S7350 CONGRESSIONAL RECORD — SENATE July 25, 2002 under the 180-day marketing exclu- Transparency Act of 2002, and that it Mr. DURBIN. Madam President, I sivity provision. Before we change the be considered under the following limi- move to reconsider the vote. law, let us have a serious re-examina- tations: That there be a time limita- Mr. REID. I move to lay that motion tion of whether to retain the 180-day tion of 2 hours equally divided and con- on the table. marketing exclusivity in its current trolled between the chair and ranking The motion to lay on the table was form both in terms of the length of the member of the committee or their des- agreed to. exclusivity period and whether the re- ignees; that upon the use or yielding The PRESIDING OFFICER. Under wards for successful invalidity and back of time, without further inter- the previous order, the Senate insists non-infringement challenges should be vening action or debate, the Senate on its amendments and requests a con- treated identically. proceed to vote on adoption of the con- ference with the House on the dis- I urge my colleagues, as well as con- ference report. agreeing votes of the two Houses. sumer organizations and pharma- The PRESIDING OFFICER. Is there The PRESIDING OFFICER appointed ceutical purchasers such as insurers objection? Mr. DURBIN, Mr. JOHNSON, Mr. REED of and self-insured businesses to reflect Without objection, it is so ordered. Rhode Island, Mr. BYRD, Mr. BENNETT, Mr. STEVENS, and Mr. COCHRAN con- upon what I have said on this subject f today. ferees on the part of the Senate. This is an area in which I think we LEGISLATIVE BRANCH APPRO- f PRIATIONS ACT, 2003—Resumed would be wise to reject Senator SCHU- GREATER ACCESS TO AFFORD- MER’s argument that all we are doing The PRESIDING OFFICER. Under ABLE PHARMACEUTICALS ACT with this legislation is restoring the the previous order, the Senate will pro- OF 2001—Continued integrity of the old Hatch-Waxman ceed to vote on H.R. 5121, the Legisla- The PRESIDING OFFICER. Under Act. But why should we be governed by tive Branch Appropriations Act. the previous order, the Senate will re- the world of 1984 when, for example, Mr. REID. Mr. President, I ask for sume consideration of S. 812. The the best selling drugs in this country the yeas and nays on the legislative Rockefeller amendment No. 4316 is have increased sales by a factor of 10? branch appropriations bill. agreed to, and the motion to reconsider Why should the value of the marketing The PRESIDING OFFICER. Is there a that vote is laid on the table. exclusivity reward increase in direct sufficient second? proportion? The amendment (No. 4316) was agreed There is a sufficient second. to. On a number of occasions, I have The question is on agreeing to the commended Senator SCHUMER and Sen- conference report. The clerk will call f ator MCCAIN for moving their legisla- the roll. SARBANES-OXLEY ACT OF 2002— tion forward, even if the bill that came The legislative clerk called the roll. CONFERENCE REPORT out of the HELP Committee does not Mr. NICKLES. I announce that the The PRESIDING OFFICER. Under resemble very closely their bill, and I Senator from North Carolina (Mr. the previous order, the Senate will pro- still have problems with the floor vehi- HELMS) is necessarily absent. ceed to the consideration of the con- cle as I have laid out in some detail. I The PRESIDING OFFICER (Mrs. ference report to acompany H.R. 3763, commend them again today. CARNAHAN). Are there any other Sen- which the clerk will report. I hope to return to the floor before ators in the Chamber desiring to vote? The legislative clerk read as follows: this debate ends to offer a few sugges- The result was announced—yeas 85, The committee of conference on the dis- tions for a more comprehensive ap- nays 14, as follows: agreeing votes of the two Houses on the proach to reforming the Drug Price [Rollcall Vote No. 191 Leg.] amendment of the Senate to the bill (H.R. Competition and Patent Term Restora- YEAS —- 85 3763), to protect investors by improving the tion Act. accuracy and reliability of corporate disclo- This in no way minimizes the impor- Akaka Durbin McConnell sures made pursuant to the securities laws, Allen Edwards Mikulski and for other purposes, having met, have tance of he matters that are the sub- Baucus Feingold Miller ject of the pending legislation, because Bennett Feinstein Murkowski agreed that the House recede from its dis- they are important areas. I do not be- Biden Frist Murray agreement to the amendment of the Senate, Bingaman Graham Nelson (FL) and agree to the same with an amendment, lieve, however, that these are the most Bond Grassley and the Senate agree to the same, signed by important issues we can address. Nelson (NE) Boxer Gregg Nickles a majority of the conferees on the part of Breaux Hagel Rather than focusing on how best to Reed both Houses. Burns Harkin bring the law back to the old days of Reid Byrd Hatch The PRESIDING OFFICER. The Sen- 1984, as Senator SCHUMER suggests, I Campbell Hollings Rockefeller ate will proceed to the consideration of want to discuss ways to modify the law Cantwell Hutchinson Santorum Sarbanes the conference report. to help usher in a new era of drug dis- Carnahan Hutchison (The report is printed in the House Carper Inouye Schumer covery while, at the same time, in- Chafee Jeffords Sessions proceedings of the RECORD of July 24, creasing patient access to the latest Cleland Johnson Shelby 2002.) medicines. Clinton Kennedy Smith (OR) The PRESIDING OFFICER. The Sen- Mr. President, I yield the floor. Cochran Kerry Snowe ator from Nevada is recognized. Collins Kohl Specter f Corzine Kyl Stabenow Mr. REID. Madam President, I sug- Craig Landrieu gest the absence of a quorum and ask ORDER OF PROCEDURE Stevens Crapo Leahy Thompson that the time not be charged against Mr. REID. Mr. President, I ask unan- Daschle Levin Thurmond Dayton Lieberman either manager. imous consent that following disposi- Torricelli The PRESIDING OFFICER. Without DeWine Lincoln Warner tion of H.R. 5121, the legislative branch Dodd Lott Wellstone objection, it is so ordered. The clerk Domenici Lugar appropriations bill, Rockefeller amend- Wyden will call the roll. ment No. 4316 be agreed to, and the mo- Dorgan McCain The legislative clerk proceeded to tion to reconsider be laid on the table. NAYS —- 14 call the roll. The PRESIDING OFFICER. Is there Allard Ensign Roberts Mr. SARBANES. Madam President, I objection? Bayh Enzi Smith (NH) ask unanimous consent that the order Without objection, it is so ordered. Brownback Fitzgerald Thomas Bunning Gramm Voinovich for the quorum call be rescinded. Mr. REID. Mr. President, I ask unan- Conrad Inhofe The PRESIDING OFFICER. Without imous consent that immediately fol- objection, it is so ordered. NOT VOTING—1 lowing action on adoption of the Mr. SARBANES. Madam President, Rockefeller amendment, the Senate Helms parliamentary inquiry of the Chair: proceed to the consideration of the The bill (H.R. 5121) was passed, as fol- What is pending before the Senate? conference report to accompany H.R. lows: The PRESIDING OFFICER. The de- 3763, the Corporate and Auditing Ac- (The bill will be printed in a future bate on the conference report is lim- countability, Responsibility, and edition of the RECORD.) ited to 2 hours equally divided.

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00028 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY July 25, 2002 CONGRESSIONAL RECORD — SENATE S7351 Mr. SARBANES. So there is 1 hour him very much for all his contribu- seeks to address the statement of pro on each side. tions. forma earnings, in order to assure a The PRESIDING OFFICER. The Sen- Before addressing the major provi- more complete and accurate picture of ator is correct. sions of the legislation, let me make a public company’s financial position. Mr. SARBANES. Madam President, I very clear that it applies exclusively to It also addresses the conflicts of in- yield myself 10 minutes. public companies—that is, to compa- terests that arise for stock analysts to The PRESIDING OFFICER. Without nies registered with the Securities and whom investors look for impartial re- objection, it is so ordered. Exchange Commission. It is not appli- search-based advice about stocks. Un- Mr. SARBANES. Madam President, I cable to provide companies, who make fortunately, many of these analysts are am very pleased that we are now con- up the vast majority of companies under pressure to promote stocks in sidering the conference report on the across the country. which their broker-dealer firms may Public Company Accounting Reform This legislation prohibits accounting have an investment banking interest; and Investor Protection Act of 2002. firms from providing certain specified on the one hand they are supposed to The Senate approved this legislation consulting services if they are also the give unbiased advice to potential pur- on July 15 on a 97–0 vote. Conferees auditors of the company. In our consid- chasers of stock, whether to buy or were named promptly both here and in ered judgment, there are certain con- sell, but at the same time the firm of the House, and the conference com- sulting services which inherently carry which they are a part is interested in mittee immediately went to work. with them significant conflicts of in- developing a business relationship with Agreement was reached yesterday in terest. Auditors, in effect, find them- the company on which the analyst is the early evening, about 7 o’clock, by selves in the position of auditing their passing judgment. It has been sobering the conference committee, and the own work. They may be acting as man- to discover that analysts have been for- House took up the conference report agement of the company, for instance, mally recommending certain stocks to this morning and acted on it earlier in on personnel matters when, as the out- the investing public, while at the same the day. The vote, I believe, was 422—3. side auditor, they were supposed to be time discussing them contemptuously The conference report has now come standing one step removed from the among themselves. We have had too over to us, and obviously, under our company as the outside auditor. This is many demonstrations of this occur- procedures, it is our turn to proceed to the reasoning behind the prohibition. ring. consider it. What has happened in recent years is The legislation includes provisions to This legislation establishes a care- that the fees earned from the con- protect analysts against retaliation, in fully constructed statutory framework sulting work have dwarfed the fees cases where a negative recommenda- to deal with the numerous conflicts of earned from the auditors, which inevi- tion may invite retaliation. Further- interest that in recent years have un- tably leads to concerns that punches more, the bill authorizes significant in- dermined the integrity of our capital may be pulled on the audit to accom- creases in funding for the Securities markets and betrayed the trust of mil- modate the significant and remunera- and Exchange Commission, which for lions of investors. tive involvement on the consulting the first time in many years will give I say to my colleagues that in every side. Certain enumerated consulting it something close to the funding re- one of its central provisions, the con- practices are therefore not allowed, sources it needs. ference report closely tracks or par- with the exception that a case-by-case There are also extensive criminal allels the provisions in the Senate bill exemption can be obtained from the penalties contained in this legislation. for which, as I indicated earlier, all the oversight board that this legislation These were initially included in legis- Members present at the time, 97 of us, establishes. lation reported by the Judiciary Com- voted only a short time ago. The auditor can engage in the bal- mittee, which Senator LEAHY offered as This legislation establishes a strong ance of consulting services with the an amendment to the bill. The House independent accounting oversight pre-approval of the audit committee of then passed its own bill with respect to board, thereby bringing to an end the the corporation. And of course an audi- criminal penalties, a separate standing system of self-regulation in the ac- tor can engage in whatever consulting bill, which in many instances doubled counting profession which, regrettably, services the firm and the corporation or even tripled the penalties in the has not only failed to protect inves- agree upon so long as the firm is not Leahy proposal as it came to the floor, tors, as we have seen in recent months, also acting as the corporation’s audi- and the Leahy proposals were further but which has in effect abused the con- tor. supplemented by an amendment from fidence in the markets, whose integrity The bill sets significantly higher Senators BIDEN and HATCH and another investors have taken almost as an arti- standards for corporate responsibility from Senator LOTT. cle of faith. governance. It requires public compa- The PRESIDING OFFICER. The Sen- This legislation reflects the extraor- nies to have independent audit com- ator has consumed 10 minutes. dinary efforts of many colleagues on mittees and also enhances the role of Mr. SARBANES. I yield myself 4 ad- both sides of the Capitol. I want espe- the audit committee, which will have ditional minutes. cially to recognize and express my deep responsibility for hiring and firing the The PRESIDING OFFICER. The Sen- gratitude to Senators DODD and auditors and setting their compensa- ator has that right. CORZINE who early on introduced legis- tion. Mr. SARBANES. These provisions, lation that in many respects serves as The legislation requires full and among other things, require the CEOs the basis for titles 1 and 2 of this legis- prompt disclosure of stock sales by and CFOs to certify their company’s fi- lation. company executives. Senator CARNA- nancial statements under penalty of On the House side, Congressman LA- HAN added an important provision to potentially severe punishments. FALCE introduced comprehensive legis- the bill, requiring electronic filing We provide a $776 million authoriza- lation on which we drew. with respect to such sales. That re- tion for the SEC. I want to spend a I also wish to acknowledge the many quirement would take effect in a year’s minute on this point, because it is very important contributions that my Re- time, to allow time for the necessary important. The Senate Appropriations publican colleague, Senator ENZI, made systems to be put in place; once in Committee is now working on an ap- at every step in the process. Senator place it will assure prompt and accu- propriation that would contain $750 ENZI had legislation of his own, but in rate disclosure of these very significant million for the SEC. It is urgent that addition we worked very closely in the transactions. we provide adequate funding for the course of developing this legislation. The legislation places limits on loans Commission, whose responsibilities Again and again I was struck by the by corporations to their executive offi- have expanded as the volume of market thoughtfulness and reasonableness of cers. It sets certain requirements for activity has grown, but whose funding his proposals for improving in the leg- disclosure with respect to special pur- has lagged. Clearly, the Commission islation. While in the end not all of pose entities, which were used by some must have the resources necessary to them were included in the legislation, corporations that have run into such ensure a decisive and expeditious re- a significant number are, and I thank serious difficulty in recent months. It sponse to the scandals we have seen in

