consistency with other relevant 
     directives and sentencing guidelines;
       (4) account for any additional aggravating or mitigating 
     circumstances that might justify exceptions to the generally 
     applicable sentencing ranges;
       (5) make any necessary conforming changes to the sentencing 
     guidelines; and
       (6) assure that the guidelines adequately meet the purposes 
     of sentencing as set forth in section 3553(a)(2) of title 18, 
     United States Code.

     SEC. 806. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

       (a) In General.--Chapter 63 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1348. Failure of corporate officers to certify 
       financial reports

       ``(a) Certification of Periodic Financial Reports.--Each 
     periodic report containing financial statements filed by an 
     issuer with the Securities Exchange Commission pursuant to 
     section 13(a) or 15(d) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78m(a) or 78o(d)) shall be accompanied by a 
     written statement by the chairman of the board, chief 
     executive officer, and chief financial officer (or equivalent 
     thereof) of the issuer.
       ``(b) Content.--The statement required under subsection (a) 
     shall certify the appropriateness of the financial statements 
     and disclosures contained in the periodic report or financial 
     report, and that those financial statements and disclosures 
     fairly present, in all material respects, the operations and 
     financial condition of the issuer.
       ``(c) Criminal Penalties.--Notwithstanding any other 
     provision of law--
       ``(1) any person who recklessly violates any provision of 
     this section shall upon conviction be fined not more than 
     $500,000, or imprisoned not more than 5 years, or both; or

[[Page 12509]]

       ``(2) any person who willfully violates any provision of 
     this section shall upon conviction be fined not more than 
     $1,000,000, or imprisoned not more than 10 years, or both.''.
       (b) Technical and Conforming Amendment.--The section 
     analysis for chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1348. Failure of corporate officers to certify financial reports.''.

  Mr. DASCHLE. Madam President, I know there are a number of Senators 
who wish to be recognized to offer amendments. I think Senator Lott 
would like very much to offer an amendment as well. What I would like 
to do is to propound a unanimous consent request involving a number of 
Senators who have amendments to be offered so they will know the 
sequence. I know Senator Edwards has been waiting a long time to offer 
an amendment, as well as Senator Levin, Senator Schumer, Senator Gramm, 
and Senator McCain. Perhaps in the next couple of minutes we can put 
together a unanimous consent request which will sequence these 
amendments so Senators will know they are protected and have the 
opportunity to then have their amendments called up. I ask that all of 
our colleagues work with us over the course of the next few minutes.
  I yield the floor to accommodate Senator Lott's interest in offering 
his amendment. We will lay aside the Biden amendment temporarily as 
that amendment is considered as well.
  The PRESIDING OFFICER. The Republican leader.
  Mr. LOTT. Madam President, first, I thank Senators Sarbanes, Gramm, 
and Leahy for the work they have put into moving through the amendment 
on which we just voted. That allows us to move on to other germane or 
important amendments that will be offered.


                           Amendment No. 4188

  Madam President, I understand the Biden amendment will be set aside. 
So I send to the desk my amendment.
  The PRESIDING OFFICER. Without objection, the pending amendment is 
set aside, and the clerk will report.
  The legislative clerk read as follows:

       The Senator from Mississippi [Mr. Lott] proposes an 
     amendment numbered 4188.

  Mr. LOTT. Madam President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

      (Purpose: To deter fraud and abuse by corporate executives)

       At the appropriate place, insert the following:

     SEC.  . HIGHER MAXIMUM PENALTIES FOR MAIL AND WIRE FRAUD.

       (a) Mail Fraud.--Section 1341 is amended by striking 
     ``five'' and inserting ``ten''.
       (b) Wire Fraud.--Section 1343 is amended by striking 
     ``five'' and inserting ``ten''.

     SEC.  . TAMPERING WITH A RECORD OR OTHERWISE IMPEDING AN 
                   OFFICIAL PROCEEDING.

       Section 1512 of title 18, United States Code is amended--
       (a) by re-designating subsections (c), (d), (e), (f), (g), 
     (h), and (i) as subsections (d), (e), (f), (g), (h), (i) and 
     (j);
       (b) by inserting after subsection (b) the following new 
     subsection:
       ``(c) Whoever corruptly--
       ``(1) alters, destroys, mutilates or conceals a record, 
     document or other object, or attempts to do so, with the 
     intent to impair the object's integrity or availability for 
     use in an official proceeding; or
       ``(2) otherwise obstructs, influences, or impedes any 
     official proceeding, or attempts to do so;

     ``shall be fined under this title or imprisoned not more than 
     ten years, or both.''

     SEC.  . TEMPORARY FREEZE AUTHORITY FOR THE SECURITIES AND 
                   EXCHANGE COMMISSION.

       (a) In General.--The Securities Exchange Act of 1934 is 
     amended by inserting after section 21C(c)(2) (15 U.S.C. 78u-
     3(c)(2)) the following:
       ``(3) Temporary freeze.--
       ``(A) Whenever during the course of a lawful investigation 
     involving possible violations of the federal securities laws 
     by an issuer of publicly traded securities or any of its 
     directors, officers, partners, controlling persons, agents or 
     employees, it shall appear to the Commission that it is 
     likely that the issuer will make extraordinary payments 
     (whether compensation or otherwise) to any of the foregoing 
     persons, the Commission may petition a federal district court 
     for a temporary order requiring the issuer to escrow, subject 
     to court supervision, those payments in an interest-bearing 
     account for 45 days. Such an order shall be entered, if the 
     court finds that the issuer is likely to make such 
     extraordinary payments, only after notice and opportunity for 
     a hearing, unless the court determines that notice and 
     hearing prior to entry of the order would be impracticable or 
     contrary to the public interest. A temporary order shall 
     become effective immediately and shall be served upon the 
     parties subject to it and, unless set aside, limited or 
     suspended by court of competent jurisdiction, shall remain 
     effective and enforceable for 45 days. The period of the 
     order may be extended by the court upon good cause shown for 
     not longer than 45 days, provided that the combined period of 
     the order not exceed 90 days.
       ``(B) If the individual affected by such order is charged 
     with violations of the federal securities laws by the 
     expiration of the 45 days (or the expiration of any extended 
     period), the escrow would continue, subject to court 
     approval, until the conclusion of any legal proceedings. The 
     issuer and the affected director, officer, partner, 
     controlling person, agent or employee would have the right to 
     petition the court for review of the order. If the individual 
     affected by such order is not charged, the escrow will 
     terminate at the expiration of the 45 days (or the expiration 
     of any extended period), and the payments (with accrued 
     interest) returned to the issuer.
       (b) Technical Amendment.--Section 21C(c)(2) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) is 
     amended by striking ``This'' and inserting ``Paragraph (1) of 
     this''.

     SEC.  . AMENDMENT TO THE FEDERAL SENTENCING GUIDELINES.

       (a) Request for Immediate Consideration by the United 
     States Sentencing Commission.--Pursuant to its authority 
     under section 994(p) of title 28, United States Code, and in 
     accordance with this section, the United States Sentencing 
     Commission is requested to--
       (1) promptly review the sentencing guidelines applicable to 
     securities and accounting fraud and related offenses;
       (2) expeditiously consider promulgation of new sentencing 
     guidelines or amendments to existing sentencing guidelines to 
     provide an enhancement for officers or directors of publicly 
     traded corporations who commit fraud and related offenses; 
     and
       (3) submit to Congress an explanation of actions taken by 
     the Commission pursuant to paragraph (2) and any additional 
     policy recommendations the Commission may have for combating 
     offenses described in paragraph (1).
       (b) Other.--In carrying out this section, the Sentencing 
     Commission is requested to:
       (1) ensure that the sentencing guidelines and policy 
     statements reflect the serious nature of securities, pension, 
     and accounting fraud and the need for aggressive and 
     appropriate law enforcement action to prevent such offenses;
       (2) assure reasonable consistency with other relevant 
     directives and with other guidelines;
       (3) account for any aggravating or mitigating circumstances 
     that might justify exceptions, including circumstances for 
     which the sentencing guidelines currently provide sentencing 
     enhancements;
       (4) make any necessary conforming changes to the sentencing 
     guidelines; and
       (5) assure that the guidelines adequately meet the purposes 
     of sentencing as set forth in section 3553(a)(2) of title 18, 
     United States Code.
       (c) Emergency Authority and Deadline for Commission 
     Action.--The Commission is requested to promulgate the 
     guidelines or amendments provided for under this section as 
     soon as practicable, and in any event not later than the 120 
     days after the date of the enactment of this Act, in 
     accordance with the procedures set forth in section 21(a) of 
     the Sentencing Reform Act of 1987, as though the authority 
     under that Act had not yet expired.

     SEC.   . AUTHORITY OF THE COMMISSION TO PROHIBIT PERSONS FROM 
                   SERVING AS OFFICERS OR DIRECTORS.

       (a) In section 21C of the Exchange Act of 1934, add at the 
     end a new subsection as follows:
       ``( ) Authority of the Commission To Prohibit Persons From 
     Serving as Officers or Directors.--In any cease-and-desist 
     proceeding under subsection (a), the Commission may issue an 
     order to prohibit, conditionally or unconditionally, and 
     permanently or for such period of time as it shall determine, 
     any person who has violated section 10(b) of this title or 
     the rules or regulations thereunder from acting as an officer 
     or director of any issuer that has a class of securities 
     registered pursuant to section 12 of this title or that is 
     required to file reports pursuant to section 15(d) of this 
     title if the person's conduct demonstrates unfitness to serve 
     as an officer or director of any such issuer.''
       (b) In section 8A of the Securities Act add at the end a 
     new subsection as follows:
       ``( ) Authority of the Commission To Prohibit Persons From 
     Serving as Officers or Directors.--In any cease-and-desist 
     proceeding under subsection (a), the Commission may issue an 
     order to prohibit, conditionally or unconditionally, and 
     permanently or for such period of time as it shall determine, 
     any person who has violated section 17(a)(1) of this title 
     from acting as an officer or director of any issuer that has 
     a class of securities registered pursuant to section 12 of 
     the Securities Exchange Act of 1934

[[Page 12510]]

     or that is required to file reports pursuant to section 15(d) 
     of that Act if the person's conduct demonstrates unfitness to 
     serve as an officer or director of any such issuer.''


                Amendment No. 4189 to Amendment No. 4188

  Mr. GRAMM. Madam President, I send a second-degree amendment to the 
desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Texas [Mr. Gramm] proposes an amendment 
     numbered 4189 to amendment No. 4188.

  Mr. GRAMM. Madam President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

      (Purpose: To deter fraud and abuse by corporate executives)

       Strike all after the first word, and insert the following:

       HIGHER MAXIMUM PENALTIES FOR MAIL AND WIRE FRAUD.

       (a) Mail Fraud.--Section 1341 is amended by striking 
     ``five'' and inserting ``ten''.
       (b) Wire Fraud.--Section 1343 is amended by striking 
     ``five'' and inserting ``ten''.

     SEC.  . TAMPERING WITH A RECORD OR OTHERWISE IMPEDING AN 
                   OFFICIAL PROCEEDING.

       Section 1512 of title 18, United States Code is amended--
       (a) by re-designating subsections (c), (d), (e), (f), (g), 
     (h), and (i) as subsections (d), (e), (f), (g), (h), (i) and 
     (j);
       (b) by inserting after subsection (b) the following new 
     subsection:
       ``(c) Whoever corruptly--
       ``(1) alters, destroys, mutilates or conceals a record, 
     document or other object, or attempts to do so, with the 
     intent to impair the object's integrity or availability for 
     use in an official proceeding; or
       ``(2) otherwise obstructs, influences, or impedes any 
     official proceeding, or attempts to do so;

     ``shall be fined under this title or imprisoned not more than 
     ten years, or both.''

     SEC.  . TEMPORARY FREEZE AUTHORITY FOR THE SECURITIES AND 
                   EXCHANGE COMMISSION.

       (a) In General.--The Securities Exchange Act of 1934 is 
     amended by inserting after section 21C(c)(2) (15 U.S.C. 78u-
     3(c)(2)) the following:
       ``(3) Temporary freeze.--
       ``(A) Whenever during the course of a lawful investigation 
     involving possible violations of the federal securities laws 
     by an issuer of publicly traded securities or any of its 
     directors, officers, partners, controlling persons, agents or 
     employees, it shall appear to the Commission that it is 
     likely that the issuer will make extraordinary payments 
     (whether compensation or otherwise) to any of the foregoing 
     persons, the Commission may petition a federal district court 
     for a temporary order requiring the issuer to escrow, subject 
     to court supervision, those payments in an interest-bearing 
     account for 45 days. Such an order shall be entered, if the 
     court finds that the issuer is likely to make such 
     extraordinary payments, only after notice and opportunity for 
     a hearing, unless the court determines that notice and 
     hearing prior to entry of the order would be impracticable or 
     contrary to the public interest. A temporary order shall 
     become effective immediately and shall be served upon the 
     parties subject to it and, unless set aside, limited or 
     suspended by court of competent jurisdiction, shall remain 
     effective and enforceable for 45 days. The period of the 
     order may be extended by the court upon good cause shown for 
     not longer than 45 days, provided that the combined period of 
     the order not exceed 90 days.
       ``(B) If the individual affected by such order is charged 
     with violations of the federal securities laws by the 
     expiration of the 45 days (or the expiration of any extended 
     period), the escrow would continue, subject to court 
     approval, until the conclusion of any legal proceedings. The 
     issuer and the affected director, officer, partner, 
     controlling person, agent or employee would have the right to 
     petition the court for review of the order. If the individual 
     affected by such order is not charged, the escrow will 
     terminate at the expiration of the 46 days (or the expiration 
     of any extended period), and the payments (with accrued 
     interest) returned to the issuer.
       (b) Technical Amendment.--Section 21C(c)(2) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78u-3(c)(2)) is 
     amended by striking ``This'' and inserting ``Paragraph (1) of 
     this''.

     SEC.  . AMENDMENT TO THE FEDERAL SENTENCING GUIDELINES.

       (a) Request for Immediate Consideration by the United 
     States Sentencing Commission.--Pursuant to its authority 
     under section 994(p) of title 28, United States Code, and in 
     accordance with this section, the United States Sentencing 
     Commission is requested to--
       (1) promptly review the sentencing guidelines applicable to 
     securities and accounting fraud and related offenses;
       (2) expeditiously consider promulgation of new sentencing 
     guidelines or amendments to existing sentencing guidelines to 
     provide an enhancement for officers or directors of publicly 
     traded corporations who commit fraud and related offenses; 
     and
       (3) submit to Congress an explanation of actions taken by 
     the Commission pursuant to paragraph (2) and any additional 
     policy recommendations the Commission may have for combating 
     offenses described in paragraph (1).
       (b) Other.--In carrying out this section, the Sentencing 
     Commission is requested to:
       (1) ensure that the sentencing guidelines and policy 
     statements reflect the serious nature of securities, pension, 
     and accounting fraud and the need for aggressive and 
     appropriate law enforcement action to prevent such offenses;
       (2) assure reasonable consistency with other relevant 
     directives and with other guidelines;
       (3) account for any aggravating or mitigating circumstances 
     that might justify exceptions, including circumstances for 
     which the sentencing guidelines currently provide sentencing 
     enhancements;
       (4) make any necessary conforming changes to the sentencing 
     guidelines; and
       (5) assure that the guidelines adequately meet the purposes 
     of sentencing as set forth in section 3553(a)(2) of title 18, 
     United States Code.
       (c) Emergency Authority and Deadline for Commission 
     Action.--The Commission is requested to promulgate the 
     guidelines or amendments provided for under this section as 
     soon as practicable, and in any event not later than the 120 
     days after the date of the enactment of this Act, in 
     accordance with the procedures set forth in section 21(a) of 
     the Sentencing Reform Act of 1987, as though the authority 
     under that Act had not yet expired.

     SEC.   . AUTHORITY OF THE COMMISSION TO PROHIBIT PERSONS FROM 
                   SERVING AS OFFICERS OR DIRECTORS.

