Senate OKs Sweeping Corporate Reform
The Senate has unanimously approved a bill that calls for sweeping changes in corporate accountability, creating stiff penalties and jail terms for company fraud and tightening oversight of the accounting industry.
The vote Monday was 97-0 for the bipartisan bill, lifted by a rising tide of unease over a string of corporate accounting scandals that have shattered Americans' confidence in business and the markets and threatened the fragile economic recovery.
"It is high time we call corporate executives on the carpet and hold them responsible," Georgia Senator Max Cleland declared on the Senate floor before the vote.
Iowa Senator Charles Grassley denounced "the crooks running these corporations."
Sponsored by Maryland Democrat Sen. Paul Sarbanes, the bill includes a new oversight board for the accounting industry and restricts the consulting services that accounting firms can offer to their audit clients.
The measure also creates a new felony of securities fraud, with a 10-year jail term; doubles jail time for wire and mail fraud; and requires corporate officers to certify that their financial statements are accurate.
The bill must still be reconciled with a more modest corporate reform measure that has already passed the House before it can be sent to President Bush for signing into law.
As the Senate neared passage of the legislation after nearly a week of debate and votes on amendments, President George W. Bush told business leaders, "We intend to hold people accountable."
"We can't pass a law that says, `You will be honest,"' the president said in a speech at the University of Alabama at Birmingham. "We can pass laws that say, `If you're not honest we'll get you."'
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.
In a show of bipartisanship, a spokesman for House Speaker Dennis Hastert, a Republican, said lawmakers would try to begin Tuesday resolving differences between the bill in the Democratic-controlled Senate and the one passed in the GOP-led House in April. The House measure is widely considered weaker, because it lacks penalties for corporate fraud and does not go as far toward reining in accountants.
"That's something that we're going to try to aim for," said Hastert spokesman John Feehery.
Senate Majority Leader Tom Daschle went further, asking Republican leader Senator Trent Lott to join him in a request to Hastert for the House to vote on the newly passed Senate measure.
In rare shows of unanimity, senators voted last week to add 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 to 10 years and fines of $500,000 to $1 million.
In his Birmingham address, Bush coupled an upbeat assessment of the economy with a warning to corporate leaders to "behave responsibly," an attempt to restore investor confidence in the wake of a wave of business scandals.
Despite the attempt, the markets dropped even further after his remarks. The Dow Jones industrials were down about 400 points in early-afternoon trading but rallied late in the session to close down 45 points.