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00029 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY S7352 CONGRESSIONAL RECORD — SENATE July 25, 2002 recent months, and to minimize the framework, which has served us well, a Member is, this is an improvement likelihood that we will see others in and I believe it will stand the test of over the status quo, and for two rea- the future. time. sons. One is obvious. That is, we needed I must underscore this point. The Our markets, which have the reputa- stiffer criminal penalties. And, second, Commission has been underfunded, and tion of being the fairest, the most effi- we needed to create an independently the result has been understaffing, high cient, the most transparent in the funded and an independently operating staff turnover and low morale as the world, have suffered greatly in recent accounting oversight board so that we Commission seeks to carry out its times, so much so that they seem to could deal with ethics questions in a work. The SEC must be in a position to have lost the confidence of our inves- framework that will promote high eth- address immediately the problems of tors. It is our purpose, with this legis- ical standards, in the framework of inadequate staff resources and inad- lation and through other actions that independence. In addition, we des- equate pay. will have to be taken by the regulatory perately needed to have an independ- At the moment, the SEC cannot offer agencies and by the private sector, to ently funded FASB. its attorneys and accountants the same see that once again our capital mar- I would just say as an aside, Madam level of salary and benefits that their kets deserve the enviable reputation President, over the years I have agreed counterparts receive at the five Fed- for fairness, efficiency, and trans- with FASB in some of their decisions; eral bank regulatory agencies. Tal- parency that they have enjoyed I have disagreed with FASB on some of ented and dedicated staff attorneys and through the years. their decisions. However, I am proud to accountants can increase their com- I yield the floor. be able to say today I have never taken pensation by as much as one-third sim- The PRESIDING OFFICER. The Sen- the position that Congress ought to ply by moving to another agency. This ator from Texas. override FASB. As incomprehensible as is an intolerable situation. Pay parity Mr. GRAMM. Madam President, I some of their rulings have been to my has been authorized and now must be yield myself such time as I may con- way of thinking, having Congress vote funded; this legislation specifically sume. on accounting standards is a very dan- provide the necessary funding. I want to begin with some thank- gerous thing. In addition, the authorization pro- yous and congratulations. First, I want Some of our colleagues want to vote vides funding that will enable the Com- to congratulate Senator SARBANES on on the whole issue of expensing stock mission to upgrade its technical capac- this bill, and I want to make note that options. Wherever you come down on ities, its computer systems, and it pro- in a very difficult period, where so that issue, having Congress vote on ac- vides significant resources so that the many were trying to point the finger of counting standards is very dangerous, Commission can augment its staff of blame, when it seemed almost every very counterproductive. I hope that attorneys, accountants and examiners day that people were clamoring to will not happen. Certainly, I am not at a time when they are needed to ad- make the strongest statement they going to vote to impose accounting dress a very heavy workload burden. could make to get the sound bite on standards on this board. We want As an aside, I mention that this television, Senator SARBANES could FASB to set accounting standards. We morning the committee reported to the have taken that same route in the want to be sure they have the inde- Senate four nominees to bring the Se- Banking Committee. We are the com- pendence that is necessary to allow curities and Exchange Commission to mittee that has jurisdiction over the them to do it. its full complement of five members. I issues that had been at the very heart In those areas there has never been a very much hope we will be able to ap- of our recent concerns in the capital disagreement on this bill. The dis- prove them next week so that they will markets. agreements that have occurred have be able to take their positions before However, Senator SARBANES did not had to do with the perception of indi- the August recess. If we do, the Com- take that route. I congratulate him. He vidual Members as to what was prac- mission will be at full strength. They not only brought good reflection on tical, what was workable, what was de- will all be in place and ready to do the himself, but he helped raise the esteem sirable. The one view I have always job, and I think that is highly desir- that the Banking Committee is held in subscribed to, and I would have to say able. and reflected well on the Senate. We given my period of service in public life In closing, let me say that I believe had hearings but we were focusing on I am more convinced of it than ever, is this conference report reflects our best what could be done to fix the problem. that Thomas Jefferson was right when efforts to deal with issues which we As a result, those hearings were the he said good men—he would say good know to be numerous and complex. most productive that were held. They people today, of course—good men with Throughout the process, we have contributed to bringing us to where we the same information are prone to have worked together carefully on these are. different opinions. issues. We have sought advice from the Now let me make it clear, from the There is a natural tendency in the most distinguished and experienced very beginning there has been a broad human mind to think, if people dis- practitioners in the field. We held 10 consensus, and a very deep consensus, agree with you, that either, A, they hearings in March with some of the on 90 percent of the issues in this bill. don’t know what they are talking very best experts in the country as our One of my frustrations in this debate— about; or B, they don’t have good in- witnesses. We have consulted exten- and when you are debating something tentions. I subscribe to the Jefferson sively, and I hope my colleagues will as high profile as this is, there are frus- thesis. agree in good faith and across party trations. I am not complaining—as my The areas where I disagree with the lines. Our vision has been broad, our wife says whenever I complain about bill are pretty straightforward. First of purpose steady. I think our approach this job, not only did nobody force you all, I believe there is a very real prob- has been reasonable. to take it, but a lot of good people lem in auditor independence. If I were We will send to the President legisla- worked hard to keep you from getting a member of this new accounting over- tion establishing a solid statutory it—I am not complaining, but part of sight board that we are going to put framework for the reforms we know are our problem has been that the media into place and I had to vote on the nine urgently needed. has wanted to present this as a debate prohibited areas that are written into Our markets have benefited beyond that had to do with how tough people law in the bill, I would want to study measure from the statutory framework were being, to the exclusion, often, in them in detail. I might very well sup- that created the SEC nearly 70 years my opinion, of how reasonable we need port all nine of them. I do not believe ago. Indeed, I think we have had a to be. they should be written into law. tendency to take that for granted. We have before the Senate a bill that The advantages of letting the board Those markets have been a very sig- is clearly an improvement over the sta- set these standards—it seems to me nificant economic asset for the United tus quo. I don’t care how disappointed that there are three: States, and an integral part of our eco- you are in any one provision—and on No. 1, the board is going to have nomic strength. This legislation will several provisions I am very dis- more time and more expertise than we serve to complement and reinforce that appointed. No matter how disappointed have and is likely to do a better job.

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00030 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY July 25, 2002 CONGRESSIONAL RECORD — SENATE S7353 No. 2, if we make a mistake and we principle, and if your company meets codified a 1991 Supreme Court decision write it into law, it is hard to fix these conditions, you are granted the that addressed what happens if you things that are written into law. As waiver? Then, all they have to do is think you have been wronged. We are Alan Greenspan has said, if Glass- prove they meet the conditions. not talking about criminal activity. Steagall, Depression-era banking legis- My concern—and who knows, maybe We are not talking about SEC enforce- lation, had been a regulation, it clearly this will be true, maybe it will not. The ment. We are not talking about the would have been changed by the 1950s. problem is we are legislating. We don’t Justice Department. We are talking We did not change it until 1999. It took know. We can’t look into the future. about civil disputes that people have. a long time to change it. My concern is that by not granting Under that law, in codifying what the Finally, and probably of greatest im- them the ability to provide blanket 1991 Supreme Court decision said, we portance, there is a natural tendency waivers we are going to force a lot of said that within a year after you be- when we are talking about the problem smaller companies to hire lawyers and lieve you have been wronged, you have in an era where we are all reading lobbyists to come to Washington to pe- to file your lawsuit, and within 3 years about Enron and WorldCom and the tition the SEC and the board. My con- after the event happens, you have to huge companies, to forget this law will cern is that this is going to use up file your lawsuit. apply to 16,254 companies. Many of their time and use up the resources of One of the things this bill does, these companies are quite small. One companies. which I oppose, is it raises that to 2 of the advantages of allowing the ac- There is another side of this story years and 5 years, respectively. I would counting oversight board to set out and that is the concern that blanket say that if there were evidence that prohibitions on auditors performing waivers could be used to get around the people were not getting these lawsuits other services in regulation, instead of intent of the law. How do you deal with filed because of a lack of time, that prescribing them in law, is that the that? How do you find a happy balance? under the circumstances I think that board can find a system whereby they It is not an easy question. I would have increasing the statute of limitations can recognize what is practical in deal- to say I believe we have imposed a one- would have been justified. But as we ing with smaller companies and how size-fits-all regimentation that is going have looked at the data, the mean av- that might differ from what is prac- to be difficult to deal with—not impos- erage lawsuit is filed 11 days after the tical for General Motors. sible to deal with, but I think it is injury is discovered. Something like 90 An example that has come to my going to be difficult. percent of the lawsuits are filed in the mind is one where I am operating a Another problem I have is that we first 6 months. It seems to me that this small public company, stock traded on have in this bill an accounting over- provision and other provisions of the an exchange or on Nasdaq, and I em- sight board. Its members are not elect- bill that expand the ability of people to ploy an accounting firm that has a ed officials. They are not appointed in sue may have a positive effect in mak- CPA who basically does my auditing. the sense that they are not Govern- ing people pay attention to their busi- He is in Houston. I am trying to hire a ment officials. They will have the abil- ness, but we all know, based on our new bookkeeper in my company. I have ity to make decisions that will affect legal system, that it is going to be three candidates. When my auditor is the livelihood of Americans who are in abused and that very heavy costs are in town auditing my books, I say: I the accounting profession. They will going to be imposed on the private sec- have these three candidates. I majored literally have the ability to say to a tor of the economy as litigation costs in physics in college, and I don’t know CPA: We are taking your license away ultimately are added to the cost of the anything about accounting. Could you and you can never practice again in product that is produced and reduced interview these three bookkeepers and providing accounting services to a pub- from the stock value held by share- tell me who you think would be best? licly traded company. holders. Under this bill, that would be illegal. Clearly, there are cases where that is I could go on and on. There are other That would be providing a personnel justified. Clearly, there are cases where people who want to speak. We are service. It is prohibited for my auditor people ought to be fined and, clearly, under a time limit. But let me sum up. to provide that service for me as well. there are cases where people ought to For General Motors, should your be put in prison. But I think when you I thought about this long and hard, auditor be providing a personnel serv- are taking people’s livelihoods, they and as I thought about this bill, I had ice? My guess is they probably should ought to have an opportunity to appeal to weigh, Does it do more good than not. But for this small company in Col- to the Federal district court where harm? I have concluded that it does. It lege Station, Texas, what this prohibi- they live. does less good than it could have done; tion ultimately will do is force them to I think there ought to be a burden on it does more harm than it should have do one of three things: In all prob- them to make their case, and obviously done—we could have corrected these ability, they will hire the bookkeeper the court is going to take into account things—but, quite frankly, in the envi- without ever getting the advice of a that this board, that was duly con- ronment we were in it was impossible. CPA; No. 2, they can hire another CPA stituted, made a decision. But I think In the environment we were in, where to interview these three candidates for that is an opportunity that people everything was judged on some concept a bookkeeper and pay them; No. 3, they ought to have that they do not have of being tough rather than on practi- can file for a waiver through the SEC under this bill. cality and workability, it was impos- and through the board. Each option is I am also concerned about litigation. sible for us to come back and deal with a worse choice from those available to During the whole Clinton administra- these problems. such a small company today, and a tion, there was only one bill where we Finally, in the timeframe that we all worse choice for its shareholders. overrode the President’s veto, and that faced in conference, we never really got The bill allows a waiver on an indi- was a bill having to do with private se- around to discussing the practical vidual company by company basis. I re- curities litigation reform. We had a kinds of things that do not seem im- joice that is the case. I personally be- massive number of predatory strike portant when you are writing law but lieve we should have given the board, suits where people filed lawsuits seem very important 2 or 5 years later with the agreement of the SEC, the against companies. They almost al- when you are implementing it. ability to grant blanket waivers based ways settled out of court. We had one Having said all that, I cannot stand on the circumstances of classes of indi- law firm that filed the lion’s share of up here and argue that this bill has vidual companies. the lawsuits. And the chief lawyer in worsened the status quo. This bill is For example, if you have already that company said, in effect, ‘‘It is better than the status quo for two rea- granted 1,000 waivers where companies wonderful to practice law where you sons. No. 1, change needs to be made have applied for a waiver for a certain don’t have clients.’’ and criminal penalties need to be requirement based on their size, their That was a mistake when he said raised. These independent boards need location, practicality, the cost, what- that, but he said it. to be established, and 90 percent of this ever, at that point shouldn’t the board We took action to try to eliminate or bill, in my opinion, clearly represents a be able to say: We have established this minimize this abuse. In doing so, we step in the right direction.