       (a) In section 21C of the Exchange Act of 1934, add at the 
     end a new subsection as follows:
       ``( ) Authority of the Commission To Prohibit Persons From 
     Serving as Officers or Directors.--In any cease-and-desist 
     proceeding under subsection (a), the Commission may issue an 
     order to prohibit, conditionally or unconditionally, and 
     permanently or for such period of time as it shall determine, 
     any person who has violated section 10(b) of this title or 
     the rules or regulations thereunder from acting as an officer 
     or director of any issuer that has a class of securities 
     registered pursuant to section 12 of this title or that is 
     required to file reports pursuant to section 15(d) of this 
     title if the person's conduct demonstrates unfitness to serve 
     as an officer or director of any such issuer.''
       (b) In section 8A of the Securities Act add at the end a 
     new subsection as follows:
       ``( ) Authority of the Commission To Prohibit Persons From 
     Serving as Officers or Directors.--In any cease-and-desist 
     proceeding under subsection (a), the Commission may issue an 
     order to prohibit, conditionally or unconditionally, and 
     permanently or for such period of time as it shall determine, 
     any person who has violated section 17(a)(1) of this title 
     from acting as an officer or director of any issuer that has 
     a class of securities registered pursuant to section 12 of 
     the Securities Exchange Act of 1934 or that is required to 
     file reports pursuant to section 15(d) of that Act if the 
     person's conduct demonstrates unfitness to serve as an 
     officer or director of any such issuer.''

  Mr. DASCHLE. Madam President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. DASCHLE. Madam President, I ask unanimous consent the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                    Amendment No. 4186, As Modified

  Mr. DASCHLE. Madam President, I think we are working through the 
number of procedural issues with which we have to deal. I want to make 
sure we are in a position to be able to complete that work. So I call 
for the regular order.
  The PRESIDING OFFICER. Amendment No. 4186 is pending.
  Mr. DASCHLE. I modify the original amendment that I offered with the 
changes that are at the desk.
  The PRESIDING OFFICER. The amendment is so modified.
  The amendment, as modified, is as follows:

       On page 117 in line 12 strike ``Act'' and insert the 
     following: Act.

          TITLE VIII--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS

     SEC. 801 SHORT TITLE.

       This title may be cited as the ``White-Collar Crime Penalty 
     Enhancement Act of 2002''.

[[Page 12511]]



     SEC. 802. CRIMINAL PENALTIES FOR CONSPIRACY TO COMMIT OFFENSE 
                   OR TO DEFRAUD THE UNITED STATES.

       Section 371 of title 18, United States Code, is amended by 
     striking ``If two or more'' and all that follows through 
     ``If, however,'' and inserting the following:
       ``(a) In General.--If 2 or more persons--
       ``(1) conspire to commit any offense against the United 
     States, in any manner or for any purpose, and 1 or more of 
     such persons do any act to effect the object of the 
     conspiracy, each person shall be fined or imprisoned, or 
     both, as set forth in the specific substantive offense which 
     was the object of the conspiracy; or
       ``(2) conspire to defraud the United States, or any agency 
     thereof in any manner or for any purpose, and 1 or more of 
     such persons do any act to effect the object of the 
     conspiracy, each person shall be fined under this title, or 
     imprisoned not more than 10 years, or both.
       ``(b) Misdemeanor Offense.--If, however,''.

     SEC. 803. CRIMINAL PENALTIES FOR MAIL AND WIRE FRAUD.

       (a) Mail Fraud.--Section 1341 of title 18, United States 
     Code, is amended by striking ``five years'' and inserting 
     ``10 years''.
       (b) Wire Fraud.--Section 1343 of title 18, United States 
     Code, is amended by striking ``five years'' and inserting 
     ``10 years''.

     SEC. 804. CRIMINAL PENALTIES FOR VIOLATIONS OF THE EMPLOYEE 
                   RETIREMENT INCOME SECURITY ACT OF 1974.

       Section 501 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1131) is amended--
       (1) by striking ``$5,000'' and inserting ``$100,000'';
       (2) by striking ``one year'' and inserting ``10 years''; 
     and
       (3) by striking ``$100,000'' and inserting ``$500,000''.

     SEC. 805. AMENDMENT TO SENTENCING GUIDELINES RELATING TO 
                   CERTAIN WHITE-COLLAR OFFENSES.

       (a) Directive to the United States Sentencing Commission.--
     Pursuant to its authority under section 994(p) of title 18, 
     United States Code, and in accordance with this section, the 
     United States Sentencing Commission shall review and, as 
     appropriate, amend the Federal Sentencing Guidelines and 
     related policy statements to implement the provisions of this 
     title.
       (b) Requirements.--In carrying out this section, the 
     Sentencing Commission shall--
       (1) ensure that the sentencing guidelines and policy 
     statements reflect the serious nature of the offenses and the 
     penalties set forth in this title, the growing incidence of 
     serious fraud offenses which are identified above, and the 
     need to modify the sentencing guidelines and policy 
     statements to deter, prevent, and punish such offenses;
       (2) consider the extent to which the guidelines and policy 
     statements adequately address--
       (A) whether the guideline offense levels and enhancements 
     for violations of the sections amended by this title are 
     sufficient to deter and punish such offenses, and 
     specifically, are adequate in view of the statutory increases 
     in penalties contained in this title; and
       (B) whether a specific offense characteristic should be 
     added in United States Sentencing Guideline section 2B1.1 in 
     order to provide for stronger penalties for fraud when the 
     crime is committed by a corporate officer or director;
       (3) assure reasonable consistency with other relevant 
     directives and sentencing guidelines;
       (4) account for any additional aggravating or mitigating 
     circumstances that might justify exceptions to the generally 
     applicable sentencing ranges;
       (5) make any necessary conforming changes to the sentencing 
     guidelines; and
       (6) assure that the guidelines adequately meet the purposes 
     of sentencing as set forth in section 3553(a)(2) of title 18, 
     United States Code.

     SEC. 806. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

       (a) In General.--Chapter 63 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1348. Failure of corporate officers to certify 
       financial reports

       ``(a) Certification of Periodic Financial Reports.--Each 
     periodic report containing financial statements filed by an 
     issuer with the Securities Exchange Commission pursuant to 
     section 13(a) or 15(d) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78m(a) or 78o(d)) shall be accompanied by a 
     written statement by the chairman of the board, chief 
     executive officer, and chief financial officer (or equivalent 
     thereof) of the issuer.
       ``(b) Content.--The statement required under subsection (a) 
     shall certify the appropriateness of the financial statements 
     and disclosures contained in the periodic report or financial 
     report, and that those financial statements and disclosures 
     fairly present, in all material respects, the operations and 
     financial condition of the issuer.
       ``(c) Criminal Penalties.--Notwithstanding any other 
     provision of law--
       ``(1) any person who recklessly violates any provision of 
     this section shall upon conviction be fined not more than 
     $500,000, or imprisoned not more than 5 years, or both; or
       ``(2) any person who willfully violates any provision of 
     this section shall upon conviction be fined not more than 
     $1,000,000, or imprisoned not more than 10 years, or both.''.
       (b) Technical and Conforming Amendment.--The section 
     analysis for chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1348. Failure of corporate officers to certify financial reports.''.

  Mr. DASCHLE. Madam President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.


         Amendment No. 4190 To Amendment No. 4186, As Modified

  Mr. DASCHLE. Madam President, I send up an amendment in the second 
degree.
  What we have done now is to assure that both the Biden amendment and 
the Lott amendment will have an opportunity to be considered and 
debated. I am hoping we might even be able to continue to work to see 
if we can have one vote rather than two.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The legislative clerk read as follows:

       The Senator from South Dakota [Mr. Daschle], for Mr. Biden, 
     proposes an amendment numbered 4190 to amendment No. 4186, as 
     modified.

  The amendment is as follows:

 (Purpose: To increase criminal penalties relating to conspiracy, mail 
    fraud, wire fraud, and certain ERISA violations, and for other 
                               purposes)

       Strike all after the first word and insert the following:

          TITLE VIII--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS

     SEC. 801 SHORT TITLE.

       This title may be cited as the ``White-Collar Crime Penalty 
     Enhancement Act of 2002''.

     SEC. 802. CRIMINAL PENALTIES FOR CONSPIRACY TO COMMIT OFFENSE 
                   OR TO DEFRAUD THE UNITED STATES.

       Section 371 of title 18, United States Code, is amended by 
     striking ``If two or more'' and all that follows through 
     ``If, however,'' and inserting the following:
       ``(a) In General.--If 2 or more persons--
       ``(1) conspire to commit any offense against the United 
     States, in any manner or for any purpose, and 1 or more of 
     such persons do any act to effect the object of the 
     conspiracy, each person shall be fined or imprisoned, or 
     both, as set forth in the specific substantive offense which 
     was the object of the conspiracy; or
       ``(2) conspire to defraud the United States, or any agency 
     thereof in any manner or for any purpose, and 1 or more of 
     such persons do any act to effect the object of the 
     conspiracy, each person shall be fined under this title, or 
     imprisoned not more than 10 years, or both.
       ``(b) Misdemeanor Offense.--If, however,''.

     SEC. 803. CRIMINAL PENALTIES FOR MAIL AND WIRE FRAUD.

       (a) Mail Fraud.--Section 1341 of title 18, United States 
     Code, is amended by striking ``five years'' and inserting 
     ``10 years''.
       (b) Wire Fraud.--Section 1343 of title 18, United States 
     Code, is amended by striking ``five years'' and inserting 
     ``10 years''.

     SEC. 804. CRIMINAL PENALTIES FOR VIOLATIONS OF THE EMPLOYEE 
                   RETIREMENT INCOME SECURITY ACT OF 1974.

       Section 501 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1131) is amended--
       (1) by striking ``$5,000'' and inserting ``$100,000'';
       (2) by striking ``one year'' and inserting ``10 years''; 
     and
       (3) by striking ``$100,000'' and inserting ``$500,000''.

     SEC. 805. AMENDMENT TO SENTENCING GUIDELINES RELATING TO 
                   CERTAIN WHITE-COLLAR OFFENSES.

       (a) Directive to the United States Sentencing Commission.--
     Pursuant to its authority under section 994(p) of title 18, 
     United States Code, and in accordance with this section, the 
     United States Sentencing Commission shall review and, as 
     appropriate, amend the Federal Sentencing Guidelines and 
     related policy statements to implement the provisions of this 
     title.
       (b) Requirements.--In carrying out this section, the 
     Sentencing Commission shall--
       (1) ensure that the sentencing guidelines and policy 
     statements reflect the serious nature of the offenses and the 
     penalties set forth in this title, the growing incidence of 
     serious fraud offenses which are identified above, and the 
     need to modify the sentencing guidelines and policy 
     statements to deter, prevent, and punish such offenses;
       (2) consider the extent to which the guidelines and policy 
     statements adequately address--
       (A) whether the guideline offense levels and enhancements 
     for violations of the sections amended by this title are 
     sufficient to

[[Page 12512]]

     deter and punish such offenses, and specifically, are 
     adequate in view of the statutory increases in penalties 
     contained in this title; and
       (B) whether a specific offense characteristic should be 
     added in United States Sentencing Guideline section 2B1.1 in 
     order to provide for stronger penalties for fraud when the 
     crime is committed by a corporate officer or director;
       (3) assure reasonable consistency with other relevant 
     directives and sentencing guidelines;
       (4) account for any additional aggravating or mitigating 
     circumstances that might justify exceptions to the generally 
     applicable sentencing ranges;
       (5) make any necessary conforming changes to the sentencing 
     guidelines; and
       (6) assure that the guidelines adequately meet the purposes 
     of sentencing as set forth in section 3553(a)(2) of title 18, 
     United States Code.

     SEC. 806. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

       (a) In General.--Chapter 63 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1348. Failure of corporate officers to certify 
       financial reports

       ``(a) Certification of Periodic Financial Reports.--Each 
     periodic report containing financial statements filed by an 
     issuer with the Securities Exchange Commission pursuant to 
     section 13(a) or 15(d) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78m(a) or 78o(d)) shall be accompanied by a 
     written statement by the chairman of the board, chief 
     executive officer, and chief financial officer (or equivalent 
     thereof) of the issuer.
       ``(b) Content.--The statement required under subsection (a) 
     shall certify the appropriateness of the financial statements 
     and disclosures contained in the periodic report or financial 
     report, and that those financial statements and disclosures 
     fairly present, in all material respects, the operations and 
     financial condition of the issuer.
       ``(c) Criminal Penalties.--Notwithstanding any other 
     provision of law--
       ``(1) any person who recklessly violates any provision of 
     this section shall upon conviction be fined not more than 
     $500,000, or imprisoned not more than 5 years, or both; or
       ``(2) any person who willfully violates any provision of 
     this section shall upon conviction be fined not more than 
     $1,000,000, or imprisoned not more than 10 years, or both.''.
       (b) Technical and Conforming Amendment.--The section 
     analysis for chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1348. Failure of corporate officers to certify financial reports.''.

       This section shall take effect one day after date of this 
     bill's enactment.

  Mr. DASCHLE. Madam President, I yield the floor. It is my 
understanding Senator Biden and Senator Lott would both like to address 
their amendments. I yield for that purpose now.
  The PRESIDING OFFICER. The Republican leader.


                           Amendment No. 4188

  Mr. LOTT. Madam President, if I could describe my amendment briefly. 
I understand Senator Biden is prepared to do the same thing.
  First, I should note, in at least one area they overlap in what they 
propose. In some other areas, there are some differences. But I don't 
see there are major problems.
  Senator Biden's amendment, as I understand it, just from looking at 
it quickly, would increase penalties in some areas that are not 
included in my amendment. What this amendment would do, though, is 
increase penalties for corporate fraud.
  Section 1 would increase maximum sentences for fraud. Mail fraud and 
wire fraud statutes are often used in criminal cases involving 
corporate wrongdoing. So obviously this is an area that is of concern 
and needs to be addressed. This section proposes doubling the maximum 
prison term for these crimes from 5 years to 10 years by amending 18 
U.S.C. sections 1341 and 1343.
  The second section would enact stronger laws against document 
shredding. Current law prohibits obstruction of justice by a defendant 
acting alone, but only if a proceeding is pending and a subpoena has 
been issued for the evidence that has been destroyed or altered. Timing 
is very important.
  Most people understand that shredding documents is a very bad thing 
to do. Obviously, you cannot do it if there is something pending or if 
there is a subpoena. But as was the case recently, they knew that an 
investigation was underway and a subpoena was likely, and the shredding 
of documents went forward.
  So this section would allow the Government to charge obstruction 
against individuals who acted alone, even if the tampering took place 
prior to the issuance of a grand jury subpoena. I think this is 
something we need to make clear so we do not have a repeat of what we 
saw with the Enron matter earlier this year.
  Section 3 freezes payments of potential wrongdoers. This section 
would allow the SEC, during an investigation, to seek an order in 
Federal court imposing a 45-day freeze on extraordinary payments to 
corporate executives.
  Again, this year we have seen just that sort of thing happening. 
While an investigation is underway, basically rewards were given to 
these corporate executives. While it would require a court order, there 
would be this 45-day freeze.
  The targeted payments would be placed in escrow, ensuring that 
corporate assets are not improperly taken from an executive's personal 
benefit.
  If an executive is charged with violations of Federal securities laws 
prior to the expiration of the court order, the escrow would continue 
until the conclusion of legal proceedings, again, with court approval.
  Section 4 involves sentencing guideline enhancements for crimes 
committed by corporate officers and directors. This section would 
implement President Bush's call on the Sentencing Commission to quickly 
adopt the new ``aggravating factor'' to provide stronger penalties for 
fraud when the crime is committed by a corporate officer or director. 
This ``aggravating factor'' is a term of art used in the law. It would 
provide, under this section, stronger penalties for such fraud.
  Section 5 would bar corporate officers and directors who engage in 
serious misconduct. Under current law, only a Federal court can issue 
an order prohibiting a person from acting as an officer or director of 
a public company.
  The SEC cannot order this remedy in its own administrative cease-and-
desist proceedings, even in a case of securities fraud where the 
person's conduct would otherwise meet the standards for imposing such a 
bar. This section would grant the SEC the authority to issue such 
orders if a person had committed securities law violation and his or 
her conduct demonstrated unfitness to serve as an officer or a 
director.
  These points are all points that were made by the President, asking 
that legislation be provided to provide for these additional increases 
and strengthening of the law. We have found clearly that in recent 
events there has been improper conduct. There have been questionable 
accounting procedures, and there has probably been some illegal 
conduct. So you can put all the laws in the world on the books, but if 
people act in bad faith, violate the law, you can never legislate 
morality.
  We have also seen that there are some cases where the law had some 
loopholes or where it was not timely or where it was not strong enough. 
One example, of course, is where there has been shredding. Another 
example is the very bad image of corporate executives taking increased 
payments, extraordinary payments, while they are being investigated. 
You can't have that sort of thing.
  I think these are basic things that should be added to this bill. It 
would strengthen the bill. I have checked with a number of Senators on 
both sides of the aisle. There is general support for this legislation.
  I thank Senator Biden for allowing me to make this brief statement 
about the amendment. Again, I emphasize that there are some 
similarities between this amendment and his amendment, but he does add 
additional penalties beyond what is in this proposal. But I did want to 
put into the bill what the President specifically recommended.
  The PRESIDING OFFICER (Mr. Dayton). The Senator from Delaware.
  Mr. BIDEN. Mr. President, this amendment is from Senator Hatch and 
me. He had as much input in this as I had. Let me respond in the spirit 
in which I was asked to do this and explain what the Biden-Hatch 
amendment does and then yield to my colleague to make any additional 
statements.

