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JULY 24, 2002
12:02 PM
CONTACT:  US Public Interest Research Group
Ed Mierzwinski, 202-546-9707,,
U.S. PIRG Consumer Program Director on Accounting and Corporate Reform Bill
Accounting and Corporate Reform Bill News Conference 24 July 2002
Cannon House Office Building Terrace
WASHINGTON - 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 here today."

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

** Consumer Federation of America ** U.S. PIRG **

Consumer and Investor Report Card for Grading the Accounting and Corporate Reform Bill Conference Committee Report

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 package to:
· Eviscerate reforms that would make audits more accurate and independent;
· Gut the standard-setting and enforcement powers of the new auditor oversight board;
· Shield dishonest auditors from accountability to their victims, by, among other things, eliminating the lengthened statute of limitations for securities fraud; and
· Eliminate the strong whistleblower and anti-shredding protections in the
Senate bill?

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.


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