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00031 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY S7354 CONGRESSIONAL RECORD — SENATE July 25, 2002 But, second—and this may sound like how the whole thing played out, it ance to small businesses and small ac- strange logic but I think it is impor- worked out from that point of view counting firms that they can continue tant. I think to understand American pretty much right. to operate the way they have in the government you have to understand it. If people on Wall Street are listening past. The American people expect Congress to the debate and trying to figure out We have given encouragement to the to respond to a problem. We may not whether they should be concerned States not to run out and apply the know the answer. We may not have about this bill, I think they can rightly same types of laws. I hope the States perfect knowledge. But they expect us feel that this bill could have been much are paying attention because they will to try to do something about it. That worse. I think if people had wanted to ruin a very good thing if they destroy in and of itself is an argument to which be irresponsible, this is a bill on which small business. Keep the eye on small we should respond. they could have been irresponsible and business, and we will continue to have I would argue—being a conservative, almost anything would have passed on big business. as everyone engaged in this debate the floor of the Senate. Corporations have been checking knows—I would argue we need to be I think given where we are on this what has been going on in their firms careful. But in the end this bill is an bill that it is a testament to the fact to a greater extent than they have ever improvement on the status quo. It that our system works pretty well. before. Boards, CEOs, CFOs, and audit could have been better. There are I yield the floor. committees have been checking to see changes that could have been made The PRESIDING OFFICER (Mr. if they have the kinds of problems that that were not. But in the end, I cannot EDWARDS). Who yields time? brought down these other companies. Mr. GRAMM. Mr. President, I yield argue that this bill should not pass, It is much like when there is a plane 12 minutes to the Senator from Wyo- should not become law. The President crash. Right after a plane crash is ming. probably the safest time in the world is going to sign the bill, and clearly he The PRESIDING OFFICER. The Sen- to fly because everybody checks their should. ator from Wyoming. I do believe we will have to come Mr. ENZI. Thank you, Mr. President. equipment ever so much more carefully back after the fact and we will have to I am here today to speak in support to make sure that the kind of defects correct some of these issues. I think as of the conference report to the ac- that may have caused other problems time goes on we will see we may not counting reform bill. I will be encour- will not happen to them. And the effect have done enough in one area. Maybe aging all Senators to vote for the con- lasts for a long time afterwards. we went overboard in another area. But ference report. Corporations have been checking the Congress will meet again, people This is earthshaking legislation that their books. They have begun changing will be paid to do this work, and I am has been done with tremendous speed. procedures. Some of the changes they confident that it will be done. It had to be earthshaking because we have made have resulted in restate- So let me conclude on this thought. I are trying to counteract the tremors ments. They have paid a price for doing believe the marketplace has gone a from the volcanic action of the moun- restatements. But they have done the long way toward solving this problem. taintop being blown off such companies right thing by doing a restatement, I think the New York Stock Exchange as Enron, WorldCom, Global Crossing, and they should be recognized for that. action was excellent. Once again, they and others. Those collapses have set up I mentioned speed before. The Senate are proving that they are a great insti- a series of tremors across this country. is not designed for speed. We started tution. As I have often said about the Congress is not the one to solve all out slow. We held 10 hearings. We New York Stock Exchange, I feel as if the problems. But as Senator GRAMM looked at the issues very carefully, ev- I am standing on holy ground at the just mentioned, we are expected to erybody resolved in writing their own New York Stock Exchange. work at solving all of the problems. We ideas. Every boardroom is different from have put in a huge effort on this bill, One of the tough things about legis- what it was before this crisis started. and it will make a difference. lating is putting it down in writing. No one sitting on a board, corporate While we have been working, the The concepts are so easy, but the de- board or an audit committee, will ever stock market has been going through tails are so tough. be the same. No auditors will ever look some tremendous gyrations. I think There are a number of people who at their task the way they did before some of those reactions in the stock drafted bills on this—both in the House all of this started, at least for a very market were to see how carefully we and in the Senate. On this side, Sen- long time. or at least for a very long would consider and resolve this issue. I ator GRAMM and I drafted a bill. Sen- time. believe, the stock market was worried ator CORZINE and Senator DODD intro- One of the advantages of having that we would overreact. The market duced a bill. Of course, Senator SAR- structure is when they forget, the watched to see if Congress would keep BANES had the overreaching bill, and I structure won’t forget. I totally agree adding and adding things, until we de- believe his benefited a little bit from with that. I think this represents a stroyed the whole system. They can having copies of both the House and complement to it. now see that did not happen—Congress Senate bills on which to build his bill. There is much in here I would have acted responsibly. We took a long and I compliment him for the way he took done differently. But in the end, I tough look at the problem and reacted, ideas from all of these different ap- think this is a response that people can but we did not overreact. At the same proaches. say the Government did hear, the Gov- time corporations across the country Again, it shows the value of legis- ernment did care, and Congress did try have been making sure they did not lating by a wide variety of people. You to fix it. I don’t doubt that there are have the kinds of problems brought to get a wide variety of viewpoints, which mistakes in here. I think I could name light in a few of these companies. actually provides some insights into some, if asked to. But, on the whole, ‘‘Corporations’’ should not be a bad areas that a person might not have this is a response that was aimed at word in this country. This country was thought about. the problem. People went about it in a built on business. But, at any rate, we concluded the reasonable manner. I always like to mention that it was hearings, and we merged the bill. This Certainly, the authors of this bill in- primarily built on small business— came to committee the week before the tended to do as good a job as they small businesses that grew up, in many Fourth of July. It passed out of com- could do. cases, but nevertheless ideas that mittee in one day. It came to the floor I again want to congratulate Senator started out as a small business. of this body just 2 weeks ago. And now, SARBANES. I also want to thank him, We have to keep our focus on those it has already been conferenced, and looking back now at how quickly the small businesses, and make sure they come back to us for final passage. Part conference went. I know people were are able to continue to operate in the of that is a result of the atmosphere we unhappy when we had this period when climate that we have in the United are in, and the need for action. Timing the floor was tied up, and there were States and under the laws that we pass. can be everything on a bill. But part of numerous amendments people wanted I am pleased to say that the actions it is because of the concentration of to add to the bill. But I think, given we took in this bill provide some assur- people who worked on this.