[[Page 12513]]

  Based on what Senator Lott has just pointed out, he has indicated 
that there are four basic sections to his amendment. On the first one, 
doubling the penalties for title 18, sections 1341 and 1343, that is 
exactly the same provision that is in the Biden-Hatch bill.
  Secondly, making it a crime for document shredding: If I am not 
mistaken, that is in the Leahy amendment we just passed and that I 
cosponsored, as well as many others.
  The third part of the amendment discussed by the Republican leader is 
something with which I happen to agree. It is not in either the Leahy 
bill just passed or in the Biden-Hatch amendment. That is the 45-day 
freeze on corporate executives' extraordinary income based upon the SEC 
being able to hold that in escrow and freeze it for 45 days while they 
look at it. I, for one, would be willing--I will yield to my colleague 
from Utah at the appropriate time--to accept that or join that in our 
amendment.
  Fourth, the Sentencing Commission provisions that were referred to by 
my friend from Mississippi are in the Biden-Hatch bill. There is only 
one piece of the legislation of the Senator from Mississippi, as I 
understand it, based on the summary, that is not either already passed 
or included in Biden-Hatch.
  But there are three areas that are not included which we think are 
very important. One is in section 2 of our legislation, which relates 
to conspiracy. Under title 18, section 371, the maximum penalty for 
general conspiracy to commit a crime is 5 years in prison regardless of 
whether the penalty for the predicate offense--that is, the thing they 
are conspiring to do--is considerably more than 5 years. So what 
Senator Hatch and I do is we allow the penalty for conspiracy to be 
consistent with what the penalty would be for the underlying crime; 
that is, the predicate crime. That is not included in the amendment of 
the Senator from Mississippi.
  Also, a very important provision of Biden-Hatch is that right now, 
under ERISA, the Employment Retirement Security Act of 1974--we were 
both here to vote for that--under current law, a violation for 
essentially squandering someone's pension to the tune of tens of 
millions, maybe billions, of dollars is a misdemeanor with a maximum 
penalty of 1 year. If you were to steal an automobile from my driveway, 
which is about 2 miles from the Pennsylvania line, drive it across the 
Pennsylvania line, under Federal law, it is a 10-year sentence. There 
is obviously a bizarre disparity.
  What we do is we increase the penalty for criminal violation of ERISA 
to 1 to 10 years, based upon the value of what is stolen in ERISA. If 
the loss in ERISA is a $20,000 pension versus several billion dollars' 
worth, the Sentencing Commission can make that judgment, as they do 
now, to have the penalty be from 1 but up to 10 years. That is not in 
Senator Lott's amendment.
  Lastly, section 6 of Biden-Hatch. Currently, the Securities and 
Exchange Commission requires regulated companies to file periodic 
financial reports with the SEC. This section of Biden-Hatch creates a 
new section in title 18 of the United States Code to require 
certification, signed by the top officials of that corporation, that 
the financial reports being filed accurately reflect the financial 
condition of the company. Criminal penalties are created for failure to 
comply with this section. Reckless failure to certify--you have to be 
able to prove it; it is a high standard--requires a penalty of up to 5 
years, while a willful failure to certify on the part of these 
executives includes a maximum penalty of up to 10 years.
  The point is, A, everything but one provision of Senator Lott's 
amendment either has been passed or is in Biden-Hatch. I will yield to 
my colleague, but I am willing to accept the one provision that is not 
included. That is the provision relating to freezing payments for up to 
45 days under the authority of the SEC of compensation packages that 
are excessive so there is time to look at it. I am willing to accept 
that.
  It does not include three sections: Conspiracy, the ERISA increased 
penalties, and the requirement of certification that the financial 
reports accurately reflect the financial condition of the company, with 
penalties to prevail if in fact they either recklessly or willfully do 
not sign such a document or they recklessly or willfully signed it and 
it does not reflect what in fact they say it reflects.
  That is a response to the majority leader's request of what the 
difference is. That is the difference.
  I now yield, with the permission of my colleagues, to the Senator 
from Utah, and I might add, this is not original stuff of Joe Biden; 
this was Hatch and Biden, Biden and Hatch. He takes equal 
responsibility for this. If we are wrong, we are equally wrong.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I am proud to stand here with my colleague 
from Delaware, who is one of the truly remarkable Senators who knows as 
much about criminal law as anybody in this body or in the Congress 
itself.
  I also rise today and applaud President Bush and Senator Lott, as 
well as Senator Biden, for offering what really, combined, will be a 
comprehensive legislative proposal that calls for harsh, swift 
punishment of corporate executives who exploited the trust of their 
shareholders and employees while enriching themselves.
  Senator Biden and I have worked together for years now on many 
important pieces of legislation. This is not new for us. I always feel 
good when I can work with my colleagues on the other side. It is always 
a pleasure to work with him. I commend him for the care and attention 
he has given to the subject of white-collar penalties, as well as for 
his leadership in this area. Just in the past 4 weeks, Senator Biden 
scheduled two hearings to review the adequacy of current penalties for 
white-collar criminal offenses. I am thankful that he did so for I 
think this is a critically important area for us to focus on, 
especially in today's unprecedented climate of market turmoil and 
corporate responsibility--or should I say irresponsibility.
  All of us well know that the past few months have been painful ones 
for our Nation's financial markets. At least some of the blame can be 
laid at the doors of some multibillion-dollar corporations, their 
highly paid executives, and the accounting firms that were supposed to 
assure the public's trust. We learn--each week it seems--of more and 
more accounting and corporate fraud and irregularities that have caused 
billions of dollars of losses to innocent investors. I am personally 
outraged by these scandals.
  The amendment I cosponsor today is a product of much thoughtful 
attention and scrutiny. No Member feels more strongly than I do about 
the importance of our criminal laws. They must be fair, and they must 
be just. If our criminal laws are to bear credibility and provide 
deterrence, they must adequately reflect the severity of the offenses. 
But right now they do not do so in the context of so-called white 
collar crimes. They are, to put it bluntly, out of whack.
  A person who steals, defrauds, or otherwise deprives unsuspecting 
Americans of their life savings--no less than any other criminal--
should be held accountable under our system of justice for the full 
weight of the harm he or she has caused. Innocent lives have been 
devastated by the crook who cooks the books of a publicly traded 
company, the charlatan who sells phony bonds, and the confidence man 
who runs a Ponzi scheme out there. These sorts of white-collar 
criminals should find no soft spots in our laws or in their ultimate 
sentences, but all too often they have done so.
  It is time for us to get tough with these offenders. We need to make 
crystal clear that we will not tolerate this sort of outrageous 
criminal conduct, conduct that not only devastates the savings of 
citizens, but also has lasting effects on the entire world's confidence 
in our American financial markets. This amendment will take away the 
soft landings these criminals have expected and obtained for far too 
long.

[[Page 12514]]

  The amendment Senator Biden and I propose--with the acceptance of the 
additional language of the President and Senator Lott--makes several 
notable improvements to current law. As Senator Biden said, and I will 
reiterate, first, our amendment increases the maximum penalties for 
those who commit mail fraud, wire fraud, and ERISA offenses, as well as 
those who conspire to violate Federal criminal laws. These changes are 
long overdue. The maximum penalty under current law for most of these 
offenses is 5 years, which is the same as the maximum penalty that 
could be handed down for mutilating a coin produced by the U.S. Mint. 
The current maximum penalty for ERISA fraud violations is just 1 year. 
In other words, a fraud committed in connection with employment 
retirement plans, no matter how severe or wide, is punishable now only 
as a misdemeanor. Under current law, one could get 5 years for 
scratching George Washington's face off a quarter but only 1 year for 
defrauding an entire company's pension plan. It goes without saying 
that we need to fix this problem.
  Think about it. Pension plans go down the drain because of dishonest 
business people, which is sometimes hundreds of millions of dollars. 
Think of all the people who lose as a result of that.
  Second, our amendment would make corporate officials criminally 
responsible for their public filings with the SEC. Make no mistake, 
these filings are critically important to investors who rely upon them 
to make decisions affecting how they should invest billions and 
billions of dollars. They need to be accurate. Our amendment makes it 
possible to hold somebody criminally accountable if they are not 
accurate.
  Third, our amendment directs the U.S. Sentencing Commission to review 
the adequacy of current guidelines for white-collar offenders. We heard 
just a few weeks ago from the Department of Justice that these types of 
criminals often get off with a slap on the wrist and that judges too 
often do contortions to avoid handing down terms of imprisonment. This 
simply is not good and will not do. It undermines the deterrent effect 
of our criminal laws, makes a mockery of our system of fair and 
evenhanded justice, and ultimately sends the wrong message to all 
Americans. Our amendment will ensure that the Sentencing Commission 
will take steps designed to ensure that our system of justice no longer 
coddles criminals simply because they ``just'' steal.
  It is time for the Senate to act on this important matter of fraud 
and responsibility. I think these amendments are a big step in the 
right direction. I compliment the President, Senator Lott, and, of 
course, my dear friend and colleague from Delaware, Senator Biden, for 
the work they have all done on these two amendments. I agree with 
Senator Biden that we are willing to accept that part of the preference 
package.
  With that, I yield the floor.
  The PRESIDING OFFICER. The Senator from North Carolina is recognized.
  Mr. EDWARDS. Mr. President, I ask unanimous consent that the pending 
amendment be laid aside.
  The PRESIDING OFFICER. Is there objection?
  Mr. SARBANES. I object for the moment. I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. BIDEN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                    Amendment No. 4190, As Modified

  Mr. BIDEN. Mr. President, I ask unanimous consent to modify the 
Hatch-Biden amendment by changing on page 6 of our amendment, under the 
title ``Failure of corporate officers to certify financial reports,'' 
line 19--it presently reads:

       (1) any person who recklessly violates any provision of 
     this section. . . .

  I ask unanimous consent to amend it to say on line 19, subsection 1:

       Any person who recklessly--

  And add the words ``and knowingly''--
     recklessly and knowingly.

  Page 6, line 19, fourth word in, add as a fifth word ``and'' and the 
sixth word ``knowingly.''
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
amendment is so modified.
  The amendment, as modified, reads as follows:

       Strike all after the first word and insert the following:

             VIII--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS

     SEC. 801 SHORT TITLE.

       This title may be cited as the ``White-Collar Crime Penalty 
     Enhancement Act of 2002''.

     SEC. 802. CRIMINAL PENALTIES FOR CONSPIRACY TO COMMIT OFFENSE 
                   OR TO DEFRAUD THE UNITED STATES.

       Section 371 of title 18, United States Code, is amended by 
     striking ``If two or more'' and all that follows through 
     ``If, however,'' and inserting the following:
       ``(a) In General.--If 2 or more persons--
       ``(1) conspire to commit any offense against the United 
     States, in any manner or for any purpose, and 1 or more of 
     such persons do any act to effect the object of the 
     conspiracy, each person shall be fined or imprisoned, or 
     both, as set forth in the specific substantive offense which 
     was the object of the conspiracy; or
       ``(2) conspire to defraud the United States, or any agency 
     thereof in any manner or for any purpose, and 1 or more of 
     such persons do any act to effect the object of the 
     conspiracy, each person shall be fined under this title, or 
     imprisoned not more than 10 years, or both.
       ``(b) Misdemeanor Offense.--If, however,''.

     SEC. 803. CRIMINAL PENALTIES FOR MAIL AND WIRE FRAUD.

       (a) Mail Fraud.--Section 1341 of title 18, United States 
     Code, is amended by striking ``five years'' and inserting 
     ``10 years''.
       (b) Wire Fraud.--Section 1343 of title 18, United States 
     Code, is amended by striking ``five years'' and inserting 
     ``10 years''.

     SEC. 804. CRIMINAL PENALTIES FOR VIOLATIONS OF THE EMPLOYEE 
                   RETIREMENT INCOME SECURITY ACT OF 1974.

       Section 501 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1131) is amended--
       (1) by striking ``$5,000'' and inserting ``$100,000'';
       (2) by striking ``one year'' and inserting ``10 years''; 
     and
       (3) by striking ``$100,000'' and inserting ``$500,000''.

     SEC. 805. AMENDMENT TO SENTENCING GUIDELINES RELATING TO 
                   CERTAIN WHITE-COLLAR OFFENSES.

       (a) Directive to the United States Sentencing Commission.--
     Pursuant to its authority under section 994(p) of title 18, 
     United States Code, and in accordance with this section, the 
     United States Sentencing Commission shall review and, as 
     appropriate, amend the Federal Sentencing Guidelines and 
     related policy statements to implement the provisions of this 
     title.
       (b) Requirements.--In carrying out this section, the 
     Sentencing Commission shall--
       (1) ensure that the sentencing guidelines and policy 
     statements reflect the serious nature of the offenses and the 
     penalties set forth in this title, the growing incidence of 
     serious fraud offenses which are identified above, and the 
     need to modify the sentencing guidelines and policy 
     statements to deter, prevent, and punish such offenses;
       (2) consider the extent to which the guidelines and policy 
     statements adequately address--
       (A) whether the guideline offense levels and enhancements 
     for violations of the sections amended by this title are 
     sufficient to deter and punish such offenses, and 
     specifically, are adequate in view of the statutory increases 
     in penalties contained in this title; and
       (B) whether a specific offense characteristic should be 
     added in United States Sentencing Guideline section 2B1.1 in 
     order to provide for stronger penalties for fraud when the 
     crime is committed by a corporate officer or director;
       (3) assure reasonable consistency with other relevant 
     directives and sentencing guidelines;
       (4) account for any additional aggravating or mitigating 
     circumstances that might justify exceptions to the generally 
     applicable sentencing ranges;
       (5) make any necessary conforming changes to the sentencing 
     guidelines; and
       (6) assure that the guidelines adequately meet the purposes 
     of sentencing as set forth in section 3553(a)(2) of title 18, 
     United States Code.

     SEC. 806. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

       (a) In General.--Chapter 63 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1348. Failure of corporate officers to certify 
       financial reports

       ``(a) Certification of Periodic Financial Reports.--Each 
     periodic report containing

[[Page 12515]]

     financial statements filed by an issuer with the Securities 
     Exchange Commission pursuant to section 13(a) or 15(d) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) 
     shall be accompanied by a written statement by the chairman 
     of the board, chief executive officer, and chief financial 
     officer (or equivalent thereof) of the issuer.
       ``(b) Content.--The statement required under subsection (a) 
     shall certify the appropriateness of the financial statements 
     and disclosures contained in the periodic report or financial 
     report, and that those financial statements and disclosures 
     fairly present, in all material respects, the operations and 
     financial condition of the issuer.
       ``(c) Criminal Penalties.--Notwithstanding any other 
     provision of law--
       ``(1) any person who recklessly and knowingly violates any 
     provision of this section shall upon conviction be fined not 
     more than $500,000, or imprisoned not more than 5 years, or 
     both; or
       ``(2) any person who willfully violates any provision of 
     this section shall upon conviction be fined not more than 
     $1,000,000, or imprisoned not more than 10 years, or both.''.
       (b) Technical and Conforming Amendment.--The section 
     analysis for chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1348. Failure of corporate officers to certify financial reports.''.

       This section shall take effect one day after date of this 
     bill's enactment.

