- The Washington Times - Wednesday, April 21, 2010

ANALYSIS/OPINION:

Today’s House Energy and Commerce Committee hearings on companies’ accounting disclosures in the wake of the new health care law should raise concerns with all Americans. Whatever one’s position on the health law, these hearings represent a significant threat to our freedom of speech.

Briefly stated, the new law eliminates a tax subsidy provided to many companies for retiree prescription drug coverage. Corporate giants such as AT&T and Deere & Co. have felt it necessary to take an income statement charge to reflect higher taxes and its impact on net income. Rep. Henry A. Waxman, California Democrat, and others connected with the administration, such as Commerce Secretary Gary Locke, have expressed objections to such charges on the theory that the law ultimately will reduce health care costs. Mr. Waxman stated, “These assertions appear to conflict with independent analyses, which show that the new law will expand coverage and bring down costs.” While this is irrelevant at the level of the individual firm, which must account for its own situation without regard for macroeconomic effects, there is nothing wrong with the exchange of views.

The problem is that it appears that Mr. Waxman and his cohorts are trying to stifle any public declarations or actions inconsistent with their health care views by forcing executives to appear under oath. Forcing someone to defend his statements or actions under penalty of perjury is a major disincentive for that person to speak the next time. Even honest people are loath to run the risk of a perjury prosecution stemming from a bona fide mistake or difference of opinion. It is safer to remain silent and avoid controversy than to incur the wrath of government. This effort to use the full machinery of government to influence positions taken by private actors is the sort of thing that has been seen far too much in today’s Russia and the former Soviet Union, where out-of-favor oligarchs are dragged before kangaroo courts on dubious tax charges.

Perhaps all of this would make sense if it resulted from a belief that the charges themselves were unjustified and injurious to investors. If there is a problem with the charges, it is one of accounting or investor protection. However, no one speaking in opposition to these charges, such as Mr. Waxman or Mr. Locke, has even addressed their necessity under applicable accounting standards or securities laws, which should be the principal points of reference. The Securities and Exchange Commission (SEC) has not addressed the matter from an investor-protection standpoint or otherwise. Interestingly, SEC Chairman Mary L. Schapiro is urging companies to account for the effects of climate change and mitigation efforts on their businesses and make such discussion legally required. It appears that the differing approaches to essentially the same issue result solely from differing political perspectives and not from good-faith application of law.

Obviously, it is impossible and undesirable to have every public-company accounting decision scrutinized by a congressional committee. Singling out decisions of this nature sends a powerful message.

What we have are politicians apparently seeking to intimidate executives simply because they have done something that is inconsistent with positions favored by the politicians. Left unchecked, this erodes our freedom of speech and strikes at the heart of our most basic freedoms - namely, the right to criticize the government or even be seen to criticize the government.

Whatever one thinks about the health law, ending the tax subsidies or the accuracy of this accounting is beside the point. It is essential that we speak out in favor of free speech and against efforts to intimidate those who exercise their rights.

Marty Robins is a corporate attorney and adjunct law professor at Northwestern and DePaul Universities’ law schools.

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