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00032 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY July 25, 2002 CONGRESSIONAL RECORD — SENATE S7355 This legislation is a response to prob- and CORZINE and GRAMM. Senator expensive to require these companies lems highlighted by the recent corpora- EDWARDS worked with me on one provi- to hire a separate auditing firm to per- tion failures of Enron, WorldCom, and sion that is in this bill to make sure form this responsibility. That problem others. It does send a clear signal to that not only accountants, analysts, was also recognized, and the needed corporate America that executives can CEOs, CFOs, Boards and audit commit- changes were made. no longer abuse the trust their share- tees were addressed under this bill, but However, I also understand that due holders place in them without severe lawyers have some responsibility, too. to the time constraints, a report will consequences. I find it very exciting we are going to not be filed with the bill. I think this This legislation builds a strong and make lawyers have a code of ethics will pose a series of problems because independent board to oversee the ac- when they are dealing with the Securi- we will not be defining what the au- counting industry. It will eliminate the ties and Exchange Commission, and thors actually intended with certain climate of self-regulation that has his- that they are going to have an obliga- sections of the bill and allowing the torically guided accounting. tion to report things when they find same written discourse that there However, I would like to make one them. I know that causes some con- would be on the bill. I think this may point clear. I believe that, overall, ac- sternation among some attorneys, but especially cause problems with the ex- countants take their responsibilities I think it will make, overall, the same traordinary number of regulations that very seriously. They did before, and kind of improvements we are expecting are going to have to be written to im- they do now. We have the best system from everybody else. plement the bill. in the world. What we are doing with Senators ALLEN, GREGG, BAUCUS, As the ranking member of the sub- this is to maintain that we have the GRASSLEY, and KENNEDY all worked on committee with jurisdiction over the best system in the world. Most ac- some provisions that we don’t talk Securities and Exchange Commission, I countants are honest and hard work- about too much; again, it is in the de- do intend to work closely with the ing. They work for the benefit of the tail area, but it has to do with the Commission to ensure that the new investors with probably the same per- blackout period when you are dealing regulations are consistent with what I centage of exceptions as other profes- with pension and other stock sales by see as congressional intent. I will work sions. executives. I know the intense hours it with others to make sure these regula- This legislation will also provide for took to come up with a solution that tions conform. strong disciplinary action against ex- would work. And if you have that many I ask the ranking member, could I ecutives who break the law. No longer people agreeing on it, there is probably have an additional 3 minutes? will they be disciplined with a slap on a good chance it will work. Mr. GRAMM. Sure. the wrist. The bill recognizes that ex- Again, I congratulate all those people Mr. President, I yield an additional 3 ecutives who destroy the dreams of in- for their constraint in limiting their minutes to the Senator from Wyoming. vestors by irresponsible and unethical ideas to what needed to be done for this The PRESIDING OFFICER. The Sen- behavior will be given the severe pun- bill. A lot of ideas were floating around ator from Wyoming. ishment they deserve. here on lots of things we can with cor- Mr. ENZI. I thank the Senator. I also want to again thank Senator porations and executives that people Mr. President, some of the issues SARBANES and Senator GRAMM for their want to have fixed, but this bill did that did not come up in this bill dealt leadership on this issue. They both maintain some real constraint to stay with FASB. We did something mar- have worked tirelessly the past few on topic. velous for FASB. We made sure of its months to get this bill finished in a I do believe the conference report is independence. One way we made sure of timely manner. I particularly appre- an improved bill from the one that its independence, besides citing in the ciate some of the insights Senator passed the Senate. Again, I appreciate law, was to make sure FASB has inde- GRAMM gave me as he worked on this Senator SARBANES working with me to pendent funding. They will not have to bill in more detail than most people make some of the changes about which come to Congress with a budget. And ever achieve. It is his standard, and he I spoke. they will not have to go to corporate carried that out again this time, which One change we made changes the im- America for funding. They will get did resolve a number of the problems. I plication that not all nonaudited serv- independent funding to be able to do want to congratulate Senator SAR- ices should be presumed illegal. The the job they need to do. That will in- BANES, and thank him for the way he bill has been changed to clearly allow hibit us from trying to change what conducted the hearings. A lot of people the audit committee to make that de- they are doing in setting accounting do not realize that the Chairman of a termination without the law implying standards. committee usually gets to pick most of that it is illegal. I am pleased to state that we have the witnesses, and the ranking member In addition, he made some changes taken a look at the things they are gets to pick a few of the witnesses. dealing with the testing of internal working on right now. They are work- As we went through these 10 hear- compliance. I believe the new language ing on four issues that are extremely ings, I couldn’t find any witnesses that more clearly represents the true role of important to make sure what happened I wouldn’t have picked were I given the auditors. One of the problems we dealt with other companies will not happen selection. There were some very quali- with throughout this process is edu- again. fied people who testified. Some of them cating Members on exactly what the I have to tell you, in those four were even accountants. I did appreciate role of an auditor is. I believe the new things they have listed as a priority, that. I apologize for asking some ques- language represents that realization, one of them is not stock options and tions of them but it was such a great and I thank the chairman for making what to do with them. They do need to opportunity for me. My staff noticed the change. address that, but I certainly hope that that when the camera focused in on the There is another important change in Congress does not decide that what we person giving the answer, the wedge of the provision dealing with corporate see as a problem does supersede other people behind them were all asleep. loans. The provision would still pro- problems that may have caused col- So what we dealt with is not the kind hibit corporate executives from reap- lapses such as Enron’s. of thing that Americans get really ex- ing millions of dollars in loans from So I hope we will not get in a posi- cited about. It is far too detailed for us their companies, but the new language tion of dictating now to FASB what to get too excited about it. For ac- also realizes that executives need to they should be working on, and in what countants, these kinds of discussions use things such as credit cards to con- order, and to what degree, or, worse are almost like watching ESPN. duct their business. So this section is a yet, just going ahead and passing ac- Senator SARBANES did continue to vast improvement. counting standards on our own. meet with me and other Members and Another item I would like to com- With respect to section 302, the con- continued to make changes that im- ment on is the understanding that in- ference recognizes that results pre- proved the bill. There was a wide vari- surance companies, many times, have sented in financial statements often ety of Senators who worked on this audits they must file with their State necessarily require accompanying dis- bill. I have mentioned Senators DODD regulators. It would be burdensome and closures in order to apprise investors of

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00033 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY S7356 CONGRESSIONAL RECORD — SENATE July 25, 2002 the company’s true financial condition enact implementing regulations that that I suspect, within an hour or so, we and results of operations. The supple- are ‘‘necessary or appropriate in the will adopt, and, hopefully, unani- mental information contained in these public interest.’’ I believe it is the in- mously, as we did the original bill that additional disclosures increases trans- tent of the conferees to permit the came out of the Senate. parency for investors. Accordingly, the Commission wide latitude in using I think it is historic. I think it is relevant officers must certify that the their rulemaking authority to deal truly critical in bringing about the financial statements together with the with technical matters such as the kind of important reforms that will disclosures contained in the periodic scope of the definitions and their appli- make a real difference to our financial report, taken as a whole, are appro- cability to foreign issuers. I would en- system, not just today but I think as a priate and fairly represent, in all mate- courage the SEC to use its authority to standard it will be very much an im- rial respects, the operations and finan- make the act as workable as possible portant part of the structure of our fi- cial condition of the issuer. consistent with longstanding SEC in- nancial system for decades to come. I also believe the conferees con- terpretations. I have said often, since we have template that the Board will have dis- Finally, I not only thank the Sen- talked about this legislation, that it cretion to contract or outsource cer- ators I have been able to work with on really does, in my mind, fill a large gap tain tasks to be undertaken pursuant this, but I also thank the staffs. I that has been missing in our securities to this legislation and the regulations thank particularly Katherine McGuire, laws that were written 70 years ago. I promulgated under the Act. The Board my legislative director, and Mike think it very well may be the most im- may outsource functions which can be Thompson, who handles my banking portant step we will have taken in that done more efficiently by existing and issues. I also thank Kristi Sansonetti, interim period, to make sure we have a established organization. An exercise who works on all of my legal issues, measured but strong securities and re- of discretion in this manner does not and Ilyse Schuman, who played a very porting structure in our Nation that absolve the Board of responsibility for important role in the blackout pension makes for the depth and breadth and the proper execution of the contracted period. beauty and effectiveness of our finan- cial markets. or outsourced tasks. I thank, on Senator SARBANES’s staff, This legislation, as has been noted, I also believe that the Conferees ex- Steve Harris, Marty Gruenberg, Steve comprehensively deals with reform of pect that the Board and the standard Kroll, Dean Shahinian, Lynsey Gra- our accounting profession, enhances setting body will deem investment ham, and Vince Meehan. corporate accountability, improves companies registered under Section 8 I thank, on Senator GRAMM’s staff, transparency, moderates conflicts in a of the Investment Company Act of 1940 Wayne Abernathy, Linda Lord, who is number of parts of our financial world, to be a class of issuers for purposes of probably one of the most knowledge- deals with the transparency of cor- establishing the fees pursuant to this able lawyers in this area I have ever porate financial statements, strength- section, and that investment compa- encountered, Michelle Jackson and ens the SEC, tightens penalties and nies as a class will pay a fee rate that Stacie Thomas. more securely sets the law, and ulti- is consistent with the reduced risk And, on Senator DODD’s staff, I thank mately, I believe, will restore the they pose to investors when compared Alex Sternhell. trust, the needed trust, and investor to an individual company. Audits of in- America will never know all the confidence in the integrity of Amer- vestment companies are substantially work these people have done on this ica’s capital markets. less complex than audits of corporate bill, the hours they have spent on it, This was an absolutely necessary entities. The failure to treat invest- daytime and nighttime. I have seen step at this time in our Nation’s his- ment companies as a separate class of them working in the early morning tory. There has been an enormous be- issuers would result in investment hours on this, and that is after spend- trayal of trust, demonstrated, cer- companies paying a disproportionate ing the previous night working on it. tainly, by the headlines and the litany level of fees. They have just spent incredible time of corporate abuses. Let me say, it goes In addition, I believe we need to be on this. deeper than just the headlines. There clear with respect to the area of for- There is some incredible expertise have been 1,100 corporate earnings re- eign issuers and their coverage under among these people. Without their statements in the last 4 years. There is the bill’s broad definitions. While for- help, we would have never gotten to a basic loss of more than just the sim- eign issuers can be listed and traded in this point. So I thank all of them. ple sense of trust that people get from the U.S. if they agree to conform to I thank the chairman and Senator the headlines. It is hard for people to GAAP and New York Stock Exchange GRAMM and all the others who have had make investment decisions when they rules, the SEC historically has per- a part in this. It is time we adopt this don’t have good facts, good numbers, mitted the home country of the issuer bill. and the ability to draw good conclu- to implement corporate governance I yield the floor. sions about where the investor dollar standards. Foreign issuers are not part The PRESIDING OFFICER. The Sen- should go. of the current problems being seen in ator from Maryland. It has led to a misallocation of cap- the U.S. capital markets, and I do not Mr. SARBANES. Mr. President, let ital. And there was a serious need for believe it was the intent of the con- me first say, I think Senator ENZI has people to have reform in this area be- ferees to export U.S. standards dis- been extremely gracious in recognizing cause this betrayal really went at the regarding the sovereignty of other the extraordinary contribution that heart of why people were employees of countries as well as their regulators. has been made by the staff as we have various firms, why investors put their I also realize inconsistencies appear formulated this legislation. I appre- trust in investing in companies, and in sections 302 and 906. The SEC is re- ciate him doing that. I certainly asso- why the American system, which so re- quired to complete rulemaking within ciate myself with his remarks about lies on trust, has been called into ques- 30 days after the date of enactment the dedication and the perseverance tion with respect to the integrity of with regard to CEO certification under and the extraordinarily high level of our financial markets in recent days. section 302. However, section 906 sug- competence that is brought to this It is an extraordinary step. I am gests that certification would be re- matter by staff on both sides of the pleased to have been a part of it. quired upon enactment, thus the pen- aisle—committee staff and personal I see the chairman just left the alties would go into effect before the staff. Chamber. I want to take a few mo- certification requirement is completed Mr. President, I yield 10 minutes to ments to make sure he knows how through the rulemaking process. I be- the Senator from New Jersey. strongly I feel about the leadership he lieve it was the intent of the Conferees The PRESIDING OFFICER. The Sen- played. For those who were not a part that the penalties under section 906 ator from New Jersey. of this measured process that Chair- should not become effective until the Mr. CORZINE. Mr. President, I am man SARBANES put forward—I have rulemaking process is finalized. honored today to stand before the Sen- said this to him personally—the 10 Under the conference report, section ate to express my strong support and hearings we had were the moral equiva- 3(a) gives the SEC wide authority to appreciation for the conference report lent of a graduate finance program. I