  Mr. BIDEN. I thank the Chair and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Maryland.
  Mr. SARBANES. Mr. President, I ask unanimous consent that the pending 
second-degree amendments be withdrawn; that no second-degree amendments 
be in order to either of the two pending first-degree amendments; that 
the Daschle for Biden amendment No. 4186 be further modified with the 
changes that are at the desk; that the time until 4:45 p.m. today be 
for debate in relation to the pending first-degree amendments; that the 
time be equally divided between the two managers or their designees; 
that at 4:45 p.m., without further intervening action or debate, the 
Senate proceed to vote in relation to the Daschle for Biden amendment 
No. 4186, as further modified; that upon disposition of that amendment, 
the Senate vote in relation to the Lott amendment No. 4188; provided 
further that upon disposition of these amendments, Senator Edwards be 
recognized to call up amendment No. 4187.
  The PRESIDING OFFICER. Is there objection?
  The Senator from Nevada.
  Mr. REID. Reserving the right to object, I ask the manager of this 
bill, the chairman of the committee, to insert after the words 
``Senator Edwards be recognized to call up amendment No. 4187,'' that 
following the disposition of that amendment, Senator Gramm be 
recognized.
  Mr. GRAMM. Following.
  Mr. REID. That is right. We were sequencing this, that following 
Senator Edwards, Senator Gramm be recognized; following that, Senator 
Levin be recognized; and following that, Senator Gramm be recognized.
  The PRESIDING OFFICER. Does the Senator from Maryland so modify his 
request? Is there objection?
  Without objection, it is so ordered.
  The amendments (Nos. 4189, and 4190, as modified) were withdrawn.
  The amendment (No. 4186), as further modified, reads as follows:

       On page 117 in line 12 strike ``Act'' and insert the 
     following: Act.

          TITLE VIII--WHITE-COLLAR CRIME PENALTY ENHANCEMENTS

     SEC. 801 SHORT TITLE.

       This title may be cited as the ``White-Collar Crime Penalty 
     Enhancement Act of 2002''.

     SEC. 802. CRIMINAL PENALTIES FOR CONSPIRACY TO COMMIT OFFENSE 
                   OR TO DEFRAUD THE UNITED STATES.

       Section 371 of title 18, United States Code, is amended by 
     striking ``If two or more'' and all that follows through 
     ``If, however,'' and inserting the following:
       ``(a) In General.--If 2 or more persons--
       ``(1) conspire to commit any offense against the United 
     States, in any manner or for any purpose, and 1 or more of 
     such persons do any act to effect the object of the 
     conspiracy, each person shall be fined or imprisoned, or 
     both, as set forth in the specific substantive offense which 
     was the object of the conspiracy; or
       ``(2) conspire to defraud the United States, or any agency 
     thereof in any manner or for any purpose, and 1 or more of 
     such persons do any act to effect the object of the 
     conspiracy, each person shall be fined under this title, or 
     imprisoned not more than 10 years, or both.
       ``(b) Misdemeanor Offense.--If, however,''.

     SEC. 803. CRIMINAL PENALTIES FOR MAIL AND WIRE FRAUD.

       (a) Mail Fraud.--Section 1341 of title 18, United States 
     Code, is amended by striking ``five years'' and inserting 
     ``10 years''.
       (b) Wire Fraud.--Section 1343 of title 18, United States 
     Code, is amended by striking ``five years'' and inserting 
     ``10 years''.

     SEC. 804. CRIMINAL PENALTIES FOR VIOLATIONS OF THE EMPLOYEE 
                   RETIREMENT INCOME SECURITY ACT OF 1974.

       Section 501 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1131) is amended--
       (1) by striking ``$5,000'' and inserting ``$100,000'';
       (2) by striking ``one year'' and inserting ``10 years''; 
     and
       (3) by striking ``$100,000'' and inserting ``$500,000''.

     SEC. 805. AMENDMENT TO SENTENCING GUIDELINES RELATING TO 
                   CERTAIN WHITE-COLLAR OFFENSES.

       (a) Directive to the United States Sentencing Commission.--
     Pursuant to its authority under section 994(p) of title 18, 
     United States Code, and in accordance with this section, the 
     United States Sentencing Commission shall review and, as 
     appropriate, amend the Federal Sentencing Guidelines and 
     related policy statements to implement the provisions of this 
     title.
       (b) Requirements.--In carrying out this section, the 
     Sentencing Commission shall--
       (1) ensure that the sentencing guidelines and policy 
     statements reflect the serious nature of the offenses and the 
     penalties set forth in this title, the growing incidence of 
     serious fraud offenses which are identified above, and the 
     need to modify the sentencing guidelines and policy 
     statements to deter, prevent, and punish such offenses;
       (2) consider the extent to which the guidelines and policy 
     statements adequately address--
       (A) whether the guideline offense levels and enhancements 
     for violations of the sections amended by this title are 
     sufficient to deter and punish such offenses, and 
     specifically, are adequate in view of the statutory increases 
     in penalties contained in this title; and
       (B) whether a specific offense characteristic should be 
     added in United States Sentencing Guideline section 2B1.1 in 
     order to provide for stronger penalties for fraud when the 
     crime is committed by a corporate officer or director;
       (3) assure reasonable consistency with other relevant 
     directives and sentencing guidelines;
       (4) account for any additional aggravating or mitigating 
     circumstances that might justify exceptions to the generally 
     applicable sentencing ranges;
       (5) make any necessary conforming changes to the sentencing 
     guidelines; and
       (6) assure that the guidelines adequately meet the purposes 
     of sentencing as set forth in section 3553(a)(2) of title 18, 
     United States Code.

     SEC. 806. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS.

       (a) In General.--Chapter 63 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1348. Failure of corporate officers to certify 
       financial reports

       ``(a) Certification of Periodic Financial Reports.--Each 
     periodic report containing financial statements filed by an 
     issuer with the Securities Exchange Commission pursuant to 
     section 13(a) or 15(d) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78m(a) or 78o(d)) shall be accompanied by a 
     written statement by the chairman of the board, chief 
     executive officer, and chief financial officer (or equivalent 
     thereof) of the issuer.
       ``(b) Content.--The statement required under subsection (a) 
     shall certify the appropriateness of the financial statements 
     and disclosures contained in the periodic report or financial 
     report, and that those financial statements and disclosures 
     fairly present, in all material respects, the operations and 
     financial condition of the issuer.
       ``(c) Criminal Penalties.--Notwithstanding any other 
     provision of law--
       ``(1) any person who recklessly and knowingly violates any 
     provision of this section shall upon conviction be fined not 
     more than $500,000, or imprisoned not more than 5 years, or 
     both; or
       ``(2) any person who willfully violates any provision of 
     this section shall upon conviction be fined not more than 
     $1,000,000, or imprisoned not more than 10 years, or both.''.
       (b) Technical and Conforming Amendment.--The section 
     analysis for chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1348. Failure of corporate officers to certify financial reports.''.


[[Page 12516]]

  Mr. BIDEN. Mr. President, I rise today--along with my good friend, 
Senator Hatch--to offer our bill, the White-Collar Penalty Enhancement 
Act of 2002 as a second-degree amendment to amendment No. 4174, Senator 
Leahy's amendment to S. 2637.
  Let me begin by applauding Senator Sarbanes for his leadership in 
sponsoring S. 2637, and guiding it through his Banking Committee with a 
17-4 vote. It is my hope and expectation that it will win the same 
overwhelming support on the floor of the Senate. I also commend 
Senators Leahy and Daschle for offering the Corporate and Criminal 
Fraud Accountability Act, of which I am a cosponsor.
  Let me briefly recount the events which bring me to the floor today 
to offer this amendment to increase penalties on white collar 
criminals. In recent months, dramatic events have shaken our country 
out of complacency. A decade of peace and prosperity came to an end, 
first with a shattering reminder of our vulnerability to external 
threats, and then with a series of spectacular corporate collapses that 
revealed cracks in the very foundation of our economic system.
  Our response to terrorism was to come together as a nation, reminded 
of all we have in common, all we have to be proud of.
  The shock of those high-flying corporations falling spectacularly to 
earth presents us with different problems. We have to examine our own 
system--the capitalist system that has brought us so much material 
success, the envy of the rest of the world.
  As the stock market continues to lose value, as the dollar has 
dropped to a 2-year low, we know that investors, here at home and 
abroad, have lost some of their faith in the American economy.
  That loss of faith has a material impact of the wealth of this 
country, as our currency and our securities lose value. Some observers 
worry aloud that a full-blown loss of faith in our economy could drain 
even more value from our markets.
  The task before us is nothing less than restoring confidence in our 
market economy. There are many facets to this problem.
  One is reforming the auditing process. On the Senate floor right now 
is the Sarbanes bill that is essential to any effort to restore 
investor's faith in our markets. Audit firms are supposed to be 
independent voices, providing disinterested information that investors 
need to assess risk and to allocate funds to those companies that will 
have the best chance of raising our standard of living.
  We need more transparency, more accountability in the conduct of 
accounting firms, and more confidence that they have access to, and are 
willing to tell us, the truth about the businesses they audit. Senator 
Sarbanes has done us all a service by bringing this bipartisan bill to 
the floor.
  Yesterday, I was hoping to hear the President support this bipartisan 
approach to reform, reform that is supported by the business community 
in the form of the Business Roundtable, when he spoke yesterday. I 
still hope he will soon add his voice in support of this landmark 
reform.
  Just as important is the amendment to the Sarbanes bill that I am 
cosponsoring with Senator Leahy. It will put real teeth in securities 
fraud enforcement, providing substantial criminal penalties for those 
who defraud investors of publicly traded securities or who destroy 
evidence to obstruct justice.
  Yesterday, the President announced his support for tougher criminal 
penalties for fraud offenses. I applaud the President's call for 
increase penalties for wire and mail fraud, and my amendment contains 
identical provisions. But I am concerned that the President's proposals 
do not go far enough.
  For example, in the wake of the publicly reported problems at Enron, 
WorldCom, and other companies, we need to restore people's faith in 
their pension plans. They need to know that the companies they work for 
will treat them fairly, handle their funds wisely, and that the 
investments made by pension funds are sound. Yet, I believe that the 
criminal penalties for violations under the Employment Retirement 
Investment Security Act of 1974, ERISA, limited to 1 year in jail, are 
woefully inadequate to protect defrauded pensioners.
  As chairman of the Judiciary Subcommittee on Crime and Drugs, I held 
a hearing several weeks ago--and am holding a second hearing this 
afternoon--on the adequacy of criminal penalties to deter this type of 
corporate wrongdoing. Corporate executives who defraud investors by 
whatever means should go to jail--period--and we need to give 
investigators and prosecutors the tools they need to send them there.
  One thing most of our hearing witnesses agreed on was that there is a 
``penalty gap'' between white collar crimes and other crimes. For 
example, if a kid steals your car and drives it over the 14th Street 
Bridge into Northern Virginia, he could get up to 10 years in jail 
under the Federal interstate auto theft law. Yet, if a corporate CEO 
steals your pension and commits a criminal violation under ERISA, he is 
only subject to 1 year in jail.
  At my hearing, we heard from Charlie Prestwood, a 63-year-old Enron 
retiree, who lives in Conroe, TX. Charlie worked proudly for some 33 
years for that company, saved and invested in his pension, and retired 
with about $1.3 million in his plan. Within a few tragic months, that 
was nearly wiped out--only $8,000 remained. Charlie is not a lawyer, 
but he had the good sense to know that its just not fair that a car 
thief who steals a jalopy can get 10 years in prison and a Gucci-clad 
corporate crook can steal a person's life savings and might only end up 
with 1 year in prison.
  Accordingly, the amendment that Senator Hatch and I offer today is 
carefully crafted to hold corporate officers responsible and to reduce 
the ``penalty gap'' between a number of white collar crimes and other 
serious crimes. It does 3 basic things.
  First, it goes beyond President Bush's proposal by raising penalties 
for those white collar crimes that are most often violated but which 
have insufficient penalties to deter corporate crooks. For example, it 
raises the maximum penalties from 1 to 10 years for ERISA criminal 
violations. It doubles penalties for wire and mail fraud from 5 to 10 
years, and it treats white collar who conspire with others like drug 
kingpins, by mandating that they receive the same maximum penalty for 
the offense underlying the charged conspiracy, rather than their 
sentence being capped at a 5-year penalty as exists under current law.
  When these penalty enhancements are taken in combination with the new 
10-year felony for securities fraud contained in the amendment I have 
co-sponsored with Senator Leahy, the Government will have the full 
range of prosecutorial arrows in its quiver to fight pension crooks and 
corporate wrongdoers. Respectfully, the President's penalty proposal is 
only one small piece of the white collar crime-fighting puzzle.
  Second, our amendment tells corporate big wigs that they are no 
longer off the hook for their companies misdeeds. My amendment requires 
top corporate officials to certify to the Securities and Exchange 
Commission that the periodic financial reports filed by their companies 
with the Commission accurately reflect the financial health of these 
corporations. Reckless failure by a corporate official to do so will 
result in up to 5 years in prison, while willful failure to do so will 
trigger a jail term of up to 10 years.
  Third, our amendment directs the U.S. Sentencing Commission to review 
and amend the federal sentencing guidelines to lengthen sentences for 
white collar criminals to reflect these new, more serious penalties. It 
also directs the Commission to impose sentencing enhancement where 
corporate officials defraud victims. I applaud President Bush for 
announcing a similar proposal.
  Make no mistake--this amendment will not stamp out white collar 
crime. We live in a fallen world where bad people do bad things--
whether its stealing cars or stealing pensions. But, its time to 
``level the playing field'' between white collar and blue collar 
criminals.

[[Page 12517]]

  I believe the amendment that Senator Hatch and I are offering will 
move us substantially in the direction of deterring corporate 
wrongdoers by holding them responsible for the criminal acts. It will 
also begin the restoration of confidence in our financial markets. We 
must do both. The time to act is now. I urge my colleagues to support 
this amendment.
  I yield the floor.


