Corporate Fraud Bill Sent To President

After approving corporate reform legislation Thursday that sharply increases penalties for fraud and beefs up oversight of accountants, Congress sent the bill to President Bush who has said he will sign it into law.

Final action came as the Senate voted overwhelmingly for the measure, following a similarly strong House vote earlier in the day.

The bill creates a new oversight board for the accounting industry, until now a largely self-regulated profession that has been implicated in a series of corporate collapses ranging from Enron Corp. to WorldCom Inc.

Maximum jail time for executives who commit mail or wire fraud is quadrupled to 20 years under the bill, which also creates a new crime of securities fraud with a maximum sentence of 25 years.

Mike Enzi, R-Wyo., a former accountant, called the legislation "earthshaking," adding that it was approved with "tremendous speed."

In the compromise measure, House Republicans accepted most of the stricter parts of a bill that the Democratic-controlled Senate passed unanimously last week.

The House approved the measure 423-3 and the Senate 99-0.

"Today's message from Congress to CEOs and corporate boardrooms is clear," said House Speaker Dennis Hastert, R-Ill.: "If you steal, cheat or commit some other white-collar crime, you'll face the same consequences as lawbreaking street thugs by spending time behind bars."

The sweeping changes are "a major step forward in reforming the operations of our financial market," said Rep. John LaFalce of New York, senior Democrat on the House Financial Services Committee. "It is my hope that this legislation will help to restore the reputation of American business."

Lawmakers in both parties were seeking to rebuild Americans' shattered confidence in business and the market, mindful that they must face voters in November.

The House vote drew quick praise from Mr. Bush.

"This legislation will protect investors, crack down on fraud and wrongdoing, and provide tough oversight of the accounting industry," Mr. Bush said in a statement. "Leaders in Congress heeded the call to put the interest of investors and employees first."

At the same time, Mr. Bush said, his administration is getting tough and "will haul in and prosecute any CEO who breaks the law."

On Wednesday, news that a House-Senate compromise agreement was near and that executives of bankrupt Adelphia Communications were arrested for alleged financial fraud fueled Wall Street's second largest point gain ever after nine weeks of punishing losses. The Dow Jones industrials climbed more than 480 points and crossed back over the 8,000 mark.

But attempts to extend the rally failed Thursday amid concern about a slump in the semiconductor industry and word of yet another accounting investigation, this time at AOL Time Warner.

With congressional elections looming, Republicans gave ground, aware that a string of corporate accounting scandals has unnerved investors and the stock market, hitting Americans' retirement savings hard.

GOP Sen. Phil Gramm of Texas, the sole dissenter among the House and Senate negotiators, acknowledged, "In the environment that we're in, virtually anything could have passed the Congress."

The measure imposes restrictions on accounting firms doing consulting for corporations whose books they audit. It prohibits personal loans from companies to their top officials and directors. And it orders new rules for financial analysts designed to prevent conflicts of interest.

In addition, the bill extends the time in which defrauded investors may bring lawsuits against companies - a hard pill to swallow for Republican lawmakers who acted several years ago to stem what they maintained was a spate of frivolous shareholder suits.

Senate Democrats agreed to the House version's longer prison terms and bigger fines for fraud and shredding documents.

The negotiators agreed to include a GOP-pushed plan to create a federal account for defrauded investors that would take in all the civil fines, payments and assets from corporate wrongdoers.

Only three House members, all Republicans, voted against the legislation Thursday: Reps. Michael Collins of Georgia, Jeff Flake of Arizona and Ron Paul of Texas.