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00034 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY July 25, 2002 CONGRESSIONAL RECORD — SENATE S7357 suspect that very few times in congres- could work together in a bipartisan tors and employees and the public need sional history have we seen the break- way to come to a thoughtful, measured to see addressed, and that is pension down in the detail and presentation of response that will make a difference, reform. I know working their way sophisticated information, complicated that really will move our securities through Congress right now are a num- topics, presented with the security and laws in a direction that will give the ber of initiatives on it. Fewer than 50 integrity that were presented in our American people confidence in how percent of Americans have pensions. hearings that led to the creation of they read an income statement, when We have a major need to address this. this legislation. He did an incredible they look at a balance sheet and when We should pull it together in as job of putting together a bill. they judge where they want to work, thoughtful a way as Chairman Sar- I get a little nervous when I hear peo- that they will have the necessary infor- banes has led our Senate to this con- ple say this was a rush to justice, a mation. clusion, led this debate to a positive rush to an answer. This was one of the I am not going to go into detail on conclusion. I hope we will address that most thoughtful and measured pro- the bill. Senator SARBANES and Sen- in the future. So, once again, I express grams of review put in place before the ator ENZI did that. It is a great piece of my great gratitude to all those in- legislation was written that absolutely legislation. I don’t think it went too volved. I particularly thank Chairman could ever have been conceived. He de- far at all. In fact, I think it is about SARBANES for his strong leadership. serves enormous credit for making sure spot on. I am sure there will be things Mr. SARBANES. Mr. President, I we were thoughtful in the process. we will need to review in time, tweak thank the able Senator from New Jer- Like Senator ENZI, I compliment all with, but this is a good set of initia- sey for his kind and gracious remarks the staffs who were involved in this. tives which will make a difference in about my efforts. I underscore the This was an incredible effort on all of America’s financial system. enormously valuable contribution that their parts. From the bottom of my When we address these issues, it does Senator CORZINE made to the develop- heart—and I am sure all those others beg to recognize that there are addi- ment not only of this legislation but who were involved in this process—I tional tasks that need to be addressed. all of the work that has come before truly appreciate the thoughtfulness I heard the chairman talk about it is the committee. He brought a perspec- and care they all gave to it. not good enough to authorize; we have tive and perception here that were ex- I also would be remiss if I did not to appropriate the funds to go with the tremely important, enabling us to mention Senator DODD for his great necessary obligations we put on the work through some difficult issues. I help in originally putting together our SEC; we need to make sure our new ad- appreciate that. initiatives with regard to accounting visory board actually has the re- I yield 7 minutes to the Senator from reform, corporate oversight, and sources. I think we do. But their inde- Vermont, chairman of the Judiciary resourcing the SEC, which I think are pendence, their ability to function, will Committee. The PRESIDING OFFICER. The Sen- fundamental parts of the legislation. come because they have the resources. ator from Vermont is recognized. We feel good about that. I think Sen- The same as the SEC; we have to do Mr. LEAHY. Mr. President, I thank ator DODD has taken an extraordinary our job in the second part of this to the chairman. The Senator from Cali- step in leadership. make sure those resources are avail- fornia wishes 1 minute. I yield 1 minute Once again, I say to the Senator from able. to her. Wyoming, this is about making Amer- We do need to make sure the SEC Mrs. BOXER. Mr. President, I came ica better. It is fundamentally about Commissioners are in place so that we to the floor to give my deepest thanks doing the right thing at the right time. can have a credible process of looking to Senator SARBANES and Senator His leadership on that, to make sure at enforcement and review of laws and LEAHY for leading us in just the way we we stayed constrained, as he says, making sure that as we structure the needed to be led toward a tough, fair thoughtful, and measured about how SEC in the days going forward, we have reform that would lead to confidence in we addressed the problem, has been the best of minds brought to bear our financial system. I also thank Sen- most appropriate, and I have appre- there. I hope we can vote on these ator ENZI for his work. ciated the opportunity to work with Commissioners very quickly. I was a stockbroker years ago, dec- him. I compliment him for that effort. For myself—I know there are dif- ades ago, and in those days the big ac- I would say the same about the Pre- ferences of views about this—there are counting firms were known for their siding Officer. The addition of a num- other unmet items on the agenda. Not integrity, and CEOs were highly re- ber of the amendments that have come, necessarily do they apply to this bill, spected. That check and balance was particularly with regard to bringing in but in my view we should, as a nation, lost along the way and it must be re- the responsibility that is associated deal with the stock options issue. I stored. with lawyering in America, as impor- don’t think Congress should write the I believe this bill will do it and our tant as it is for accountants and CFOs accounting rules, but I believe to rec- people will, once again, have trust and and CEOs, I think was an important ognize that stock options are an ex- confidence in our financial system. step. There has been a lot of really pense is relatively self-evident to those They will know when they read an an- great effort here. who have operated in business. They nual report and it is signed off on by an Now that the chairman is back in the are used as a substitute for compensa- accounting firm that it means what it Chamber, I want to say again, this is a tion. Compensation is an expense. That says and says what it means. That will classic example of quality leadership, is why you see Chairman Greenspan bring the stock market back into bal- of thoughtful leadership, and getting to and all of what I think is the critical ance. It will not happen tomorrow. a result that will make a difference in weight of those who have observed on This isn’t magic legislation. But over the lives of Americans in the years this issue speaking out that this is an time confidence will be restored and ahead. issue that needs to be addressed. The our economy will be on solid footing This is a little more personal for me Bermuda registry of companies, deriva- once again. I thank my friends. because for the 5 years before I came tives regulation are also issues. Mr. LEAHY. Mr. President, I thank here, I was a CEO. Sometimes you Could I have 1 additional minute? Chairman SARBANES for his leadership want to hide from that moniker these Mr. SARBANES. I yield an additional on this impressive bill and on the con- days since it is not so popular. I think minute. ference agreement. The then-Congress- these days about the words of Andy The PRESIDING OFFICER. The Sen- man SARBANES was one of the first peo- Grove, who said that he was ashamed ator may continue. ple I met when I came to Washington and embarrassed by some of the ac- Mr. CORZINE. We need to address as an elected Member of this body. We tions and many of the actions that are these issues. There are missing gaps in have been friends from that time for- associated with the abuse we have other parts of our oversight of our se- ward. I have been so pleased to work seen. I stand with Andy Grove on that. curities markets and financial markets with him. This is not one of our prouder mo- that need to be addressed. I am proud that the conference agree- ments in our financial system. But Finally, I believe there is a gaping ment includes and adopts the provi- what does make me proud is that we hole in our oversight of what our inves- sions of the Leahy-McCain amendment,

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00035 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY S7358 CONGRESSIONAL RECORD — SENATE July 25, 2002 which the Senate adopted by a 97-to-0 out in Judiciary Committee make sure This comes on the heels of the disclo- vote—again, with the strong help and whistleblowers are protected. sure of corporate corruption that has support of the Senator from Maryland. Third, we include new anti-shredding been endemic in recent months, where These provisions are nearly identical crimes and the requirement that cor- we have witnessed lost jobs, lost sav- to the Corporate and Criminal Fraud porate audit documents be preserved ings, lost pensions, and ultimately lost Accountability Act, which I introduced for 5 years with a 10 year maximum confidence worldwide in America’s cap- with Majority Leader DASCHLE and penalty for willful violations. Prosecu- ital markets. others in February. It was reported tors cannot prove their cases without There is an urgency that strong leg- unanimously by the Senate Judiciary evidence. As the Andersen case showed, islation be passed by this body and the Committee in April. instead of just incorporating the loop- Congress to restore confidence—restore The Presiding Officer helped get this holes from existing crimes and raising both the perception and the reality of through the Judiciary Committee. The the penalties, we need tough new provi- integrity in our capital markets. Leahy-McCain amendment provides sions that will make sure key docu- This legislation is strong legislation. new crimes with tough criminal pen- ments do not get shredded in the first That is why it has been applauded by alties to restore accountability and place. editorial writers from the east coast to transparency in our markets. It accom- It only takes a minute to warm up the west coast. Senator SARBANES has plishes this in three ways: No. 1. It the shredder, but it can take years for been the subject of much congratula- punishes criminals who commit cor- prosecutors and victims to prove a tory observation on the part of so porate fraud. No. 2. It preserves evi- case. many. This comes on the heels of, dence that can prove corporate fraud. The conference report also maintains frankly, much weaker legislation that No. 3. It protects victims of corporate almost identical provisions to those had been passed previously in the fraud. authored by Senator BIDEN and ap- House of Representatives, the other As a former prosecutor, I know noth- proved unanimously by the Senate. body. ing focuses one’s attention on the ques- These include enhanced criminal pen- By passing a strong Senate bill, we tion of morality like seeing steel bars alties for pension fraud, mail fraud, were able to go to conference. I am closing on them for a number of years wire fraud, and a new crime for certi- proud to have served on that con- because of what they did. fying false financial reports. As chair- ference committee and to craft legisla- The conference report includes a man of the Judiciary’s Subcommittee tion there that goes in the direction of tough new crime of securities fraud on Crime and Drugs, Senator BIDEN de- the Senate rather than in the direction which will cover any scheme or artifice serves praise for his leadership of these of the other body and gives this Nation to defraud investors. We added the issues. strong securities legislation. It pro- longer jail term of the other body. It is time for action—decisive and vides a stiff penalty for corporate There are three key provisions of the comprehensive reforms that will re- wrongdoing, creates a strong oversight Senate-passed bill that were not in the store confidence and accountability in board to ensure that corporate audits recently passed House bill but are now our public markets for the millions of are done properly, and that the books, in the conference agreement. I think Americans whose economic security is in fact, are not cooked. It imposes they are truly an essential part of a threatened by corporate greed. tough new corporate responsibility comprehensive reform measure. First, We cannot stop greed, but we can standards and implements control over we extend the statute of limitations in keep greed from succeeding. stock analysts’ conflicts of interest, so We have seized this moment to make securities fraud cases. In many of the they are not making a fortune while a good beginning to fashion protections State pension funds cases, the current advising their clients to invest. It re- for corporate fraud victims, preserve quires public companies to quickly and short statute has barred fraud victims evidence of corporate crimes and hold from seeking recovery for Enron’s mis- accurately disclose financial informa- corporate wrongdoers accountable. We tion. It ensures that the Securities and deeds in 1997 and 1998. For example, have much to do to help repair the Exchange Commission has the re- Washington State’s policemen, fire- breaches of trust that have so shat- sources to accomplish its mission of fighters, and teachers were blocked tered confidence in our markets and regulating the securities markets. from recovery of nearly $50 million in market information. We have made a These important provisions will en- Enron investments by the short statute good start today toward restoring that sure that America’s financial markets of limitations. That is why the last two confidence but more will be needed. In remain efficient and transparent and SEC Chairmen—one a Republican and addition we will need swift and strong the envy of the world. It will benefit the other a Democrat—endorsed a enforcement actions and good faith ad- average people who may not have had longer short statute of limitations to ministration of the reform set forth in enough information to make informed provide victims with a fair chance to our conference report. Our conference decisions in the past and certainly recoup their losses. is concluding but our work is just be- could not have possibly known that the Secondly, we include meaningful pro- ginning. books were cooked, that the audits tections for corporate whistleblowers, Again, I thank the Senator from were incorrect, and that corruption as passed by the Senate. We learned Maryland. was running rife. They had no way of from Sherron Watkins of Enron that Mr. SARBANES. Mr. President, I knowing that. these corporate insiders are the key thank the Senator from Vermont. I un- This will turn that around. This is witnesses that need to be encouraged derscore again how important his con- not the last word, but this is a criti- to report fraud and help prove it in tributions were. The Senate Judiciary cally important step in the right direc- court. Enron wanted to silence her as a Committee reported out a bill without tion to returning integrity to our mar- whistleblower because Texas law would opposition in the committee. That is kets. We can observe, having come allow them to do it. Look what they something which accompanied this leg- through this horrible experience in re- were doing on this chart. There is no islation. cent months of disclosure after disclo- way we could have known about this I yield 4 minutes to the Senator from sure of corruption having taken place, without that kind of a whistleblower. South Dakota, and then it is my inten- a recognition that free market econo- Look at this. They had all these hidden tion to go to the Senator from North mies can only work when there is a cop corporations—Jedi, Kenobi, Chewco, Carolina. on the beat. Free market economies Big Doe—I guess they must have had Mr. JOHNSON. Mr. President, most can only work when there are fair, ‘‘little doe’’—Yosemite, Cactus, Pon- of all I thank him for his extraordinary well-enforced, and strictly enforced derosa, Raptor, Braveheart. I think leadership on the development of this rules. A free market economy without they were probably watching too many landmark legislation. I think it is fair rules, without a cop on the beat, is not old reruns when they put this together. to say this is the most critically im- an economy that will ever work at all. The fact is, they were hiding hundreds portant piece of investor protection This goes a long way, I believe, to re- of millions of dollars of stockholders’ legislation since the Securities Act of viving confidence in America’s eco- money in their pension funds. The pro- 1933 or the Securities Exchange Act of nomic future. It goes a long way to re- visions Senator GRASSLEY and I worked 1934. storing the fairness and transparency