                           amendment no. 4188

  Mr. HATCH. Mr. President, I want to applaud President Bush and 
Senator Lott for offering a comprehensive legislative proposal that 
calls for harsh, swift punishment of corporate executives who exploit 
the trust of their shareholders and employees, while enriching 
themselves.
  This bill, which tracks the President's recent proposal, increases 
the criminal penalties that apply to fraud statutes that are frequently 
used to prosecute corporate wrongdoers. It also strengthens an existing 
obstruction of justice statute, and calls for an aggravated sentencing 
enhancement for frauds perpetrated by corporate officers and directors. 
Finally, it increases the Security and Exchange Commission's 
administrative enforcement tools by strengthening the SEC's ability to 
freeze improper payments to corporate executives while the company is 
under investigation, and by enabling the SEC to bar corporate officers 
and directors from continued service where they engage in serious 
misconduct.
  I support these provisions because I strongly believe that it is 
critical that we hold corporate executives accountable for acts of 
wrongdoing. We can do so by supplying the SEC and federal prosecutors 
with the civil and criminal tools they need to investigate and 
prosecute acts of corporate misconduct.
  Let me briefly elaborate on some of the specific provisions contained 
in this bill.
  First, as I mentioned, the bill doubles the maximum prison term for 
mail and wire fraud offenses, from 5 years to 10 years. This is 
identical to a provision Senator Biden and I have included in our 
amendment. This is a necessary sentencing enhancement, and one that is 
long overdue. Because prosecutors frequently use the mail and wire 
statutes to charge acts of corporate misconduct, it is important that 
we ensure that the penalties that apply to such offenses are 
sufficiently severe to deter and punish corporate wrongdoers.
  Second, like the suggested enhancement contained in the bill Senator 
Biden and I have proposed, this amendment directs the U.S. Sentencing 
Commission to review the sentencing guidelines that apply to acts of 
corporate misconduct and to enhance the prison time that would apply to 
criminal frauds committed by corporate officers and directors. As I 
have stated, I strongly support such an enhancement because corporate 
leaders who hold high offices and breach their duties of trust should 
face stiff penalties.
  Third, the amendment strengthens an existing federal offense that is 
often used to prosecute document shredding and other forms of 
obstruction of justice. Section 1520 of Title 18 of the United States 
code currently prohibits individuals from persuading others to engage 
in obstructive conduct. However, it does not prohibit an act of 
destruction committed by a defendant acting alone. While other existing 
obstruction of justice statutes cover acts of destruction that are 
committed by and individual acting alone, such statutes have been 
interpreted as applying only where a proceeding is pending, and a 
subpoena has been issued for the evidence that is destroyed.
  This amendment closes this loophole by broadening the scope of the 
Section 1512. Like the new document destruction provision contained in 
S. 2010, this amendment would permit the government to prosecute an 
individual who acts alone in destroying evidence, even where the 
evidence is destroyed prior to the issuance of a grand jury subpoena.
  Prosecutors in the Andersen case succeeded in convicting the 
corporation. However, in order to so, they had to prove that a person 
in the corporation corruptly persuaded another to destroy or alter 
documents, and acted with the intent to obstruct an investigation. 
Certainly, one who acts with the intent to obstruct an investigation 
should be criminally liable even if he or she acts alone in destroying 
or altering documents. This amendment will ensure that individuals 
acting alone would be liable for such criminal acts.
  This amendment also includes new statutory provision that will 
strengthen the SEC's ability to freeze improper payments to corporate 
executives while a company is under investigation. These provision 
would prevent corporate executives from enriching themselves while a 
company is subject to an SEC investigation, but before the SEC has 
gathered sufficient evidence to file formal charges.
  In particular, these provisions would enable to SEC to freeze 
improper payments by obtaining a federal court order. The order, which 
could last for 45 days and be extended upon a showing of good cause, 
would freeze extraordinary payments to corporate executives and require 
that such payments be escrowed. And where an executive is charged with 
a securities law violation prior to the expiration of the court order, 
the escrow would continue, with court approval, until the conclusion of 
legal proceedings.
  Finally, the amendment grants the SEC the authority to bar 
individuals who have engaged in serious misconduct from serving as 
officers and directors of nay public company. Under current law, only a 
court may order an officer and director bar. In an SEC enforcement 
action, a court may issue an order that bars a person from acting as an 
officer or director of a public company where the person has committed 
a securities fraud violation, and his or her conduct demonstrates 
``substantial unfitness'' to serve as an officer or director. However, 
under current law, the SEC cannot order this remedy in an 
administrative cease-and-desist proceedings, even where the person's 
conduct would otherwise meet the standards for the bar.
  This amendment would enable the SEC to issue such a bar where the 
officer or director has committed a securities law violation and his or 
her conduct demonstrates ``unfitness'' to serve as an officer or 
director. This will give the SEC the ability to punish an officer or 
director who has committed an unlawful act, where it has not yet 
instituted an enforcement action.
  I strongly believe that if Congress and the President act together to 
increase corporate transparency and to enact tough civil and criminal 
provision, we will succeed in restoring confidence in our market 
economy. The Federal government plays an important role in upholding 
and enforcing standards of corporate conduct. I look forward to working 
with my colleagues and with the President to enact needed legislation 
to strengthen corporate accountability.
  Mr. GRAMM. Mr. President, let me try to explain where we are. We are 
about to have two votes. One vote is on a bipartisan amendment that was 
put together prior to our receipt of the language of the President's 
proposal. That was done by Senator Biden and Senator Hatch. That 
amendment will be voted on first.
  I believe that amendment deals with the same subject area as the 
President's proposal. The overlap is not perfect, but when you take 
Senator Leahy's amendment that we have already adopted, when you take 
this amendment, the things that are covered in the President's proposal 
are covered.
  We also have the legislative language proposed by the White House to 
follow on the proposals the President made yesterday in New York.
  When we adopt these two amendments, we will have added a substantial 
amount to the underlying bill. We will have added, in essence, two 
different variants of the President's proposal of yesterday. I assume 
we will get a unanimous vote for both of these amendments. I commend to 
my colleagues to vote for both of them.
  At that point, we will proceed in the outline we have. It is my 
understanding we will try to put together an additional list, depending 
on the amount of time we have. Once these

[[Page 12518]]

two votes are taken, the subject matter of the President's proposal of 
yesterday will be part of this bill. I commend to my colleagues to vote 
for both amendments.
  Mr. SARBANES. Mr. President, in just a few minutes, at 4:45, we will 
move to the first of two votes. The first vote will be on the Daschle 
amendment, and the second vote on the Lott amendment. I urge my 
colleagues to support both amendments.
  At the conclusion of those votes, we will go to Senator Edwards, who 
has been waiting patiently, to call up an amendment. Then we have 
sequenced behind Senator Edwards, for purposes of calling up 
amendments, Senator Gramm, and Senator Levin has an amendment involving 
the powers of the SEC, and then back to Senator Gramm. That is the 
procedure we have managed to put into place so far while continuing to 
work to try to compile a list of amendments and to do some sequencing.
  We urge our colleagues to inform us--I am not urging to add 
amendments, but just informing colleagues of the process so they can be 
on the alert.
  Very shortly we will begin the first of two rollcall votes. Both of 
these are amendments which strengthen the penalties. Many are related 
to the Leahy amendment which we adopted earlier today, and in a sense 
deal primarily with the subject matter that was in the Leahy amendment.
  I urge my colleagues to be supportive of both amendments.
  Mr. GRAMM. I yield back any time I may have.
  Mr. SARBANES. I yield back the time.
  The PRESIDING OFFICER (Mr. Miller). The question is on agreeing to 
amendment No. 4186 as further modified. The yeas and nays have been 
ordered. The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. REID, I announce that the Senator from New Jersey (Mr. Corzine) 
is necessarily absent. I further announce that, if present and voting, 
the Senator from New Jersey (Mr. Corzine) would vote ``aye.''
  Mr. NICKLES, I announce that the Senator from North Carolina (Mr. 
Helms), the Senator from Ohio (Mr. Voinovich), and the Senator from 
Idaho (Mr. Crapo) are necessarily absent. I further announce that, if 
present and voting, the Senator from North Carolina (Mr. Helms), would 
vote ``aye.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 96, nays 0, as follows:

                      [Rollcall Vote No. 170 Leg.]

                                YEAS--96

     Akaka
     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bunning
     Burns
     Byrd
     Campbell
     Cantwell
     Carnahan
     Carper
     Chafee
     Cleland
     Clinton
     Cochran
     Collins
     Conrad
     Craig
     Daschle
     Dayton
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Edwards
     Ensign
     Enzi
     Feingold
     Feinstein
     Fitzgerald
     Frist
     Graham
     Gramm
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Hollings
     Hutchinson
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Kyl
     Landrieu
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     McCain
     McConnell
     Mikulski
     Miller
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Nickles
     Reed
     Reid
     Roberts
     Rockefeller
     Santorum
     Sarbanes
     Schumer
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stabenow
     Stevens
     Thomas
     Thompson
     Thurmond
     Torricelli
     Warner
     Wellstone
     Wyden

                             NOT VOTING--4

     Corzine
     Crapo
     Helms
     Voinovich
  The amendment (No. 4186), as further modified, was agreed to.
  Mr. SARBANES. Mr. President, I move to reconsider the vote.
  Mr. LEAHY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                       Vote On Amendment No. 4188

  The PRESIDING OFFICER. Under the previous order, the question is on 
agreeing to Lott amendment No. 4188.
  Mr. HATCH. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be.
  The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from North Carolina (Mr. 
Helms), the Senator from Ohio (Mr. Voinovich), and the Senator from 
Idaho (Mr. Crapo) are necessarily absent.
  I further announce that if present and voting the Senator from North 
Carolina (Mr. Helms) would vote ``yea.''
  The result was announced--yeas 97, nays 0, as follows:

                      [Rollcall Vote No. 171 Leg.]

                                YEAS--97

     Akaka
     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bunning
     Burns
     Byrd
     Campbell
     Cantwell
     Carnahan
     Carper
     Chafee
     Cleland
     Clinton
     Cochran
     Collins
     Conrad
     Corzine
     Craig
     Daschle
     Dayton
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Edwards
     Ensign
     Enzi
     Feingold
     Feinstein
     Fitzgerald
     Frist
     Graham
     Gramm
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Hollings
     Hutchinson
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Kyl
     Landrieu
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     McCain
     McConnell
     Mikulski
     Miller
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Nickles
     Reed
     Reid
     Roberts
     Rockefeller
     Santorum
     Sarbanes
     Schumer
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stabenow
     Stevens
     Thomas
     Thompson
     Thurmond
     Torricelli
     Warner
     Wellstone
     Wyden

                             NOT VOTING--3

     Crapo
     Helms
     Voinovich
  The amendment (No. 4188) was agreed to.
  Mr. REID. Mr. President, I move to reconsider the vote.
  Mr. SARBANES. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. REID. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  Mr. SARBANES. Mr. President, I ask for the regular order.
  The PRESIDING OFFICER. Under the previous order, the Senator from 
North Carolina is recognized.


                           Amendment No. 4187

  Mr. EDWARDS. Mr. President, I wish to say a few words about an 
amendment I intend to offer along with Senators Enzi and Corzine. This 
amendment addresses an important player in the problem we have had with 
corporate misconduct in this country. It is a player with which I have 
a lot of personal experience. That player is a lawyer.
  As most people know, I practiced law for 20 years and spent a lot of 
time representing kids and families against very powerful interests. I 
think I have a reasonably good understanding of what responsibilities 
we as lawyers have to the people we represent. While those are the 
kinds of folks that I mostly represented, other lawyers have different 
kinds of clients. Some lawyers represent corporations rather than 
individuals. The lawyers who represent corporations have the same kind 
of responsibility, but it is to a different entity and a different 
group of people. They have a responsibility, though, to represent that 
corporation, their client, zealously, the same way I had the 
responsibility to represent kids and families.
  One of the problems we have seen occurring with this sort of crisis 
in corporate misconduct is that some lawyers have forgotten their 
responsibility. We have heard a great deal

[[Page 12519]]

about managers and accountants, which Senator Enzi is familiar with, 
and scandals such as Enron and WorldCom. Managers and accountants are 
the focus of Senator Sarbanes' bill, and they are critical to us doing 
what needs to be done to correct this problem and restore the public 
confidence.
  The truth is that executives and accountants do not work alone. 
Anybody who works in corporate America knows that wherever you see 
corporate executives and accountants working, lawyers are virtually 
always there looking over their shoulder. If executives and/or 
accountants are breaking the law, you can be sure that part of the 
problem is that the lawyers who are there and involved are not doing 
their jobs.
  For the sake of investors and regular employees, ordinary 
shareholders, we have to make sure that not only the executives and the 
accountants do what they are responsible for doing, but also that the 
lawyers do what they are responsible for doing as members of the bar 
and as citizens of the country.
  Let me be a little more specific about what this amendment does and 
what the responsibility of a lawyer is and should be. If you are a 
lawyer for a corporation, your client is the corporation and you work 
for the corporation and you work for the shareholders, the investors in 
that corporation; that is to whom you owe your responsibility and 
loyalty. And you have a responsibility to zealously advocate for the 
shareholders and investors in that corporation.
  What we have seen some lawyers do, unfortunately, is different. We 
have seen corporate lawyers sometimes forget who their client is. What 
happens is their day-to-day conduct is with the CEO or the chief 
financial officer because those are the individuals responsible for 
hiring them. So as a result, that is with whom they have a 
relationship. When they go to lunch with their client, the corporation, 
they are usually going to lunch with the CEO or the chief financial 
officer. When they get phone calls, they are usually returning calls to 
the CEO or the chief financial officer. The problem is that the CEO and 
the chief financial officer are not the client. Their responsibility 
and the client they have to advocate for--and which they have an 
ethical responsibility to advocate for--is, in fact, the corporation, 
not the CEO or the chief financial officer.
  One of the most critical responsibilities that those lawyers have is, 
when they see something occurring or about to occur that violates the 
law, breaks the law, they must act as an advocate for the shareholders, 
for the company itself, for the investors. They are there and they can 
see what is happening. They know the law and their responsibility is to 
do something about it if they see the law being broken or about to be 
broken.
  This amendment is about making sure those lawyers, in addition to the 
accountants and executives in the company, don't violate the law and, 
in fact, more importantly, ensure that the law is being followed. For 
some time, the SEC actually tried to do that in the late 1970s and 
early 1980s. They brought legal actions to enforce this basic 
responsibility of lawyers--the responsibility to take steps to make 
sure corporate managers didn't break the law and harm shareholders in 
the process. If you find out that the managers are breaking the law, 
you must tell them to stop. If they won't stop, you go to the board of 
directors, which represents the shareholders, and tell them what is 
going on. If they won't act responsibly and in compliance with the law, 
then you go to the board and say something has to be done; there is a 
violation of the law occurring. It is basically going up the ladder, up 
the chain of command.
  For years, the SEC recognized the principle that lawyers had a legal 
responsibility to go up the ladder if they saw wrongdoing occurring. 
But then they stopped. One of the reasons they stopped is because there 
were a lot of protests coming from the organized bar. With Enron and 
WorldCom, and all the other corporate misconduct we have seen, it is 
again clear that corporate lawyers should not be left to regulate 
themselves no more than accountants should be left to regulate 
themselves. There has been a lot of debate, rhetoric, and discussion--
rightfully so--about the necessity about not ``letting the fox guard 
the chicken coop.'' The same is true with lawyers. This has become 
clear through various acts of misconduct. The lawyers have involvement 
and responsibility, and they also cannot be left to regulate 
themselves.
  In January, a bipartisan group of the top securities lawyers and 
legal ethics experts in the country wrote a letter to Harvey Pitt 
telling him it was time for the SEC to enforce the up-the-ladder 
principle, as in the past. Mr. Pitt's top lawyer said: We are not going 
to do anything. If Congress wants something done, Congress should act. 
Then I wrote a letter to Mr. Pitt in essence saying: We are ready to 
act here. Will you help us in crafting legislation and working out this 
problem?
  That was 3 weeks ago. As of now, I have not yet received a response.
  The time has come for Congress to act. This amendment acts in a very 
simple way. It basically instructs the SEC to start doing exactly what 
they were doing 20 years ago, to start enforcing this up-the-ladder 
principle.
  This is what the amendment says specifically: First, the SEC shall 
establish rules to protect investors from unprofessional conduct by 
lawyers, conduct that violates the legal standards of the profession.
  Second, the SEC shall make one rule in particular, and it is a simple 
rule with two parts. No. 1, a lawyer with evidence of a material 
violation of the law has to report that evidence either to the chief 
legal counsel or the chief executive officer of the company. No. 2, if 
the person to whom that lawyer reports doesn't respond appropriately by 
remedying the violation, by doing something that makes sure it is 
cured, that lawyer has an obligation to go to the audit committee or to 
the board. It is that simple. You report the violation. If the 
violation isn't addressed properly, then you go to the board.
  Three important details about this amendment address some of the 
concerns that I have heard voiced. First, the way we have drafted the 
bill, the duty to report applies only to evidence of a material 
violation of the law. That means no reporting is required for piddling 
violations or violations that don't amount to anything. The obligation 
to report is triggered only by violations that are material--violations 
that a reasonable investor would want to know about. So we have been 
very careful there.
  Second, when the evidence is reported within the company, we have not 
specified how a CEO or a general counsel should act to rectify the 
violation. That is because the truth is that the appropriate response 
to cure the problem will vary dramatically, depending on the 
circumstances. If the CEO can do a short investigation, for example, 
and figure out that no violation occurred, then the obligation stops 
there. But if there is a serious violation of the law, the appropriate 
response is clear: The CEO has to act promptly to remedy the violation. 
If he doesn't, the lawyer has to go to the board. It is that simple.
  One final point. Nothing in this bill gives anybody a right to file a 
private lawsuit against anybody. The only people who can enforce this 
amendment are the people at the SEC.
  They will enforce this amendment not on behalf of any private party, 
but in the name of the American people. This is about forcing the SEC 
to do its job and protect the American people.
  Mr. President, I call up amendment No. 4187 and ask for its immediate 
consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from North Carolina [Mr. Edwards], for himself, 
     Mr. Enzi, and Mr. Corzine, proposes an amendment numbered 
     4187.

  Mr. EDWARDS. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

     (Purpose: To address rules of professional responsibility for 
                               attorneys)

       On page 108, line 15, insert before the end quotation marks 
     the following:

[[Page 12520]]

       ``(c) Rules of Professional Responsibility for Attorneys.--
     Not later than 180 days after the date of enactment of this 
     section, the Commission shall establish rules, in the public 
     interest and for the protection of investors, setting forth 
     minimum standards of professional conduct for attorneys 
     appearing and practicing before the Commission in any way in 
     the representation of public companies, including a rule 
     requiring an attorney to report evidence of a material 
     violation of law by the company or any agent thereof to the 
     chief legal counsel or the chief executive officer of the 
     company (or the equivalent thereof) and, if the counsel or 
     officer does not appropriately respond to the evidence 
     (adopting, as necessary, appropriate remedial measures or 
     sanctions with respect to the violation), requiring the 
     attorney to report the evidence to the audit committee of the 
     board of directors or to another committee of the board of 
     directors comprised solely of directors not employed directly 
     or indirectly by the company, or to the board of directors.

