[Congressional Record (Bound Edition), Volume 148 (2002), Part 9]
[House]
[Page 12796]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            CORPORATE CRIME

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from California (Mr. Sherman) is recognized for 5 minutes.
  Mr. SHERMAN. Mr. Speaker, this has been a week of disappointment. In 
the effort to combat corporate crime, we heard from the President 
something that was more of a pep talk than a policy pronouncement. He 
called upon us to reenact all the laws and regulations we already have 
and to say this time we really mean it.
  Let us face it. The biggest reason for crime is that under certain 
circumstances crime pays, and the biggest reason why circumstances 
arise in which people conclude that crime pays is inadequate law 
enforcement. That is true with grand theft auto. It is true with 
corporate grand theft. And unfortunately the other party for the last 6 
years has been working to undermine the enforcement at the SEC. As 
David Ruder, a former Republican head of the SEC, said in 1995, the 
Republican Congress is dealing with the SEC as though it were the enemy 
instead of the policeman on the beat.
  Earlier this year, the President put forward a budget to this 
Congress which cut the SEC budget in real terms, allowed no increase 
for inflation, and cut the enforcement budget. This spring, I proposed 
to the Committee on Financial Services an increase in the authorization 
of the SEC of $120 million to focus enforcement on the financial 
statements filed by the thousand largest companies in America. Every 
Republican on our committee voted no, every Democrat voted yes, the 
amendment went down.
  It is time for us, if we are serious about dealing with securities 
crime, to fund the SEC. But it is time for us to do more as well. The 
bill passed by the Senate, the other body, is a good first step, but I 
hope in conference, or perhaps in a second bill, that we go beyond 
that.
  There are a whole host of ideas that we ought to include. We ought to 
explore the idea of having our thousand largest companies audited every 
6 months instead of every year. We have been auditing every 12 months 
since the 1933 act. Certainly the speed by which decisions are made, 
the speed at which stocks are bought and sold, is far more than twice 
as fast as it was in 1933. And if WorldCom is going to try to misstate 
its income for five quarters, it is better that they are caught after 
two quarters than after four quarters, assuming the audit is competent. 
And I will get to that in a second.
  In addition, the Federal Government ought to certify some stock 
analysts as being genuinely independent. And to be independent, under 
this standard, it is not enough that the particular analyst does not 
get direct cash from the issuer, but rather that the employer of the 
analyst do no underwriting, consulting or in any other way receive 
money from the very companies that are being analyzed.
  Now, some may accept a lower standard, and they are welcome to, but 
to be certified as independent, I would expect an analyst to be loyal 
to his or her employer. And, therefore, it would be good to have 
analysts who are employed by those who are not getting money from the 
very companies that are being analyzed.
  Mr. Speaker, the Chair of the Committee on Energy and Commerce, the 
gentleman from Louisiana (Mr. Tauzin), was on the morning shows this 
past Sunday indicating that Arthur Andersen had a peculiar problem that 
has led to a great overrepresentation of Arthur Andersen among the 
problem audits. He indicated that the structure of that firm was such 
so that the engagement partner, the salesman partner, had total power, 
and the technical review partners were not necessarily even consulted 
before the audit was concluded.
  I had put forward to our committee back in April a requirement that 
accounting firms dealing with publicly traded companies avoid that 
Arthur Andersen structure and use a structure that almost all of them 
have always used, and that is that the technical review partners who 
are insulated from the client make the final determination. 
Unfortunately, even while the Republican Chair of the Committee on 
Energy and Commerce is saying this is the problem, the Republicans on 
our committee are voting against a solution.
  It is time that we go beyond rhetoric and adopt legislation. We have 
a long way to go in restoring confidence to our capital markets.

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