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00036 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY July 25, 2002 CONGRESSIONAL RECORD — SENATE S7359 so that people may make their invest- their homes. I have been in homes and I believe it goes way beyond mere ac- ments—and investments may go up, spent time with families whose child counting issues. What we are agreeing and they may go down, but they can will never walk, who have been blinded to today deals with the financial secu- know when they make those invest- for life, who have been crippled for life, rity of millions of individual investors ments, they are making those invest- who have suffered injuries from which across this country, the security of ments based on true and accurate anal- they will never recover. their pensions, their 401(k) programs, ysis and not on bogus numbers that These children blinded for life, crip- and their other investments for the fu- some audit firm on the take has been pled for life, severely injured for life— ture of their children and their grand- willing to put forward as the truth there is a description in the HHS re- children. when, in fact, they are not the truth. port on which the President is relying What we are talking about today in- Again, the whole Nation owes a great which talks about when juries find volves the very vitality of our econ- deal of gratitude to Chairman SAR- they have been hurt and award money omy, the amount of investment that BANES and to the Senate, in this case, to them, they describe it as ‘‘winning will take place in the economy, the for what I am confident is going to be the lottery ticket.’’ The parents of a number of jobs that will be created, an overwhelming vote in favor of this child who has been blinded for life, the and the vitality of farms. It involves legislation. parents of a child who will never walk, the standing of AMERICA in the inter- I yield the floor. rest assured they do not believe they national economy, whether we will Mr. SARBANES. Mr. President, I have the winning lottery ticket. continue to be a safe haven for invest- yield 6 minutes to the Senator from My question is: How many of those ments from those abroad, attracting North Carolina. people are the President talking to the capital that helps us build a strong The PRESIDING OFFICER (Mr. when he is in North Carolina today? foundation for America’s economy. CORZINE). The Senator from North The next time he comes back to North More than anything else, this bill Carolina. Carolina, we invite him to talk to some embodies the basic values upon which Mr. EDWARDS. Mr. President, I of those people because those are the this has been based. It clearly answers thank, along with all my colleagues, ordinary Americans to whom he should the question: Will we continue to en- Senator SARBANES for the extraor- be talking. Those are the people who courage those virtues that have always dinary work he has done on this bill. are going to be impacted. The children characterized America and will our Na- We are proud of him. America appre- who have suffered serious injuries are tion continue to be the land of oppor- ciates very much what he and others the ones who are going to have the tunity based upon hard work, honesty, who have worked with him have done. greatest impact and have their rights and playing by the rules or, will we be I also thank Senator ENZI, who is in taken away by what the President is perceived as the land of opportunity the Chamber, and Senator CORZINE, proposing. based upon deceit. I believe that the who is presiding, for the work they Unfortunately, listening to ordinary right answer, based upon traditional have done with me on what I think is people is not what this administration values and virtues, is embodied in the an important part of this legislation does. They have done it time and time accounting reform and corporate re- which, in addition to corporate CEOs again. It is stunning, but it is sad and sponsibility bill. and accountants, is holding the law- consistent. When this administration I congratulate our colleagues, Sen- yers involved in these transactions re- has a choice between protecting the ators SARBANES, DODD, CORZINE and sponsible and accountable; that if they rights of big companies, big insurance ENZI. They demonstrated leadership see something wrong occurring, they companies versus the rights of ordi- and foresight in this issue. should do something about it—report it nary people, they choose the big insur- Since the tragedies of 9/11, our coun- to their client, to the corporation, re- ance company, the big companies every try has been involved in twin struggles: port it to the CEO, the chief legal offi- single time. They have been dragged One, the physical national security of cer and, if necessary, report it to the kicking and screaming to do something this country; and, second, getting this board. about corporate responsibility, which economy moving again to ensure the In Congress, we are doing what needs we are doing in the Congress. economic security of Americans across to be done and stepping to the plate On the Patients’ Bill of Rights, on this country. There are parallels be- with regard to corporate responsibility. which Senator KENNEDY, Senator tween these two challenges. Both oc- That is in striking contrast to what is MCCAIN, and I have worked so hard, curred as a result of unexpected trage- going on in my home State right now. they have consistently sided with the dies but have presented us with oppor- At a time when Americans are de- big HMOs, which is why we do not have tunities to make this an even better, manding more corporate responsi- a Patients’ Bill of Rights in this coun- stronger, more secure Nation. Both in- bility, when Congress is stepping up try. volve breaking the political gridlock and doing what needs to be done, the On prescription drugs, when we tried and the bureaucratic inertia that all President has gone to North Carolina to do something about the cost of pre- too often make progress in this Capitol today to ask for less corporate respon- scription drugs on the floor of the Sen- difficult. And both involve striking the sibility, to make it easier on insurance ate, this administration consistently right balance between individual free- companies and to make it harder on sided with the big drug companies. dom and liberty on the one hand, that victims. When it comes to the environment, we cherish, and collective security, The President is in North Carolina this administration has weakened which makes individual liberty mean- today proposing some of the smallest clean air laws that protect the air for ingful, on the other. limits that have ever been proposed for our children and consistently sided Let me conclude where I began. This families who have suffered tragedies, with the big energy companies that are issue goes a long way beyond mere ac- serious problems, as a result of poor polluting our air. counting issues. It goes a long way be- medical care at a time when medical Today the President adds to that list, yond economic policy. It goes to the malpractice insurance premiums con- in going to the State of North Caro- very heart of who we are, what we stitute way less than 1 percent, sub- lina, the big insurance companies. This stand for as a people, and the kind of stantially less than 1 percent, of med- President loves to talk about compas- values we cherish in the United States ical care costs in this country. sion. My question to him is: Where is of America. This will protect indi- The President is holding a round- his compassion for the victims? vidual investors. It will help to ensure table, as I speak, on this subject. I Mr. President, I yield the floor. the integrity of our economy. But more would like to see how many victims of Mr. BAYH. Mr. President, I rise than anything else, it will ensure that medical negligence, of medical mal- today in support of the accounting re- those Americans who have embraced practice, people who have been dev- form and corporate responsibility con- our tradition with virtues, who have astated and their lives devastated, are ference agreement. I do so, because I worked hard and saved their money, participating in this roundtable. I believe very strongly that it is in the who have played by the rules, and are know these people. For many years I best interests of America at this crit- honest are able to get ahead in this so- have represented them. I have been in ical time in our history. ciety.

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00037 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY S7360 CONGRESSIONAL RECORD — SENATE July 25, 2002 It will send a loud and clear signal to The conference report requires CEOs the headlines read ‘‘Sarbanes bill dead’’ those who practice corporate fraud to certify their financial statements or or ‘‘Accounting Reform Fading.’’ that they do not have an avenue to suc- face up to 20 years in prison for fal- In the wake of recent revelations cess in this country. That does not em- sifying information on reports. It keeps about WorldCom and just 2 days ago body the best values of America. I executives from obtaining corporate Merck, corporate corruption has strongly support the accounting reform loans that are not available to out- reached an all-time high; we are now at and corporate responsibility conference siders. It requires public companies to a new level of corporate corruption. agreement. I urge my colleagues to provide periodic reports to the SEC on We’ve reached a new low and the ques- enact this important legislation. off-balance transactions, arrange- tion every member of the Senate must Mr. KERRY. Mr. President, I strong- ments, obligations and other relation- be asking is: ‘‘Where does it end?’’ ly support the Sarbanes-Oxley Act of ships that may have a material current Buzzwords like ‘‘accounting fraud,’’ 2002 because it will help end the cor- or future effect on the company’s fi- ‘‘corporate corruption,’’ ‘‘Restate- porate abuses that in recent months nancial condition. It requires directors, ments,’’ ‘‘Cooking the books,’’ are have plagued our economy and will officers and 10 percent equity holders being bandied about in the press, in the help restore confidence in our econ- to report their purchases and sales of coffee shops, at the dinner tables omy. I would like to take this oppor- company securities within two days of across America. Just this weekend at tunity to express my appreciation for the transaction. the Taste of Buffalo, people came up to the efforts that Senator PAUL SAR- I am pleased that the conference re- me and said ‘‘Throw ‘em in jail, BANES, Chairman of the Senate Bank- port includes the Corporate Fraud and Chuck!’’ They were talking about the ing, Housing and Urban Affairs Com- Criminal Fraud Accountability Act Ken Lay’s, Bernard Ebers’, the Andrew mittee, has made to develop and enact which will provide for criminal pros- Fasdow’s of the corporate world. White this important legislation. As a former ecution and enhanced penalties of per- collar criminals who ran giant corpora- member of the Banking Committee, I sons who defraud investors in publicly tions and used tricky gimmicks to rob know how difficult it is to respond traded securities or alter or destroy investors of not only their hard money quickly to recent events that affected evidence in Federal investigations. It but also their confidence in the strong- our capital markets. However, Senator will also prohibit debts incurred in vio- est and fairest markets in the world. SARBANES has put together a coalition lation of securities fraud laws from * * * They are the investment giants: which led to a unanimous vote in sup- being discharged in bankruptcy and Enron, Arthur Andersen, Adelphia, port of his bill in the Senate, and the protect whistle blowers who report CMS Energy, Reliant Resources, provisions of which is the base text for fraud against retaliation by their em- Dynergy, Tyco International, and now this conference report. ployers. Xerox and WorldCom. A mere handful The United States must stand for the The conference report requires the of our nations top companies who have fairest, most transparent and efficient SEC to adopt rules to foster greater gone under as a result of misrepre- financial markets in the world. How- public confidence in securities research sented earnings and poor management. ever, the trust and confidence of the including: protecting the objectivity In less than a years time, these so- American people in their financial and independence of stock analysts called investment giants through the markets have been dangerously eroded who publish research intended for the great gift of deceit and tricky account- by the emergence of serious accounting public by prohibiting the pre-publica- ing practices have reduced themselves irregularities by some companies and tion clearance of such research or rec- to mere shells of their former exist- possible fraudulent actions by compa- ommendations by investment banking ence. nies like WorldCom, Inc., Enron, Ar- or other staff not directly responsible As a result, their use of tricky gim- thur Andersen and others. Some in- for investment research; disclosing micks to hide the real picture and lit- vestment banks have been charged whether the public company being ana- erally milk the system dry have caused with publicly recommending stocks for lyzed has been a client of the analyst’s investors around the globe to question public purchase that their own ana- firm and what services the firm pro- integrity of our nations markets, lysts regarded as junk. vided; limiting the supervision of re- which are supposed to be the strongest The shocking malfeasance by these search analysts to officials not engaged and most resilient because they are businesses and accounting firms has in investment banking activities; pro- perceived as the most open, most put a strain on the growth of our econ- tecting securities analysts from retal- transparent markets in the world. Up omy. The misconduct by a few senior iation by investment banking staff. until now, the United States had been executives has cost the jobs of hard- The provisions included in this legis- a magnet for foreign investment. Yet, working Americans, including 17,000 at lation will help restore confidence in the selfish, greedy actions of a small WorldCom and thousands more at com- our capital markets and in turn will few have led to a steady and precipi- panies accused of similar wrongdoing. help provide for future economic tous drop in foreign investment in our The lack of faith in our financial mar- growth. It is an important first step, financial markets. kets contributed to an overall decline not a last. Mr. President, I am pleased It is no secret that greed played a in stock values and has caused grave to support the Conference Report and major role in our markets rapid decline losses to individual investors and pen- will continue to look for ways to im- and slow demise. The heads of these en- sion funds. For example, the losses to prove investor confidence in our finan- tities stole millions, some billions of the California Public Employees Re- cial markets. dollars from investors, and it is now tirement System from the recent Mr. SCHUMER. Mr. President, every- time that we make them pay for their WorldCom disclosures total more than one knows that New York City is the actions. $580 million. financial capital of the world. Yet as I commend the NASDAQ and the New The conference report creates a new we continue to rebuild our city in light York Stock Exchange for their an- Public Company Accounting Oversight of the tragic events of September 11, nouncements of new, tough corporate Board to oversee the auditing of com- we are now faced with the devastating governance standards. The New York panies that are subject to the federal effects of depressed markets and un- markets have taken the first steps to securities laws. The Board will estab- sure investors, who are once again vic- correct corporate corruption, and now lish auditing, quality control, and eth- tims. With more than half of American it is our turn to find the right balance ical standards for accounting firms. households investing in the markets, in light of these unsteady markets and The conference report restricts ac- we’re all affected by a crisis in investor times. counting firms from providing a num- confidence. So what is the right balance? The ber of non-audit services to its audit I can’t think of a more appropriate right balance is one that will not only clients to preserve the firm’s independ- time than the present for the Senate to offer strict corporate governance laws, ence. It also requires accounting firms debate legislation to restore dwindling protect the average investor from to change the lead or coordinating investor confidence and bring sound being swindled out of his or her hard partners for a company every five footing back to our financial markets. earned savings by a fast-talking, years. Isn’t it ironic? Just a few weeks ago, wheeling and dealing broker, but will