  Mr. EDWARDS. I yield the floor.
  Mr. GRAMM addressed the Chair.
  Mr. SARBANES. Will the Senator yield for a question?
  The PRESIDING OFFICER. The Senator from Texas.


                Amendment No. 4200 to Amendment No. 4187

  (Purpose: To modify attorney practices relating to clients, and for 
                            other purposes)

  Mr. GRAMM. Mr. President, on behalf of Senator McConnell, I send a 
second-degree amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Texas [Mr. Gramm], for Mr. McConnell, 
     proposes an amendment numbered 4200 to amendment No. 4187.

  Mr. GRAMM. Mr. President, I ask unanimous consent that the reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  Mr. GRAMM. Mr. President, I am not going to talk about the amendment. 
Senator McConnell was concerned--he has an appointment tonight and he 
wanted to be recognized, so I offered the amendment for him. I wish to 
say a few words before I yield, giving him an opportunity to speak on 
behalf of the second-degree amendment.
  I wish to print in the Record the lead editorial from today's Wall 
Street Journal. I would like to read the first paragraph. I want to 
make it clear, I am not talking about this amendment, I am just talking 
about the climate we are in. This is the lead editorial in today's Wall 
Street Journal:

       As if investors weren't frightened enough, the politicians 
     are now offering to help. That was worth more than 180 points 
     off the Dow yesterday, but then stock prices aren't the 
     point. Everything you're hearing now from Washington is aimed 
     at winning the November elections, not calming financial 
     markets.

  This is an excellent editorial. One can agree with it or not agree 
with it. The point I want to make is the following: There is a 
wonderful line in a very famous economics book, ``The Wealth of 
Nations,'' where Adam Smith is talking about government and talking 
about problems. A line in ``The Wealth of Nations'' goes something 
like: The economy is powerful and it overcomes not only the illness but 
the absurd prescription of the doctor that comes from the Government.
  I believe we have now put together the makings of a good bill. We 
still have differences of opinion. We still have differences not on 
whether we should set up a board, not on how strong it should be. We 
agree on those issues. We have differences about how independent the 
SEC should be. We have differences as to whether that board ought to 
set audit standards and independent standards or whether we ought to do 
it by law.
  As we go through the process in the next 2 days, if the some 30 
amendments that people on my side of the aisle are proposing to offer 
is any index, and as someone once said--and I am sorry I cannot 
remember his name--I have only seen the heart of a good man, not 
necessarily the heart of an evil man. I have just seen these 
amendments.
  I am concerned that people who are looking at investing are going to 
say: My God, it is one thing that my stock has been battered because 
there were people who did things that were wrong, there were people who 
did things that were illegal, but now I am going to be battered by one-
upmanship efforts to show that Congress is really tough, that Congress 
is tougher than the President, the President is tougher than the 
Congress, that Republicans are tougher than Democrats, or Democrats are 
tougher than Republicans.
  I would just like to say, not that anybody is going to be calmed by 
what I say, but I would like to say, in the end, I think we will end up 
with a fairly responsible bill, and I hope people who are thinking 
about investing money will take into account that this, too, will pass; 
that this summer will pass; that after all the charges are made and the 
one-upmanship has occurred, in the end, normally this process has 
worked pretty well for over 200 years, and my guess is it will work 
well again and we will end up in a give-and-take in conference, with 
the White House involved, measuring each amendment in terms of what we 
think will work and what we think probably hurts more than it helps--
the absurd prescription of the doctor about which Adam Smith talked.
  If we do go too far in one area or we do not go far enough in 
another, there is going to be another Congress next year and the year 
after and for every year from now until the end of the world, I hope.
  Just reading this article set me thinking about it. There are 
probably people trying to decide this afternoon what they are going to 
do tomorrow on Wall Street. We have this bill passed in the House 
where, if you are domiciled outside the United States and move your 
domicile, you cannot get Government contracts. This is the era of 
where, if you want to slap an accountant around, it is not going to do 
a lot of harm. It is not fair, it is not right, I am not for it, and I 
am not going to do it, but if you want to slap business around, this is 
a wonderful time to do it.
  The problem is the market is going to open in the morning and people 
are going to either buy or sell or they are going to do both.
  I ask unanimous consent to print this lead editorial from the Wall 
Street Journal in the Record.
  There being no objection, the editorial was ordered to be printed in 
the Record, as follows:

                     [From the Wall Street Journal]

                 Review & Outlook: The November Markets

       ``Congress must now act to restore public confidence.''--
     Senator Carl Levin (D., Mich.)
       As if investors weren't frightened enough, the politicians 
     are now offering to help. That was worth 180 more points off 
     the Dow yesterday, but then stock prices aren't the point. 
     Everything you're hearing now from Washington is aimed at 
     winning the November elections, not calming financial 
     markets.
       That includes President Bush's much-touted Wall Street 
     speech yesterday on ``corporate responsibility.'' His stern 
     words for CEO wrongdoers were perfectly apt, and some of his 
     proposals might even help. But coming so long after the Enron 
     scandal first broke, and amid election season, the speech was 
     widely and accurately described as an exercise in defensive 
     politics.
       Democrats immediately panned it as inadequate, but they'd 
     have said that if Mr. Bush had proposed public hangings. 
     Their goal is to associate Republicans with corporate 
     ``greed,'' to knock Mr. Bush's approval rating from its war-
     time pedestal and develop a campaign issue.
       You can judge their sincerity by the sop to trial lawyers 
     that has suddenly appeared in the ``reform'' queue. For 
     months Maryland Democrat Paul Sarbanes has worked to form a 
     bipartisan coalition for accounting reform. But now Senate 
     Democrats are also demanding that Mr. Bush sign onto 
     expanding the time available for plaintiff plutocrat Bill 
     Lerach to file shareholder suits. In other words, what 
     they're really after is a Bush veto, which they will then run 
     against.
       It's not as if Mr. Bush is letting business off the moral 
     hook. He's creating a new Justice Department task force on 
     corporate fraud, which as these things go will find someone 
     to indict. He's also painted a bull's-eye on CEOs, who will 
     now be personally and criminally liable (and face stiff 
     penalties) for their companies' financial results.
       We only hope Justice keeps in mind the requirement of mens 
     rea, or criminal intent, when it's CEO hunting. This legal 
     principle got trampled in the rush to convict Arthur 
     Andersen. If otherwise honest CEOs can be indicted merely for 
     putting their names to a statement that turns out to be 
     false, good luck finding competent executives.
       The brighter CEOs have also been busy cleaning up their own 
     act. They understand something that politicians won't admit, 
     which is that only business is truly capable of restoring 
     confidence in business. The New

[[Page 12521]]

     York Stock Exchange and Goldman Sachs chief Hank Paulson have 
     proposed more CEO supervision by independent directors, among 
     other reforms.
       Just as significant, major pension funds and large 
     investors have begun to scrutinize stock options and other 
     forms of executive compensation. This sort of due diligence 
     too often went missing in the ``decade of greed,'' as 
     liberals now like to call the 1990s. (Or are we confusing our 
     decades?)
       Mr. Bush put it well yesterday: ``I challenge every CEO in 
     America to describe in the company's annual report, 
     prominently and in plain English, details of his or her 
     compensation package, including salary and bonus and 
     benefits. And the CEO, in that report, should also explain 
     why his or her compensation package is in the best interests 
     of the company he serves.'' The point isn't that there is a 
     moral taint to high pay but that it has to be justified in 
     shareholders value.
       The one place we've thought regulatory change might help is 
     audit reform. Clearly the culture of the accounting trade 
     went awry in the 1990s, and not only at Arthur Andersen. We 
     favored Paul Volcker's plan, which would have restored some 
     internal accounting-firm discipline and reduced conflicts of 
     interest. But the accounting lobby resisted and now finds 
     itself fending off much more intrusive regulation in 
     Congress. Serves them right.
       As a political matter, Republicans are also paying for 
     protecting the accountants. Bush SEC Chairman Harvey Pitt, 
     who once worked for the Big Five, is now being urged to 
     resign by the likes of Al Gore, Tom Daschle and John McCain. 
     As these columns noted long before these politicians wet 
     their finger to the wind, Mr. Pitt's temptation now will be 
     to appease these critics by cracking down too hard on too 
     many, in a way that further roils financial markets. A 
     regulator with more credibility usually has to regulate less.
       The investing public, fortunately, seems to understand 
     this. While rightly angry about WorldCom and Enron, the 
     public hasn't panicked even after three years of stock-market 
     losses. Americans know that even scarier than a bear market 
     in stocks is a bull market for politicians.

  Mr. GRAMM. Mr. President, I ask my colleagues to read the editorial 
and pray over it. As I say, there are some things in it one may like, 
some one may not like; one may not like any of it, or one may like all 
of it.
  In the next couple of days, we are going to have a lot of proposals 
that are going to be frightening to investors. I wanted to take this 
opportunity tonight to tell them that--I know my dear colleague who is 
sitting in the chair as a Presiding Officer remembers the old hymn, 
``This is My Father's World.'' Remember that hymn? It talks about all 
these things that are happening, all these bad things that happen, but 
in the end it is going to be right. I think the Lord is going to count 
on us to right it. I hope it is in good hands.
  In any case, I wanted to say that as we hear all these ideas brought 
up, if you are thinking about investing money tomorrow or next week or 
next year, do not be frightened. I think this issue is going to move 
back toward a middle course, and if we go too far--and I hope we will 
not, and I am dedicated to not doing more harm than good--then we will 
fix it, and if in some areas we do not go far enough, we can come back 
and fix it, too.
  As I said, I offered the second-degree amendment for Senator 
McConnell who has an appointment and wanted to get his amendment in. I 
yield the floor.
  The PRESIDING OFFICER. The Senator from Kentucky is recognized.
  Mr. McCONNELL. Mr. President, I say to my friend from Texas, I have 
enjoyed his wisdom over the last 18 years. I am going to save my 
remarks about how I feel about his departure until later in the year. 
We have just heard another example of the extraordinary wisdom of the 
senior Senator from Texas from which I have benefited for 18 years. I 
wish to tell him again how much his service has meant not only to his 
State but to our Nation.
  I say to my friends from Wyoming and North Carolina, they will be 
relieved to know I do not intend to make my speech on the second-degree 
amendment. This is an amendment about which I am sure the junior 
Senator from South Carolina is going to be particularly enthusiastic. I 
say that with tongue in cheek. I will briefly describe what it is.
  This is an amendment to provide a client's bill of rights for clients 
with Federal claims or who are in Federal court. Fundamentally, what 
this client's bill of rights would provide is an opportunity for an 
orderly and systematic notice from their lawyers of the fee 
arrangements to which they are subjecting themselves; in addition to 
that, a bereavement rule which would prevent the solicitation of 
business within 45 days of the occurrence of the event. That is a brief 
summary of what my amendment is about. There will be ample time for 
everyone to take a look at the amendment over the evening. It does not 
in any way detract from the underlying Edwards-Enzi amendment, which I 
support and commend the authors for offering. I think it is right on 
the mark. I would like to see these principles expanded to a larger 
class of clients so they, too, can receive adequate protection.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. REID. Mr. President, I ask unanimous consent that following the 
previous sequence already in place, the amendments listed in this 
agreement be the next six amendments in the sequence, in the order 
listed: Carnahan amendment regarding electronic filing; McCain 
amendment regarding accounting treatment/stock options; Dorgan 
amendment regarding bankruptcy/disgorgement; Enzi amendment regarding 
materiality; Schumer amendment regarding restitution; and Murkowski 
amendment regarding the Ninth Circuit.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Several Senators addressed the Chair.
  Mr. REID. Mr. President, I would say to the Chair that I ask the 
Senator to yield to me for a unanimous consent request so the Senator 
from Illinois would have the floor.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I want to make a comment about the second-
degree amendment that is pending. I want to commend my colleague, the 
Senator from Kentucky.
  Last night, at the close of the session, there was an amendment 
offered by the Senator from Kentucky and the Senator from Texas. Now 
remember, this bill is about corporate misconduct. This is about 
corporate corruption. Last night, they decided we ought to expand the 
jurisdiction and scope of this debate to include reforming labor 
unions.
  I have followed Enron, WorldCom, and others very closely and do not 
recall ever hearing anybody say the root cause of the problem of these 
corporations was labor unions. Thank goodness the Senate rejected that 
notion.
  The Senator from Kentucky comes back tonight and says, no, it is not 
just labor unions, it is the fees paid to lawyers; that is the problem. 
When you are dealing with corporate corruption, it is the fees paid to 
lawyers, contingency fee contracts, and class actions.
  I was stopped cold when I heard this amendment being described to try 
to understand what this has to do with making certain that criminal 
misconduct by corporate officers will result in time in jail. I do not 
get the connection. Perhaps the Senator from Kentucky can help me 
understand this. How does the issue of attorney's fees relate to 
corporate misconduct and corporate corruption?
  I am sorry he cannot join us in this debate to respond, but I say to 
my colleagues I am beginning to get the distinct impression that the 
other side of the aisle is trying to change the subject on us. I do not 
think they want to talk about wrongdoing in corporate boardrooms and 
what we can do to restore confidence.
  Yesterday, the President used the bully pulpit and turned the bears 
loose on Wall Street. Today, we had another dip in the stock market. We 
had better get honest. We had better get real. We had better make some 
real changes in the law to bring honesty in transactions with major 
businesses if we want to restore America's confidence in business 
dealings and bring people back to the stock market and get this economy 
back on track and give people a chance to save for their retirement. 
That is what this is all about.
  Somehow or another the other side of the aisle wants us to veer off 
now and

[[Page 12522]]

