- July 24 - "U.S. PIRG cannot believe that the conferees have chosen to make
deals behind closed doors. The only deal you should cut is to pass a strong bill
that's a good deal for consumers and investors. The final bill should prevent
cheating, punish criminals and protect small investors.
At a minimum, the final package should be the Senate-passed Sarbanes-Leahy
bill. We can give the conference a passing grade if it rejects all the Oxley-Gramm/accounting
industry weakening amendments. The Senate bill includes critical provisions that
cannot be deleted or gutted. We should lengthen the statute of limitations to
protect victims. We should protect corporate whistleblowers. We should make corporate
boards and CEOs accountable.
Ideally, the conferees will strengthen the Senate-passed bill. That would be
the best deal for consumers and small investors. We doubt they can do so behind
closed doors, but here's what they should do:
* First, strengthen the
auditor independence requirements and toughen the oversight board.
* Second, add two amendments that weren't even considered on the Senate floor.
* (1) Add the Levin-McCain amendment to require proper expensing of stock options.
* (2) Add the Shelby-LaFalce amendment to restore aiding and abetting liability
to lawyers, accountants and investment bankers and others who act as accomplices
to corporate crooks.
We are pleased to join Reps.
Gephardt and LaFalce today. We especially want to commend Mr. LaFalce for his
longtime leadership on behalf of consumers. Thank you for the opportunity to be
U.S. PIRG is the national
lobbying office for the state Public Interest Research Groups. State PIRGs are
non-profit, non-partisan public interest advocacy groups. For a summary of all
press statements and releases by public interest groups on accounting and corporate
reform, see the state PIRG corporate reform pages at http://enronwatchdog.org/newsroom/index.html
** Consumer Federation
of America ** U.S. PIRG **
Consumer and Investor Report
Card for Grading the Accounting and Corporate Reform Bill Conference Committee
The two-part test of a final
Accounting and Corporate Reform Bill is simple: First, is it strong enough to
deter accounting fraud and corporate misconduct to guarantee that the markets
pick winners, not cheaters? Second, when that system of safeguards fails, will
the new law help preserve evidence, punish criminals and protect victims?
A. PASS/FAIL (Minimum Standard
To Pass): Did the conference adopt and pass the Senate-passed Sarbanes-Leahy bill
with no weakening amendments? Did the conference reject the Oxley-Gramm/accountant-proposed
· Eviscerate reforms that would make audits more accurate and independent;
· Gut the standard-setting and enforcement powers of the new auditor oversight
· Shield dishonest auditors from accountability to their victims, by, among
other things, eliminating the lengthened statute of limitations for securities
· Eliminate the strong whistleblower and anti-shredding protections in
QUESTION A: Worth 60 Points,
Anything Less is a Failing Grade. (See consumer/public interest group letter of
22 July 2002 for detailed analysis of the gutting amendment package).
B. Additional Questions
(4 X 10 Points Each): Did the conference improve the Senate bill to restore provisions
deleted in committee or add provisions not considered on the floor?
(1) Improve Auditor Independence
by strengthening the ban on non-audit services and requiring periodic rotation
of audit firms, thus minimizing their financial incentives to turn a blind eye
to accounting irregularities.
(2) Strengthen the Oversight
Board by requiring a super-majority of public members subject to meaningful independence
requirements, thus helping protect it from capture by the industry, and by improving
the transparency of disciplinary proceedings.
(3) Restore Aiding And Abetting
Liability (Shelby/LaFalce). Enron's auditors, Arthur Andersen, and its lawyers,
Vinson & Elkins, are arguing to courts that they cannot be sued in shareholder
lawsuits since they only "aided and abetted" Enron's fraud and are not
primary perpetrators. To ensure victims of fraud can recover their losses, the
law must overturn the Supreme Court's 1994 Central Bank decision.
(4) Require the Expensing
of Stock Options (Levin-McCain). Congress should eliminate the perverse incentives
our accounting rules provide to offer incentive compensation in the form of stock
options rather than grants of company shares, which would more closely align executives'
interests with those of average shareholders.
EXTRA CREDIT: Add Baker
Provision To Return Investor Funds. Use funds from fines and disgorgement of ill-gotten
gains to provide restitution to investors who have lost money in the markets as
a result of corporate malfeasance.