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00038 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY July 25, 2002 CONGRESSIONAL RECORD — SENATE S7361 also severely punish those individuals tion. But the legislation goes much fur- section in the Sarbanes-Oxley Act, pro- who intentionally mislead investors ther, as it should, because the problem vides for regular and systematic re- with faulty practices. That is why I am goes much deeper. We are faced with views by the Securities and Exchange introducing the following amendments more than the wrong doing of indi- Commission of the periodic reports to the Public Company Accounting Re- vidual executives, we are faced with a filed by public companies that are list- form and Investor Protection Act of crisis in confidence in American cap- ed on a national securities exchange or 2002 to further limit the ability of com- ital markets and American business. on Nasdaq. The section requires that pany execs from personally manipu- This conference report retains the there be some review of issuers’ disclo- lating and rigging the system for their strong Senate reforms virtually intact. sures at least once every three years. personal benefit and interest. It bars an auditor from offering audit The bill identifies factors which the The first amendment prohibits com- services and other consulting services Commission should consider in sched- panies from issuing personal loans to to the same client. It says publically uling reviews, including the issuer’s company executives as seen with traded companies must change the capitalization, stock price volatility Worldcom, whose CEO received more partner in charge of the audit every and restatements of earnings. We ex- than $300,000 in loans from the tech- five years. It strengthens oversight of pect the Commission to exercise its nology giant. Instead, CEOs will have accountants, by establishing an inde- discretion to determine the appro- to go to the bank, just like everyone pendent board to set and enforce stand- priate level and scope of review for else, to acquire a loan; which, will re- ards. And it enhances disclosure. This each company’s reports in the further- duce the risk of CEOs ability to use alone is real reform. But the bill does ance of the protection of investors and company funds for personal purposes. more. It makes corporate executives the public interest. The second amendment requires com- more accountable to their share- The PRESIDING OFFICER. Who pany execs to forfeit any and all bo- holders. It makes investment analysts yields time? nuses and additional compensation if more accountable to the public. And Mr. SARBANES. Mr. President, may their restatements occur along with it’s bill contains strong penalties for I ask what the time situation is? criminal liability. corporate wrong-doers. The PRESIDING OFFICER. The Sen- It is my hope that by revealing the All and all, this legislation lets the ator from Maryland has 15 minutes 10 few bad apples at the bottom of the sunshine back into the smoke-filled seconds. The Senator from Wyoming barrel, and punishing these individuals corporate board rooms so that insiders has 21 minutes 30 seconds. for their immoral behavior, we can have harder time cheating the out- Mr. SARBANES. I yield 3 minutes to save the rest of the industry and re- siders. It is structural reform that re- the Senator from New York. store confidence in our markets. stores checks and balances that will The PRESIDING OFFICER. The Sen- The legislation pending before us will protect against fraud, deception, and ator from New York. make it harder for companies to lie reckless carelessness. Mr. SCHUMER. I thank the Chair. about their assets. Thats the least we We need to restore America’s faith in Mr. President, this is an extremely can do in re-establishing public con- corporate America. It has gone beyond important day for our capital markets, fidence in corporate America. Our com- individual wrong doing. The system for our country, and for the future of mon purpose today is to ensure that hides and encourages corruption. our economy. As we all know, cap- the Enron’s, the Tyco’s, and the Today the Congress passes strong re- italism has its ups and downs and WorldCom’s never happen again. works in ups and downs, and there have Now is the time for us to act. It is form. Now I call on the President to been periods throughout our history—I the least we can do to shore up the in- make enactment and enforcement of can think of the S&L crisis a decade vesting public’s confidence in our mar- this new law a priority. ago—where things get off track, out of kets. Mr. BOND. Mr. President, last night, Mr. WELLSTONE. Mr. President, 2 the conference committee released its control. It is our job as Government years ago it was pretty lonely being in final report on comprehensive account- not to interfere with entrepreneurial favor of the auditor independence re- ing reform and corporate governance vigor, not to create such regulation forms that then-SEC Chairman Arthur legislation. The reaction of our finan- that they become a straitjacketed Levitt said were necessary to guard cial markets confirms that this legisla- company, but at the time when the against unprecedented accounting tion is absolutely necessary to help re- markets show that things have gotten scandals. I am proud that I was one of store integrity and confidence to our off track, it is our job to help put them the few who thought Chairman Levitt free market system and our investment back on track. was going in the right direction. Unfor- community. There is a bottom line principle here: tunately it took the implosion of sev- However, in our rush to enact broad If investors, whether throughout the eral multi-billion dollar firms, and a reforms, we may be damaging the eco- United States or the rest of the world, loss of tens of thousands of jobs and nomic framework for small companies do not believe companies are on the hundreds of billions of dollars in inves- to reach our capital markets. In the level, they will not invest. Unfortu- tor equity, to prove that he was right. long term, the reforms will make our nately, the revelations of the last year Now America’s capital markets have economy stronger. In the short term, have given people the view that they been shaken by a dramatic loss in in- we will be creating complete chaos for are not on the level. That it is not the vestor confidence, threatening the eco- small publicly traded companies and same for them in terms of even infor- nomic recovery. companies trying to gain the capital mation as it is for somebody at the top, But today, Congress has acted. I rise for growth through stock offerings. that the information they may be get- today in strong support of the Public I am extremely disappointed in the ting may be wrong or distorted far be- Company Accounting Reform and In- conferees’ decision not to recognize yond what they normally would in the vestor Protection Act conference re- this fact and provide the Securities and world. So this bill puts that back. port. I commend the Senator from Exchange Commission and the pro- I think it is a carefully balanced bill. Maryland, the Chairman of the Bank- posed Public Company Accounting There are some changes in it. There are ing Committee for putting together Oversight Board with greater flexi- some changes not in it that I would significant, structural reform of cor- bility in dealing with small firms. like to have seen, but the perfect porate governance and auditor inde- Small business has been the driving should not be the enemy of the good. It pendence and for defending it in con- force of our economy for well over a is a good bill, a fine bill. In fact, when ference. decade. The high hurdles in the legisla- the agreement was reached, the Dow And I am heartened that the Presi- tion are necessary for large, conglom- Jones went up 400 points. I do not dent and the House leadership have fi- erate companies but they may be a trip think it was coincidental. Whether it nally agreed to comprehensive reform wire for our small business entrepre- be CEOs of large companies or indi- instead of mere half-measures and neurial community. vidual investors, the public is saying to tough rhetoric. Mr. SARBANES. Mr. President, I us, make it right. Look at the abuses This bill holds the bad actors ac- note that the Congress, in the En- that occurred in the past and make countable for their fraud and decep- hanced Review of Periodic Disclosures sure they cannot occur again, and do it

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00039 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY S7362 CONGRESSIONAL RECORD — SENATE July 25, 2002 in a careful way that keeps our mar- mous way we achieved the result and here without him. I tip my hat to him kets fluid, liquid, deep, and important. overwhelming support of the Senate and to MIKE ENZI, the only Member of I think this bill does it. and the House fulfill a responsibility of this Chamber who actually knew some- I want to pay a great deal of tribute Congress to protect investors. There is thing at a practical level about what it to our chairman, Senator SARBANES, more work to be done, but we have was to be an accountant and what life and to so many others who made this begun a significant part of the journey. was like in the trenches. bill a reality. With the passage of this In fact, we traveled a great distance For the staff and others who worked bill, we can tell investors, while we down the road in fulfilling a congres- on this legislation, this was not the have not cleared up every problem, and sional responsibility in responding to most popular idea in the world. Had it perhaps we will come back and address the events that began to unfold, at not been for unfolding events, I am not this later—I think we will have to in a least to the public’s awareness, last Oc- sure we would have developed that couple areas—we have certainly made tober. And the story is not yet com- kind of support. I will love to one day things better. plete. We do not know the final results. tell my daughter, who is only an in- A few weeks ago, Washington looked I have a few minutes in which to fant, that it was the power of our per- as if it was dithering in the face of cri- share some thoughts. I am going to suasion which convinced a majority sis, but today we proudly act in a bi- move quickly to share comments. I here to go along. partisan way to restore faith in our begin by commending my colleague Not many understood the value, the markets, the deepest, strongest, and from Maryland, the chairman of the substantive value, of this bill. MIKE best markets in the world. Banking Committee, for the tremen- ENZI did, a number of others did, there I dare say, I know there are some dous job he has done. I said yesterday, were many in the House who did, but who are against any change or any reg- any students of the Congress of the an awful lot of people, even as late as ulation, but our markets will be United States who want to seek out a week ago, were suggesting maybe stronger tomorrow than they were this good examples of how a legislative this bill was a bad idea, and that it morning when this bill passes the product can be developed, nurtured, would not go anywhere, and it House, the Senate, and is signed by the analyzed, discussed, debated, and fi- shouldn’t go anywhere; we ought to President. nally passed, this is about as good an spend another couple of months think- The PRESIDING OFFICER. Who example as I have seen in recent years ing about it. yields time? of how one ought to proceed. Certainly Those notices were not a month old, Mr. SARBANES. Mr. President, we the hearings we held in the Banking or 2 months old; that was 5 or 6 day are down quite far in our time. Senator Committee I don’t recall attracting ago. I understand it was the public’s demand that we respond to this that DODD, who wishes to speak, is at a me- much attention. I don’t recall a single had an awful lot to do with the support morial service. I suggest if the other one of the 12 hearings we held appear- we garnered. That is all right. I never side could use some of its time, it ing on the nightly news or being lead argue about how you get support would be helpful in balancing this out. stories on some of the 24-hour news around here as long as you get it in the I ask unanimous consent that while we stations. end. We got it in the end, and that is are trying to work this out the time I recall a great many hearings where people sat there, raised their right the important news. not be charged to either party, and I The fact is, we are about to vote hand, and took the fifth amendment. suggest the absence of a quorum. overwhelmingly to support a very crit- That got a lot of attention. The 12 The PRESIDING OFFICER. The ical piece of legislation. I am con- hearings held in the Banking Com- clerk will call the roll. fident, as he has already indicated, mittee of the Senate, where we went The legislative clerk proceeded to that the President will sign this bill through the deliberate, slow, ponderous call the roll. into law. We are already seeing mar- Mr. ENZI. Mr. President, I ask unani- process of actually listening to people kets respond, not entirely because of mous consent that the order for the who had something to say about what this, but certainly in no small measure quorum call be rescinded. ought to be done to clean up this mess, because of the events that have un- The PRESIDING OFFICER. Without never made it on the nightly news that folded and the parts Congress played. objection, it is so ordered. I am aware of. The chairman of the committee has Mr. ENZI. I suggest the absence of a I commend again my friend and col- talked about part of the bill. There are quorum. league with whom I have enjoyed my very important pieces, including the The PRESIDING OFFICER. The service in the Congress of the United auditor independence. The board will clerk will call the roll. States for more than a quarter of a be revolutionary in how it operates. The assistant legislative clerk pro- century. We have sat next to each Someone pointed out today, a lot of ceeded to call the roll. other for a good part of that time in what the regulators do will determine Mr. SARBANES. Mr. President, I ask both the House and in this Chamber. I the value of what we have written leg- unanimous consent that the order for sit next to him on the Foreign Affairs islatively. I am confident that will be the quorum call be rescinded. Committee and on the Banking Com- the case. The PRESIDING OFFICER. Without mittee. If I could make the choice and Having FASB now be compensated objection, it is so ordered. it would not be determined by senior- for and paid for from public money and Mr. SARBANES. Mr. President, I ity, I would make him my choice for not relying on the largess and gen- yield 8 minutes to the distinguished seatmate. I have great respect for him erosity of the accounting industry to Senator from Connecticut. and admire him immensely. He has receive compensation will make a sig- The PRESIDING OFFICER. The Sen- proven the value of having PAUL SAR- nificant difference in establishing ac- ator from Connecticut. BANES as a Member of this body. counting rules and procedures. Cer- Mr. DODD. Mr. President, when we I also point out the Presiding Officer, tainly having prohibitions against opened the conference on this legisla- one of the most junior Members of this those going from the industry, working tion a week or so ago, I said my hope Chamber, who provided an incredible, for the clients for whom they have was the passage of this bill would be invaluable support and source of ideas, done audits, will have a beneficial ef- quick, decisive, and unanimous. Two guidance. Rarely does a new Member fect on slowing down this not only ap- out of three is not bad. We got quick play such an important role on such an pearance of conflict, but certainly the and decisive and almost unanimous. important piece of legislation. Of any conflicts of interest that have occurred Our colleague from Texas, and our Member who was involved in this proc- too often. friend, was unable to support the final ess, MIKE ENZI of Wyoming and others There are many other parts of the product for reasons he has already ex- all would agree, in any history written bill, including corporate penalties, that plained. of the development of the bill, the role were crafted by our colleague from I thought we did an excellent job in of a freshman Senator from the State Vermont and other Members of the Ju- moving as quickly as we did. I believe of New Jersey named JON CORZINE diciary Committee, that deserve a passage of the legislation and the quick needs to be talked about. He played a great deal of credit for their contribu- and decisive manner and nearly unani- very important role. We would not be tion to this process. The leadership,