talk about attorney's fees. I do not get the connection, and I urge my 
colleagues to take a close look at this long amendment and try to join 
me in divining what they are trying to achieve other than to perhaps 
change the subject.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Wyoming is recognized.
  Mr. ENZI. Mr. President, I do rise in support of the Edwards-Enzi-
Corzine amendment. I am disappointed there has been a second-degree 
amendment to this, on which amendment we are working. It does not deal 
with the same topic. It does not deal with the same bill. It is going 
off in a different direction. If we keep having second-degree 
amendments throughout that go off in other directions, we are not going 
to get this bill finished and through the process. So it would be my 
hope it would be withdrawn.
  I will concentrate my efforts on the amendment I have worked on with 
Senator Edwards, Senator Corzine, and others. This amendment is 
designed to assure that attorneys are responsible for fully informing 
their corporate client of evidence of material violations of Federal 
securities law. That is what we are talking about through the whole 
accounting reform.
  Over the past few months, Congress and the public have concentrated 
on the role of accountants and auditors involved in Enron, WorldCom, 
Global Crossing, and others. We have held hearings and drafted 
legislation intended to restore a high level of ethical behavior to 
corporate America and the accounting industry. This breach in ethical 
behavior led to the problems these companies are now experiencing. I 
have to say through all of those hearings, as an accountant, I felt the 
profession was very picked on, and the profession deserved to be picked 
on--not everybody in the profession. Again, it is that one-half of 1 
percent or one-tenth of 1 percent who are fouling up everything for 
everybody. It happens in a lot of different professions.
  As we beat up on accountants a little bit, one of the thoughts that 
occurred to me was that probably in almost every transaction there was 
a lawyer who drew up the documents involved in that procedure. I know 
as to the companies we looked at, that was the case. It seemed only 
right there ought to be some kind of an ethical standard put in place 
for the attorneys as well. All of the people who are involved should be 
looking at a new way of doing business.
  As an accountant, I have been deeply disturbed by the action taken by 
some in my profession, and as a result I have taken a more personal 
interest than others might in drafting legislation which will ensure 
that accountants act professionally and responsibly, and which will 
protect the interests of corporate shareholders.
  Following hearings on this matter, it has become clear that the role 
of attorneys who counseled these corporations and their accountants 
must be scrutinized as well. Just like accountants, these lawyers are 
expected to represent the corporation in the best interests of the 
shareholders. In doing so, these attorneys are hired to aid the 
corporation and its accountants in adhering to Federal securities law.
  When their counsel and advice is sought, attorneys should have an 
explicit, not just an implied, duty to advise the primary officer and 
then, if necessary, the auditing committee or the board of directors of 
any serious legal violation of the law by a corporate agent. Currently, 
there is no explicit mandate requiring this standard of conduct. It is 
clearly in the best interest of their client to disclose this kind of 
information to the board, rather than just upper management.
  Maybe it could be called the ``smell test.'' If something smells 
wrong, somebody who can do something to fix it ought to be told.
  It is important to understand the corporate attorney's client is the 
whole corporation and its shareholders, and not just the CEOs or some 
of the executives, accountants, or auditors. As a result, their 
ultimate duty of representation is not to the people to whom they 
normally report but to the shareholders through the board of directors.
  This amendment would require the Securities and Exchange Commission 
to enact rules within 180 days to set forth minimum standards of 
professional conduct and responsibility for attorneys appearing and 
practicing before the Commission; not all attorneys, just attorneys 
appearing and practicing before the Commission; that is, those who are 
dealing with documents that deal with companies listed by the 
Securities and Exchange Commission.
  This amendment instructs the Commission to establish rules that 
require an attorney, with evidence of material legal violation by the 
corporation or its agent, to notify the chief legal counsel or the 
chief executive officer of such evidence and the appropriate response 
to correct it. If these officers do not promptly take action in 
response, the Commission is instructed to establish a rule that the 
attorney then has a duty to take further appropriate action, including 
notifying the audit committee of the board of directors or the board of 
directors themselves, of such evidence and the actions of the attorney 
and others regarding this evidence. It is all within the corporation.
  This amendment is simple. It requires the attorney to contact 
specific persons who are part of the management hierarchy and explain 
the problem. If that fails to correct the problem, the attorney must 
contact the audit committee or the board of directors.
  I am usually in the camp that believes States should regulate 
professionals within their jurisdiction. However, in this case, the 
State bars as a whole have failed. They have provided no specific 
ethical rule of conduct to remedy this kind of situation. Even if they 
do have a general rule that applies, it often goes unenforced. Most 
States also do not have the ability to investigate attorney violations 
involved with the complex circumstances of audit procedures within 
giant corporations.
  Similarly, the American Bar Association's Model Rules of Professional 
Responsibility do not have mandatory rules for professional conduct for 
corporate practitioners which require them to take specific action. The 
ABA merely has a general rule that an attorney must represent the best 
interests of an organization and suggests a number of ways an attorney 
could respond, including reporting illegal conduct to a responsible 
constituent of the organization, such as the board of directors. But 
this does not mandate action.
  In response to Enron and the current environment concerning corporate 
integrity, on March 27 of this year the ABA did form a task force on 
corporate responsibility. But how many task forces have been formed and 
accomplished nothing? Task forces are often used to delay 
implementation of necessary changes. When task forces are used, we all 
know it takes years to set up the rules. When they are established, 
States may not actively enforce them or even have the means to enforce 
them.
  In any event, it is my understanding that the ABA's task force's 
preliminary recommendations are for the attorney to report law 
violations through a chain or ladder of the corporation. That is what, 
in fact, this amendment does, first through the legal counsel or CEO 
and then to the audit committee or the board of directors.
  While I almost always advocate a State solution, in this instance I 
must advocate a Federal solution. In the past, Congress has authorized 
a Federal commission to regulate the conduct of attorneys through 
promulgation of rules on attorneys practicing before them. For example, 
31 U.S.C. section 330 provides the Treasury Department authority to 
regulate the practice of attorneys appearing before the Internal 
Revenue Service. Accordingly, the IRS has promulgated rules on the 
conduct of attorneys.
  Under 31 CFR, part 10.21 of the IRS regulations, each attorney who 
knows the client has not complied with the revenue laws or who has made 
an error or omission on any return or document required by the IRS 
shall advise the client promptly of the fact of such noncompliance, 
error, or omission. The amendment I am supporting will give

[[Page 12523]]

the SEC authority to promulgate a rule similar to the IRS rule.
  In the past, the SEC has tried to impose ethical conduct on 
attorneys. SEC rule 2(e), previously 102(e), authorizes the Commission 
to disbar or suspend from practice before it a lawyer or other 
professional who violates the securities law, assists in someone else's 
violation, or otherwise engages in unprofessional conduct.
  Through this process, the SEC previously instituted proceedings under 
rule 102(3) to enforce the ethical standards for the practice of 
Federal securities law. But it has stopped bringing these types of 
actions. This amendment will get the SEC back on track and make 
attorneys stand up and pay attention if they have evidence a corporate 
agent has committed a material legal violation.
  In the wake of Enron, over forty professors with expertise in Federal 
securities and ethics law, have written to SEC Chairman Harvey Pitt 
asking for some form of regulation over the practice and conduct of 
attorneys involved in Federal securities law.
  In their letter, they state that if senior managers will not rectify 
a violation, lawyers who are responsible for the corporation's 
securities compliance work, should be required to report to the board 
of directors.
  As they point out, such a disclosure obligation is still less onerous 
than that imposed on accountants under section 10A of the 1934 
Securities Exchange Act, which requires an auditor to report, both to 
the client's directors and simultaneously to the SEC, and illegal act 
if management fails to take remedial action.
  The amendment I am supporting would not require the attorneys to 
report violations to the SEC, only to corporate legal counsel or the 
CEO, and ultimately, to the board of directors.
  Some argue that the amendment will cause a breach of client/attorney 
privilege, which is ludicrous. The attorney owes a duty to its client 
which is the corporation and the shareholders. By reporting a legal 
violation to management and then the board of directors, no breach of 
the privilege occurs, because it is all internal--within the 
corporation and not to an outside party, such as the SEC.
  This amendment also does not empower the SEC to cause attorneys to 
breach their attorney/client privilege. Instead, as is the case now, 
attorneys and clients can assert this privilege in court.
  In addition, this amendment creates a duty of professional conduct 
and does not create a right of action by third parties. The Fourth 
Circuit has made such a ruling concerning the code of conduct applied 
by the IRS Rules.
  The SEC has already found that attorneys who fail to take steps to 
prevent their clients from violating Federal securities law are guilty 
of aiding and abetting. This amendment will put attorneys on the right 
course. By reporting violations to the board of directors, they can 
avoid being found guilty of aiding and abetting their client.
  Just as I am concerned about the conduct of accountants because that 
is my profession, I would think member attorneys would be as concerned 
about the conduct of the legal profession. To ignore the role attorneys 
played in Enron, World.Com and Global Crossing is a disservice to their 
profession.
  I hope you will join me in ensuring that attorneys are required to 
conduct themselves ethically and in the best interests of their client 
when they see evidence of a material legal violation. They should be 
expressly required to report that type of activity to upper managers, 
and ultimately, to the board of directors who represent the 
shareholders.
  After Enron, it is clear we need some hard and fast rules, and not 
just an arcane honor code rarely adhered to, so the necessary measure 
of client duty is placed into the hearts and minds of the legal 
profession. Again, I am disappointed there is a second-degree 
amendment. This is an important amendment and something that I thought 
would be cleared by both sides. We will deal with the rest of the 
process.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Akaka). The Senator from Wyoming yields 
the floor.
  The Senator from New Jersey.
  Mr. CORZINE. Mr. President, first, I am proud to have worked with 
Senator Edwards and Senator Enzi on this amendment on lawyer 
responsibility in corporate practice. It is an exceptional piece of 
additional effort in dealing with corporate fraud, corporate crime, and 
corporate abuse. I am very happy to have participated with him, and I 
particularly compliment Senator Edwards on bringing this important 
issue to the attention of the Senate and for making sure that we 
propose this strong amendment, to ensure corporate lawyers' ethical 
responsibilities.
  I, too, with the Senator from Wyoming, am disappointed. We are mixing 
apples and oranges when we are talking about lawyer's fees. This is 
dealing with corporate actions of lawyers. I don't understand why we 
are trying to move to a completely different subject when what we are 
trying to deal with is corporate responsibility. Lawyers play a role in 
that as much as accountants and management.
  Again, I thank Senator Enzi for his cooperation and leadership, not 
only on this effort but with regard to the core bill, which is going to 
make a big difference in the marketplace. People talk about weakness in 
the market and are fearful of what we do in Congress, but they are 
really fearful of what we will not do or what we might do in addressing 
some of the quite obvious needed reforms.
  We have talked a lot in the wake of Enron and WorldCom about the 
responsibility of accountants and corporate managers. Rightly so, as we 
have seen far too much bending of the rules, breaking of the rules in 
pursuit of profit, pursuit of personal gain. In their wake, 
shareholders, employees, and frankly the whole economy, has suffered 
from the selfishness that we have seen demonstrated by the actions of 
many--the criminal actions, in some instances.
  It is not insignificant that even before this week, before there was 
so much focus on this issue, this year there had been roughly $2 
trillion worth of damage, value lost in the stock market, which is 
reflective of the discomfort that investors across the globe, as well 
as here at home, feel about where we stand.
  As a former corporate leader, I tell you I am disgusted with many of 
the actions I have seen taken by some corporate managers when they 
betrayed shareholders' trust, employees' trust, and the public 
confidence in general. I think they have basically betrayed our whole 
Nation's economy. That is why I have been pleased to work on this 
critical legislation that Senator Sarbanes has proposed regarding the 
accounting industry's corporate responsibility.
  But I do not think that is enough. I think, as Senator Edwards said 
when he brought this to our attention, executives and accountants do 
not work alone. In fact, in our corporate world today--and I can verify 
this by my own experiences--executives and accountants work day to day 
with lawyers. They give them advice on almost each and every 
transaction. That means when executives and accountants have been 
engaged in wrongdoing, there have been some other folks at the scene of 
the crime--and generally they are lawyers.
  This is not a new issue. The SEC had an unambiguous view about this 
more than 10, 15 years ago. More than 10 years ago Judge Stanley 
Sporkin, while commenting on the criminal actions of Charles Keating, 
noted that Keating had:

       . . . surrounded himself with literally scores of 
     accountants and lawyers to make sure all the transactions 
     were legal.

  In a now famous refrain, Sporkin lamented:

       Where were these professionals . . . when these clearly 
     improper transactions were being consummated? . . . Where, 
     also, were the outside accountants and attorneys when these 
     transactions were being effectuated?''

  That sounds a little familiar in the current circumstance. The bottom 
line is this. Lawyers can and should play an important role in 
preventing and addressing corporate fraud. Our amendment seeks to 
ensure that. It seeks to

[[Page 12524]]

go back to the old way: When lawyers know of illegal actions by a 
corporate agent, they should be required to report the violation to the 
corporation.
  Let me be clear. The same as I feel about most accountants and most 
business leaders, the vast majority of lawyers discharge their duties 
with integrity and in an ethical manner. This is not an effort to blame 
corporate lawyers. But we cannot overlook the role corporate lawyers, 
the lowest common denominator, can play in addressing abuses and 
ensuring that our markets have integrity. We need to clarify that 
corporate lawyers have a duty to the shareholders, not just to the 
management that hired them.
  That is why Senator Edwards, Senator Enzi, and I have crafted an 
amendment that will clarify that lawyers who know of wrongdoing by a 
corporation must report that wrongdoing to the client so it can be 
corrected. The client is more than just the person who hired them. The 
lawyer's client is the corporation's shareholders, not the manager. As 
we have seen far too often this year, when management is engaged in 
fraud it harms the shareholders. That is why we need to ensure that 
lawyers who know of illegal acts report those acts to the board of 
directors which represent those shareholders. Our amendment would 
require the SEC to establish rules in the public interest and for the 
protection of investors, setting forth minimum standards of 
professional conduct for attorneys appearing and practicing before the 
Commission. Those rules would include--shall include a requirement that 
lawyers who have evidence of a violation of law would be required to go 
up the ladder of corporate management and report the violation.
  It is a simple principle--very much common sense. If a manager 
doesn't respond appropriately, including remedying any violation, the 
lawyer would then be required to report the violation to the board of 
directors which represents the shareholders.
  We should recognize that in some instances where there may be 
evidence of a violation, it may become apparent after a more complete 
investigation that there is not an actual violation. But when lawyers 
are aware of a potential violation, they do have a duty to investigate. 
And if they determine there is a material violation of law--not some 
small violation, some insignificant rule--that violation should be 
remedied by the corporation. If it is not remedied, it is the duty of 
the lawyer, under our language, to report it to the board.
  I am pleased that Senator Edwards and Senator Enzi and I have been 
able to craft an amendment that will firmly establish the ethical duty 
of corporate lawyers to report wrongdoing to their client, including, 
if necessary, to the board of directors that represents a company's 
shareholders.
  Addressing the role of corporate lawyers is just as important a step 
as it is with accountants and with corporate officers. If we want to 
truly address this breakdown in corporate responsibility, it is a 
critical piece of the puzzle that cannot be overlooked. I urge my 
colleagues to support this sensible amendment.
  Once again I say I am disappointed with the McConnell amendment. I 
suggest we move to table that, in light of its irrelevance with respect 
to the underlying matter.
  I will withdraw that motion, and I suggest the absence of a quorum.
  Mr. REID. Will the Senator withhold?
  Mr. SARBANES. Does the Senator yield the floor?
  The PRESIDING OFFICER. Does the Senator withhold suggesting the 
absence of a quorum?
  Mr. CORZINE. Yes. I yield the floor.
  The PRESIDING OFFICER. The Senator from Georgia.


                           Amendment No. 4206

  Mr. MILLER. Mr. President, I ask unanimous consent the pending 
amendments be laid aside so I may offer an amendment, and that there be 
a time limitation of 2 minutes on my amendment, with no amendments in 
order to my amendment. This amendment has been agreed to by both 
managers.
  Mr. REID. Reserving the right to object, and following the 
disposition of this that we will return to the Edwards amendment?
  The PRESIDING OFFICER. That is the understanding of the Chair. Is 
there objection? Without objection, it is so ordered.
  Mr. MILLER. I send my amendment to the desk.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Georgia (Mr. Miller) proposes an amendment 
     numbered 4206.

  Mr. MILLER. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To express the sense of the Senate that the chief executive 
   officer of a corporation should sign the corporation's income tax 
                                returns)

       At the end add the following new title:

                   TITLE VIII--CORPORATE TAX RETURNS

     SEC. 801. SENSE OF THE SENATE REGARDING THE SIGNING OF 
                   CORPORATE TAX RETURNS BY CHIEF EXECUTIVE 
                   OFFICERS.

       It is the sense of the Senate that the Federal income tax 
     return of a corporation should be signed by the chief 
     executive officer of such corporation.

  Mr. MILLER. Mr. President, this amendment is only three lines long. 
Let me read them to the Senate:

       It is the sense of the Senate that the Federal income tax 
     return of a corporation shall be signed by the chief 
     executive officer of such corporation.

