House Gets Tough On Business Fraud

Jumping on the Senate bandwagon, the House reversed itself Tuesday and speedily approved new criminal penalties for corporate fraud in an attempt to shore up investor confidence and calm uneasy markets.

The House measure was approved 391-28.

House Republicans were embarrassed by the weakness of their accounting reform bill after the Senate unanimously passed a tougher bill Monday night, reports CBS News Correspondent Bob Fuss.

The legislation to create stiff penalties and jail terms for executives who deceive investors was adopted by a unified Senate on Monday but rebuffed by the Republican-led House in April when it passed a bill to tighten oversight of the accounting industry.

Some differences between the two bills still have to worked out in a House-Senate conference before a final version can be sent to the White House for the president's signature.

"This is a tough bill that cracks down on the corporate crooks," Rep. James Sensenbrenner, R-Wis., chairman of the House Judiciary Committee, said in floor debate.

The House measure would create criminal penalties for company officials who retaliate against whistle-blowers, while the Senate measure provides only civil penalties.

Democrats accused GOP leaders of reversing themselves only because Americans' confidence in business and the markets has become badly shaken and the issue of corporate accountability is resonating in this congressional election year.

"A deathbed conversion" was Rep. John LaFalce, D-N.Y.'s description of the Republican move.

Rep. Maxine Waters, D-Calif., told the Republicans: "You're trying to jump on the bandwagon at the last minute when you should have been there a long time ago."

Democrats said the House bill fell short. They objected to it being rushed through to passage without giving them the chance to propose amendments.

Federal Reserve Chairman Alan Greenspan told Congress on Tuesday that the criminal penalties included in the Senate measure are "the most important part of the bill."

Galvanized by the need to shore up investor confidence, lawmakers have put the legislation on a fast track.

Without dissent, the Senate on Monday passed the most sweeping changes in corporate accountability since the Depression. The vote was 97-0 for the bipartisan bill, lifted by a rising tide of unease over a string of corporate accounting scandals that have shaken Americans' confidence in business and the markets and threatened the fragile economic recovery.

Greenspan told Congress Tuesday the economy is on the road to full recovery but will keep feeling the effects of last year's recession. Corporate executives should be held accountable to accurately state the financial condition of their companies, he said.

"The effects of the recent difficulties will linger for a bit longer but as they wear off, and absent significant further adverse shocks, the U.S. economy is poised to resume a pattern of sustainable growth," Greenspan told the Senate Banking Committee.

After the Senate vote Monday night, President Bush said, "I am pleased the Senate has now acted on a tough bill that shares my goals. ... We owe it to America's workers and shareholders to crack down on wrongdoing and fix the system to prevent future abuses."

Mr. Bush urged Congress to get him a bill to sign before adjourning for its summer recess. Congressional leaders indicated they would try to do that.

"The president thinks they both passed tough bills and the bill that he's going to sign is going to be a tough bill and he's going to work with the House and Senate to bring both sides together to get it done," White House spokesman Ari Fleischer said Tuesday.

A spokesman for House Speaker Dennis Hastert, R-Ill., said lawmakers would try on Tuesday to take initial procedural steps toward resolving differences between the bill passed by the Democratic-controlled Senate and a version passed in April by the GOP-led House. The House measure is widely considered weaker.

One Republican aide, who spoke on condition of anonymity, said GOP leaders still held out hope that a final compromise with the Senate could be reached by the end of next week on overall legislation to crack down on corporate wrongdoing. Passage of a separate bill to mete out stronger penalties could give GOP lawmakers a campaign asset when they return home for the monthlong summer break beginning July 26.

Mr. Bush and the Republicans have been on the defensive as Democrats have made corporate accountability a political issue in this congressional election year. Fleischer said Monday, "The closer it gets to the election, it's going to be expected that some people are going to engage in statements that are political in nature."

The Senate bill contains a series of new penalties, including 10-year prison terms for securities fraud. Chief executive officers and chief financial officers who certified false company financial reports would be slapped with prison terms of five years to 10 years and fines of $500,000 to $1 million.

The measure drew praise from groups as diverse as the Business Roundtable, representing CEOs of major corporations, and the Consumer Federation of America although it said the bill didn't go far enough.