- The Washington Times - Thursday, April 25, 2002

The House voted yesterday in favor of Enron-inspired legislation requiring corporations to tell the truth to investors and putting a tighter rein on the accounting industry.
The bill, passed on a 334-90 vote, fulfills part of President Bush's plan for curbing the deceptive behavior of executives and auditors that led Enron Corp. to hide billions of dollars in losses and debts from investors and that precipitated the company's demise last year. But it lacks some of the enforcement teeth sought by the White House.
Mr. Bush commended the House for quickly passing the bill but hinted that he looks forward to signing a stronger measure, which is almost certain to emerge from the Democratic-led Senate.
"With 80 million Americans participating as shareholders of companies, we must ensure high standards, tough disclosure requirements and accurate information," he said.
House Democrats capitalized on the bill's lack of penalties for executives who falsify financial statements and drafted an alternative bill with several measures Mr. Bush had sought.
Three of those would have required chief executives to personally certify the accuracy of financial statements while allowing the Securities and Exchange Commission to disgorge executive stock bonuses and bar executives from serving as officers or board members of other public corporations if found guilty of fraud.
Broad support for such tougher sanctions led to a narrow 219-202 defeat of the Democratic alternative. But 87 Democrats said the Republican version of the bill was enough of an improvement to pass it on to the Senate.
"It starts us in the right direction," said Rep. Ken Bentsen, Texas Democrat. "It puts Congress on record that we will not tolerate abuses in the public market and also puts the regulators on notice."
The bill gives the SEC increased funding and a clear mandate to pursue accounting fraud through the creation of a new private regulatory board to oversee and discipline the accounting profession.
"Congress should act again" if the SEC fails to curb abuses with these added powers, he said.
House Financial Services Committee Chairman Michael G. Oxley said he crafted the Republican bill to directly address problems raised by the fall of Enron and Global Crossing without "going to an extreme and damaging the capital markets."
The Enron debacle "shocked" the economy and has caused a widespread loss of investor confidence, making it imperative for Congress to bolster the efforts of the SEC and Justice Department to prosecute wrongdoers, the Ohio Republican said.
In a Houston trial due to start May 6, Justice is prosecuting Enron's long-time auditor, Arthur Andersen LLP, for obstruction of justice because it destroyed some Enron audit documents last fall after learning the SEC had started an inquiry.
The case, which has led to an exodus of Andersen clients that many say will drive the auditor out of business, has been a showcase of the government's existing powers to prosecute securities fraud. Justice is trying to get Andersen to settle the obstruction charge and cooperate in going after Enron.
But many Democrats complained that the Republican bill, by merely requiring more disclosure of corporate financing tactics and ratifying the SEC's plans to set up the independent accountant regulator, does not go far enough.
"Millions of working Americans have been robbed by earnings manipulation, deceptive accounting and hyped securities analyst reports," said Rep. John J. LaFalce, author of the defeated Democratic alternative, pointing out the weak spots in the Republican measure.
"The bill before us is a cosmetic, a press release," enabling legislators to make a hollow claim that they took action to help investors and company employees who lost billions of dollars, said Mr. LaFalce, New York Democrat. "It's only a matter of time before the next Enron or Global Crossing occurs, and today's bill does nothing about it."
One Democratic amendment requiring that one of the five new regulatory board members not be from the accounting profession was added to the bill. The Democratic alternative would have required two worker and pension plan representatives on the board.
The Republican bill parrots reforms announced earlier this year by Mr. Bush and SEC Chairman Harvey L. Pitt, many of which can be carried out without legislation. The current industry-dominated regulatory structure has been widely criticized as weak in ways that led to the Enron abuses.
Despite disagreements between Republicans and Democrats over how aggressively to pursue corporate fraud, the debate yesterday lacked much of the partisan posturing seen elsewhere as the parties angle for control of the House in the fall elections.
"There's bipartisan agreement that this was a business failure, not a political failure," said Rep. David Dreier, California Republican. "Democrats and Republicans have come together to deal with this and provide a level of confidence to the investor class."

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