  Believe it or not, that is not in the law right now, and it should 
be. The average wage earner on his 1040 form has to sign it. We require 
it of him. That is what we should require of the CEO of a corporation, 
just treat them the same.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Maryland, Senator Sarbanes.
  Mr. SARBANES. I urge the adoption of the amendment.
  The PRESIDING OFFICER. Is there further debate?
  Mr. GRAMM. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  Mr. GRAMM. Mr. President, I withdraw the request. I don't have any 
problem. It was a confusion of which amendment.
  The PRESIDING OFFICER. Without objection, the amendment is agreed to.
  The amendment (No. 4206) was agreed to.
  Mr. LEVIN. Mr. President, I move to reconsider the vote.
  Mr. REID. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. REID. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DASCHLE. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DASCHLE. Mr. President, I announce that there will be no more 
rollcall votes tonight. I hope Senators will come to the floor and 
continue to participate in the debate. But for the interest of Senators 
and schedules, we will have no additional rollcall votes tonight.
  I yield the floor, and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. SARBANES. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SARBANES. Mr. President, while we are all waiting for further 
business, I will take just a moment to speak to the amendment that has 
been offered by the very able Senator from North Carolina. In fact, I 
would like to put a couple of inquiries to the Senator, if I might.
  It is my understanding that this amendment, which places 
responsibility upon the lawyer for the corporation to report up the 
ladder, only involves going up within the corporate

[[Page 12525]]

structure. He doesn't go outside of the corporate structure. So the 
lawyer would first go to the chief legal officer, or the chief 
executive officer, and if he didn't get an appropriate response, he 
would go to the board of directors. Is that correct?
  Mr. EDWARDS. Mr. President, my response to the question is the only 
obligation that this amendment creates is the obligation to report to 
the client, which begins with the chief legal officer, and, if that is 
unsuccessful, then to the board of the corporation. There is no 
obligation to report anything outside the client--the corporation.
  Mr. SARBANES. I think that is an important point. I simply asked the 
question in order to stress the fact that that is the way this 
amendment works. This has been a very carefully worked out amendment. I 
engaged in an exchange with the distinguished Senator from North 
Carolina, and the Senator from Wyoming, Mr. Enzi, the cosponsors of 
this amendment. I know how careful they have been in trying to craft 
the amendment and in bringing it here. I think they have done an 
absolutely first-rate job in sort of focusing the amendment, 
considering questions that were raised from one source or another, and 
adjusting it in order to meet them.
  I think the amendment they have now put before us is an extremely 
well reasoned amendment, and it ought to command the support of the 
Members of this body.
  I very deeply regret that Senator McConnell has added an amendment to 
the amendment. His amendment really doesn't address this amendment. It 
doesn't really address the subject matter of this legislation. It is a 
total diversion. Of course, I presume it will complicate our ability to 
try to move ahead as we consider amendments. It obviously complicates 
the consideration of the Edwards-Enzi amendment which is now pending.
  Furthermore, I understand that under this amendment it can only be 
enforced by the SEC through an administrative proceeding. Is that 
correct?
  Mr. EDWARDS. The answer is yes. The only way to enforce this legal 
requirement is through an administrative process.
  Mr. SARBANES. That was an effort, of course, to deal with the idea 
that somehow it might bring causes of action from outside, or somewhere 
else. So it is limited to the SEC. The SEC, as I understand it, had 
something like this in place in the past. Is that correct?
  Mr. EDWARDS. The answer is yes. Years ago, the SEC had and enforced 
such a regulation, which they have not been doing for some time.
  Mr. SARBANES. I further understand that a number of professors of 
securities regulations and professional ethics are, in fact, supportive 
of this proposal. I think at an earlier time they wrote to the SEC 
urging the SEC itself to put some provision such as this into place. Is 
that correct?
  Mr. EDWARDS. The Senator is correct. There is a large group of 
distinguished securities lawyers and legal ethics lawyers who have 
written the SEC suggesting exactly what the Senator said--that it 
become part of the regulations and part of the law.
  Mr. SARBANES. This amendment really, in effect, parallels or follows 
those recommendations--at least in substantial respect--as I understand 
it.
  Mr. EDWARDS. That is correct.
  Mr. SARBANES. Again, that letter which I have had the chance to 
review, and also the signatories to it--some 40 or so distinguished 
professors of securities regulations or professors of professional 
ethics at the law schools--is also a very carefully reasoned proposal. 
The one they submitted to the SEC is the one the Senator from North 
Carolina has tracked in his amendment.
  I thank both Senator Edwards and Senator Enzi for their very careful 
work. And I very much hope at the appropriate time we will be able to 
adopt this amendment and include it in this legislation. I think it 
makes an important contribution.
  Mr. President, I yield the floor. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. LEVIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LEVIN. Mr. President, I ask unanimous consent at this time that I 
be called upon to offer an amendment; that the amendment be debated 
tonight--it is the amendment on SEC enforcement--and that when the 
debate is completed tonight and when we recess until the morning, that 
when the morning arrives, we would then return immediately to the 
Edwards underlying amendment and the McConnell second-degree amendment 
thereto.
  The reason I make this unanimous consent proposal tonight is that 
there are a lot of relevant amendments which are waiting in line, which 
are important amendments, which have a lot of support, I believe, on a 
bipartisan basis in this body that ought to be considered prior to 
cloture or else; because they may not be technically germane, they 
would be precluded if cloture is invoked.
  I have a number of amendments on the list. I think we should move 
this train forward tonight, utilize the time this evening to move this 
process forward so as many of these amendments as possible can be 
considered before cloture. I make that unanimous consent proposal at 
this time.
  The PRESIDING OFFICER. Is there objection?
  The Senator from Texas.
  Mr. GRAMM. Mr. President, reserving the right to object, let me say 
that we have a lot of people who want to offer amendments. I have on my 
side some 30 amendments. We had better follow the regular order. Let me 
say that I would intend, once we have disposed of this unanimous 
consent request, to ask that all further amendments be germane to the 
bill and that at noon tomorrow we proceed to third reading. But I 
object to the unanimous consent request.
  The PRESIDING OFFICER. Objection is heard.
  The Senator from Nevada.
  Mr. REID. Mr. President, I ask unanimous consent that at 10:30 
tomorrow morning, Thursday, July 11, the Senate resume consideration of 
S. 2673 and that the time until 12 noon be divided as follows: The 
first 45 minutes under the control of Senator Byrd; the remaining 45 
minutes under the control of Senator McConnell or his designee; that at 
12 noon Senator Enzi be recognized to make a motion to table the 
McConnell second-degree amendment No. 4200, with no intervening 
amendment in order prior to disposition of the McConnell amendment.
  That is not part of this agreement. For the information of Senators, 
we would have an hour, beginning at 9:30, for morning business for both 
sides, equally divided.
  Mr. LEVIN. Mr. President, reserving the right to object.
  Mr. GRAMM. Mr. President, I think this is a perfectly reasonable 
unanimous consent request, and I do not object.
  Mr. LEVIN. Reserving the right to object, Mr. President, I have two 
questions relative to this unanimous consent request. The first 
question is, Does this then mean we would move to the disposition of 
the Edwards amendment?
  Mr. REID. Mr. President, that is my hope. One of the reasons we want 
to dispose of the second-degree amendment--Senator Enzi, who has worked 
with you and others on the underlying amendment, is going to move to 
table. We hope we can move to the Edwards amendment.
  The Senator from Texas, Mr. Gramm, has told us he wants to study this 
tonight and he will give us word on it tomorrow. I think it has been 
debated quite sufficiently. It appears to me the Edwards amendment is 
reasonable. I think in the dialog he answered all the questions of the 
Senator from Texas. I have no problem if the Senator wants to spend the 
night looking it over more.
  Mr. LEVIN. My second question under the reservation is this: This 
does not then change the order that has been previously listed for 
amendments

[[Page 12526]]

under the earlier UC request; is that correct?
  Mr. REID. That is correct. We have a number of amendments queued up. 
Senator Edwards has been here all day, for example. The Senator from 
Michigan has been here a long time today. We hope we can move through 
some of these tomorrow.
  As the Senator knows, there is anticipation tonight that a cloture 
motion will be filed on this bill. The majority leader has told 
everyone that we have only 3 weeks remaining in this little session 
before the August recess. We would like to do prescription drugs. We 
are going to move, we hope, to the MILCON appropriations bill in the 
next day or so. We have homeland security we have to do. There is so 
much to do and a limited amount of time in which to do it.
  Mr. LEVIN. Further reserving the right to object, Mr. President, I 
will simply add the following because there are relatively few hours 
between now and a vote on cloture, assuming that cloture motion is 
filed. I think we should fully utilize that time to consider relevant 
amendments. What my great fear is--which is being reinforced tonight--
is that the time is going to be filled not by relevant amendments but 
in other ways which would preclude the consideration of relevant 
amendments in the event cloture is adopted. That is a major concern I 
have. I don't know if other people waiting in line with amendments that 
are relevant amendments have the same concern, but I hope and believe 
they do.
  I hope it will be possible for relevant amendments to be considered, 
if not tonight, then tomorrow, and that the time be fully utilized; 
otherwise, it would simply preclude important relevant amendments that 
are waiting in line.
  Mr. REID. Mr. President, the Senator also speaks for others. We have 
had, over the last several months, problems getting legislation up the 
way we used to do it here. It is difficult when we have obstacles that 
are brought up. It does not allow us to proceed in the normal fashion. 
I hope the Senator will allow the agreement to go forward.
  The PRESIDING OFFICER (Ms. Cantwell). The Senator from Texas.
  Mr. GRAMM. Madam President, I am told one of my colleagues is coming 
down to object to this unanimous consent request. I have to suggest the 
absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. Madam President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. I renew my unanimous consent request.
  The PRESIDING OFFICER. Is there objection?
  Mr. GRAMM. Madam President, the reservations of the Senator from 
Michigan have no impact on this unanimous consent request? That is a 
parliamentary inquiry. The reservations expressed by the Senator 
Michigan have no impact on the unanimous consent request as it is 
written?
  The PRESIDING OFFICER. That is correct.
  Mr. GRAMM. I have no objection.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Nevada.
  Mr. REID. Madam President, I appreciate very much the work of the 
managers of this bill. This is very important legislation. I was 
advised by the chairman of the committee just a few minutes ago the 
stock market dropped again today almost 300 points. We need to do 
something to reestablish credibility and to reestablish the confidence 
of the American people in corporate America. This legislation goes a 
long way toward that end. I hope there will be cooperation tomorrow so 
that some of these relevant amendments can be offered.
  I hope everyone understands the importance of this legislation. I am 
confident they do. I appreciate the ability to work this out so we can 
at least move forward tomorrow to the extent we do in this unanimous 
consent agreement.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Madam President, let me just outline, if I may, where I 
see we are in the process. Tonight, a cloture motion is going to be 
filed. Tomorrow we are going to have a series of amendments. As 
everybody knows, when cloture is invoked, the relevant test is 
germaneness, not relevance, not significance, not the feeling of a 
Member that their amendment is important or more important than any 
other Member. The test is germaneness.
  Anybody who has ever been involved in a situation where we move 
toward cloture understands that once we are on that track, unless 
amendments are relatively acceptable on a broad basis to all parties 
involved, knowing that the amendment is sheared off at the hour of 
cloture, that amendment in all probability--let me state it more 
precisely--that amendment is not going to be adopted.
  We can do this in one of two ways, and either way works perfectly 
with me. We can either try for the nongermane amendments--if your 
amendment is germane, you are solid, you can offer it now, you can 
offer it later, and you are going to get a vote on it. But if your 
amendment is not germane, I suggest we try to get our staffs together 
and see if something can be worked out where if part of the amendment 
or all of the amendment or the amendment and something else is 
noncontroversial, it could be adopted.
  At the end of the day, we will all be happier if we do that. If we 
spend all of tomorrow butting heads knowing what the final outcome is 
going to be, the net result is we are just going to have unhappiness 
and no good will come out of it.
  I say to anyone who has a nongermane amendment, in the end, to have 
that amendment adopted it is going to have to be generally supported 
because, obviously, any Member is going to be able to prevent it from 
being voted on. It is going to get sheared off at cloture.
  I have a list of amendments, most of which have absolutely nothing to 
do with this bill. I have amendments on bankruptcy. I have amendments 
on the Ninth Circuit Court of Appeals. I have amendments on pensions. I 
have amendments on tax policy. I have numerous amendments on stock 
options.
  I submit to all these people who want to offer amendments that what 
we ought to do if we are going to try to get something done is to have 
them have their staff sit down with staff on both sides of the aisle 
and say: Is there anything in here that might be generally agreed to, 
and if that is the case, we could move in that direction.
  Finally, let me say we have in place a unanimous consent agreement 
about how we are going to proceed tomorrow morning, and I ask the 
Democratic floor leader, if I can, given that we have a unanimous 
consent agreement in place for the morning, can we simply have the 
floor open for the purpose of debate only tonight so that those of us 
who are going to be here all day tomorrow, as we were all day today, 
can go home?
  Mr. REID. I say to my friend, there are some things we have to do, 
such as filing cloture, and if that situation of debate only is in 
effect, we could not do that.
  Mr. GRAMM. With what now?
  Mr. REID. If there is debate only, we could not file the cloture 
motion.
  Mr. GRAMM. If you can just tell us, if we can have an agreement--the 
Senator can amend it. All I am saying is, if people want to stay and 
debate any pending amendment or talk about whatever they want to talk 
about, that is fine. It seems to me if we are through with all of our 
business except debate, we could let people who have debated enough go 
home.
  Mr. REID. The leader has stated there will be no more rollcall votes 
tonight. I hope if one wants to talk about the bill, they will do that, 
but I do not think we need a UC to accomplish that.
  Mr. GRAMM. If the Senator will yield, what about a unanimous consent 
request, except to file a cloture motion, that there will be debate 
only tonight? That way we do not have a problem of potentially someone 
asking unanimous consent for something.

[[Page 12527]]


  Mr. REID. My personal feeling is I have no problem with that. I have 
to check with staff to make sure I am not missing anything, but I want 
to make sure the Senator from North Carolina is protected.
  Mr. EDWARDS. Will the Senator from Texas yield, if he has the floor?
  Mr. GRAMM. If I do I yield to him.
  The PRESIDING OFFICER. The Senator from North Carolina.


                    Amendment No. 4187, As Modified

  Mr. EDWARDS. Madam President, I have a modification to my amendment 
at the desk.
  The PRESIDING OFFICER. The amendment is so modified.
  The amendment, as modified, is as follows:

       On page 108, line 15, insert before the end quotation marks 
     the following:
       ``(c) Rules of Professional Responsibility for Attorneys.--
     Not later than 180 days after the date of enactment of this 
     section, the Commission shall establish rules, in the public 
     interest and for the protection of investors, setting forth 
     minimum standards of professional conduct for attorneys 
     appearing and practicing before the Commission in any way in 
     the representation of public companies, including a rule 
     requiring an attorney to report evidence of a material 
     violation of securities law or breach of fiduciary duty or 
     similar violation by the company or any agent thereof to the 
     chief legal counsel or the chief executive officer of the 
     company (or the equivalent thereof) and, if the counsel or 
     officer does not appropriately respond to the evidence 
     (adopting, as necessary, appropriate remedial measures or 
     sanctions with respect to the violation), requiring the 
     attorney to report the evidence to the audit committee of the 
     board of directors or to another committee of the board of 
     directors comprised solely of directors not employed directly 
     or indirectly by the company, or to the board of directors.

  Mr. EDWARDS. I yield the floor.
  The PRESIDING OFFICER. The Senator from Nevada.


                             Cloture Motion

  Mr. REID. Madam President, I send a cloture motion to the desk.
  The PRESIDING OFFICER. The cloture motion having been presented under 
rule XXII, the Chair directs the clerk to read the motion.
  The assistant legislative clerk read as follows:

                             Cloture Motion

       We, the undersigned Senators, in accordance with the 
     provisions of rule XXII of the Standing Rules of the Senate, 
     do hereby move to bring to a close the debate on Calendar No. 
     442, S. 2673, the Public Company Accounting Reform and 
     Investor Protection Act of 2002:
         Jon Corzine, Deborah Stabenow, Paul Wellstone, Ron Wyden, 
           Daniel Akaka, Barbara Boxer, Charles Schumer, Byron 
           Dorgan, Harry Reid, Paul Sarbanes, Daniel Inouye, John 
           Edwards, Barbara Mikulski, Thomas Carper, Jack Reed, 
           Tim Johnson.

  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Madam President, before the Senator from Texas departs, 
I wish to add an observation to the comments he made before about how 
to proceed.
  There are a number of amendments. The definition of germaneness, once 
cloture has been invoked, is very narrow. There are amendments that 
Members have which in the normal terminology would be regarded as 
germane and are certainly relevant. It seems to me an effort should be 
made to address those amendments as well as ones that are perceived to 
be germane in the very narrow sense.
  There is another category of amendments that I am not very 
sympathetic to, and those are ones that have really nothing to do with 
this bill. The second-degree amendment offered by the Senator from 
Kentucky that is now pending, in my judgment, is an example of that. We 
probably ought to move very quickly to table those kinds of amendments 
when they come up so we have an opportunity for colleagues who have 
amendments that are really relevant to this legislation to bring them 
up and to have them considered.
  Mr. GRAMM. Will the Senator yield?
  Mr. SARBANES. Yes.
  Mr. GRAMM. I think we have a fairly broad consensus that is the 
direction in which we should go. The fact that we are getting ready to 
have cloture should not prevent us from adopting amendments where there 
is support and where there is a collective judgment that the amendment 
is relevant. The plain truth is that anyone knowing that cloture was 
coming could have held up the President's amendment which added 
criminal sanctions. Any Member of the Senate could have prevented that 
from being voted on knowing that it was nongermane, but nobody did that 
because there was a general base of support for it.
  All I was saying was that every Member of the Senate knows the 
germaneness rule and everybody knows that, come whenever we invoke 
cloture, any amendment that is nongermane is going to fall. Then what 
is going to happen is, unless there is some consensus for the 
amendment, it is simply going to be delayed until it is cut off.
  If what the Senator is saying is that if an amendment is relevant, if 
it would improve the bill, if it is not highly controversial, we ought 
to take it, I agree with that. Looking down my amendment list, there 
are not a lot of such amendments, but the ones that are there, if 
people want to bring them up, I am not going to oppose an amendment 
simply because it is not germane.
  Mr. SARBANES. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Madam President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Madam President, I ask unanimous consent that the 
previously agreed to Daschle for Biden amendment, No. 4186, as 
modified, be inserted in the appropriate place in the bill.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________