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00040 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY July 25, 2002 CONGRESSIONAL RECORD — SENATE S7363 Senator DASCHLE, certainly for insist- I look forward to your vibrancy, your to talk with me about the need for ing we move as rapidly as we did to get ideas, and your passion in whatever audit independence. Senator SARBANES the product done in committee and get role you decide to assume in the next and others have made that possible. it on the floor of the Senate, under- part of your life, and thank you for the Many people took their savings, con- standing how important this issue tremendous work you have given to the verted it to stock, and thought it would be to the shareholder interests committee and this body through your would be there for their children or and pensioners and to others who de- service. grandchildren. Many people had 401(k)s pend upon a solid, strong economy for I thank again the chairman and they were counting on. All of this has their well-being—certainly their con- other members of the committee for eroded in value. Investors do not have tribution is extremely important as contributing to what may be one of the the confidence in the economy. I think well. most important pieces of legislation the key is to make the structural We have seen the economy begin to this body will consider in the 107th change and make sure people can count do a bit better. I don’t think our work Congress and one of the most impor- on the independent audits, that no one is done, despite the accomplishments tant in the area of financial services in is cooking their books. This is the best in this legislation. My hope would be many, many decades. of government oversight. I am very that before this Senate adjourns in a I yield the floor. proud to support this legislation. week and a half from now, we might The PRESIDING OFFICER. Who Once again, I thank the chair of the deal with the pension issue. I don’t yields time? Banking Committee for exceptional know if that will be possible. I know Mr. GRAMM. Mr. President, how leadership. there are a lot of other issues that need much time do we have? I yield the floor. to be considered. My hope is if we are The PRESIDING OFFICER. The Sen- The PRESIDING OFFICER. The Sen- not able to do that in the next week ator from Texas has 14 minutes. ator from Maryland. and a half, we will come back soon Mr. GRAMM. We were going to shoot Mr. SARBANES. Mr. President, as after we reconvene in September. for about 4:30 so I may yield some of it Senator GRAMM was speaking earlier I I sit on the Health, Education, Labor, back, depending on who comes over. was thinking to myself that he really and Pensions Committee with the pre- Let me, first, thank my dear col- was exemplifying on the floor of the siding officer who is interested in that league, Senator DODD, for his kind Senate the sort of dialog we went committee. My hope is that we can comments. I have enjoyed working through in the committee. As he was deal with the pension reform matters with him over the years. I very much making an argument about auditor that are necessary, as well, for adop- appreciate the comments he made. independence, I was thinking that is tion by this Congress before the 107th I want to say something about my really a very reasonable argument and Congress adjourns. staff. A famous philosopher once said: one to which we really paid attention. Again, I commend all those involved. In no way can you get a keener insight I want to give the counterargument, I thank Alex Sternhill of my office, into the true nature of a leader than by and then make a concluding comment Steve Harris, Marty Gruenberg, all the looking at the people by whom he sur- about the terrific work of the staff on Members who worked with the chair- rounds himself. this bill. man’s committee and the full com- I would always be happy to have any- Senator GRAMM has suggested that mittee of the Senate Banking Com- body judge me by Linda Lord and by the conference report should be mittee, and those on the minority side, Wayne Abernathy. It is amazing how changed to give the SEC or the Over- as well, who played an extremely im- much impact staffers have on the Sen- sight Board authority to grant broad portant role. ate. I am blessed in this area to have categorical exemptions from the list of While he disagreed with the final out- two of the best staff people who have non-audit services that Section 201 of come of the bill, the Senator from ever served any Senator in the history Texas and I have had a great relation- the bill prohibits registered public ac- of this country. On most issues on ship over these many years we have counting firms to provide to public which I worked with Linda Lord, she served together. I have always enjoyed company audit clients. knows more about this subject than Such a change, in my view, would being on his side. He is a tough oppo- anybody, and generally more than ev- weaken one of the fundamental objec- nent, but when we worked together we erybody else combined. In working tives of the conference report: to draw have done some pretty good work with her, I see that the Lord was a a bright line around a limited list of around here and passed some pretty great discriminator; he gave some peo- non-audit services that accounting good bills. He is leaving and I believe the Senate ple incredible ability and most of us he firms may not provide to public com- will be less vibrant an institution be- gave relatively few, in the way of tal- pany audit clients because their doing cause of his absence. It is important ents. I thank her for the great job she so creates a fundamental conflict of in- that this place be a place of ideas for has done. terest for the accounting firms. debate to occur, and the Senator from I thank Wayne Abernathy. In the This limited list is based on a set of Texas has always made that kind of years I was chairman of the Banking simple principles: contribution. Committee, Wayne Abernathy was A public company auditor, in order The PRESIDING OFFICER. The time chairman of the Banking Committee. to be independent, should not audit its of the Senator has expired. In the day-to-day work, he has made an own work (as it would if it provided in- Mr. DODD. Hang on. I am com- incredible contribution. If there is an ternal audit outsourcing services, fi- mending him. He is going to give me unfairness to it, it is that I have gotten nancial information systems design, more time. credit for all the good work that they appraisal or valuation services, actu- Mr. GRAMM. The Senator can have have done, and I am grateful for that. arial services, or bookkeeping services all the time he wants. I reserve the remainder of my time. to an audit client). Mr. DODD. Mr. President, I have The PRESIDING OFFICER. Who A public company auditor should not learned after more than 20 years that if yields time? function as part of management or as you want the minority to give you a Mr. SARBANES. How much time do I an employee of the audit client (as it little more time, start complementing have remaining? would if it provided human resources them. It is amazing. Egos are alive and The PRESIDING OFFICER. The Sen- services such as recruiting, hiring, and well in the Senate. ator has 3 minutes remaining. designing compensation packages for I am going to miss him. He is not Mr. SARBANES. I yield 1 minute to the officers, directors, and managers of done. We have more work, obviously, in the Senator from Minnesota. an audit client). the remaining weeks, but this may be Mr. WELLSTONE. I thank the Sen- A public company auditor, to be inde- one of the last major bills the Banking ator from Maryland. I thank him forhis pendent, should not act as an advocate Committee considers. I don’t know great leadership and the other Sen- of its audit client (as it would if it pro- what life holds for him down the road, ators working on this. I can only say vided legal and expert services to an but the good Lord is not done with him this in 1 minute: I remember when Ar- audit client in judicial or regulatory yet. thur Levitt came by several years ago proceedings.)

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00041 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY S7364 CONGRESSIONAL RECORD — SENATE July 25, 2002 A public company auditor should not tioning as the president of the com- former Comptroller General Charles be a promoter of the company’s stock pany. There would have been no need Bowsher, former SEC Chairman Arthur or other financial interests (as it would for an SEC action if the non-audit serv- Levitt, and former Federal Reserve be if it served as a broker-dealer, in- ice were simply prohibited. Board Chairman Paul Volcker. vestment adviser, or investment bank- The inherent conflict created by The argument is made that small er for the company). these consulting services has been ex- companies, in particular, may be bur- I want to emphasize that Section 201 acerbated by their rapid growth in the dened by this requirement and that the does not bar accounting firms from of- last 15 years. According to the SEC, 55 SEC should have broad authority to fering consulting services. It simply re- percent of the average revenue of the grant categorical exemptions. It is quires that they not offer certain con- big five accounting firms came from even argued that so many companies sulting services to public companies accounting and auditing services in would seek case-by-case exemptions for which they wish to serve as ‘‘inde- 1988. Twenty-two percent of the aver- that the SEC would become over- pendent auditor.’’ An accounting firm age revenue came from management whelmed and would be unable to proc- is free to offer any services it wants to consulting services. By 1999, those fig- ess the exemptions in a timely manner. any public companies it does not audit ures had fallen to 31 percent for ac- The point is that if the provision of a (or to any private companies). It also counting and auditing services, and non-audit service to a public company may engage in any non-audit service, risen to 50 percent for management audit client creates a conflict of inter- including tax services, that is not on consulting services. Recent data re- est for the accounting firm that non- the list for an audit client if the activ- ported to the SEC showed on average audit service should be prohibited, ity is approved in advance by the audit public accounting firms’ non-audit fees whether the public company is large or committee of the public company. comprised 73 percent of their total fees, small. Investors rely on the audit in The conference report does authorize or $2.69 in non-audit fees for every $1.00 making their investment decisions, and the new Oversight Board, on a case-by- in audit fees. the independence of the audit should case basis, to exempt any person, A number of the most knowledgeable not be compromised by the provision of issuer, public accounting firm, or and thoughtful witnesses who testified the non-audit service. If a legitimate transaction from the prohibition on before the Senate Banking Committee exceptional hardship is imposed, then the provision of non-audit services to in the hearings held in preparation for the Oversight Board would have the au- the extent that such exemption is nec- this legislation argued that the growth thority to grant case-by-case exemp- essary or appropriate in the public in- in the non-audit consulting business tions. terest and is consistent with the pro- done by the large accounting firms for The present Comptroller General, tection of investors. their audit clients has so compromised David Walker, issued a particularly The exemptive authority provided the independence of the audits that a strong statement in support of the ap- the Board is intentionally narrow to complete prohibition on the provision proach to auditor independence taken apply to individual cases where the ap- of consulting services by accounting in the bill conference report I would plication of the statutory requirement firms to their public audit clients is re- like to quote: would impose some extraordinary hard- quired. Perhaps the strongest advo- I believe that legislation that will provide ship or circumstance that would merit cates of this view have been the man- a framework and guidance for the SEC to use in setting independence standards for public an exemption consistent with the pro- agers of large pension funds who are entrusted with people’s retirement sav- company audits is needed. History has shown tection of the public interest and the that the AICPA [American Institute of Cer- protection of investors. ings. tified Public Accountants] and the SEC have But the fundamental presumption of For example, the California Public failed to update their independence stand- the provision is that these non-audit Employees’ Retirement System ards in a timely fashion and that past up- services, by their very nature, present (CalPERS), manages pension and dates have not adequately protected the a conflict of interest for an accounting health benefits for more than 1.3 mil- public’s interests. In addition, the account- firm if provided to a public company lion members and has aggregate hold- ing profession has placed too much emphasis audit client. ings totaling almost $150 billion. Ac- on growing non-audit fees and not enough emphasis on modernizing the auditing pro- Arthur Andersen was conflicted be- cording to CalPERS CEO, James E. Burton: fession for the 21st century environment. cause it served Enron as both an audi- Congress is the proper body to promulgate a tor and a consultant, and for two years the inherent conflicts created when an ex- framework for the SEC to use in connection it also served as Enron’s internal audi- ternal auditor is simultaneously receiving with independence related regulatory and en- tor, essentially auditing its own work. fees from a company for non-audit work can- forcement actions in order to help ensure not be remedied by anything less than a Enron was Andersen’s largest client, confidence in financial reporting and safe- bright-line ban. An accounting firm should guard investors and the public’s interests. and in 2000 Andersen earned $27 million be an auditor or a consultant, but not both in consulting fees from the company The independence provision [of the bill] . . . to the same client. strikes a reasoned and reasonable balance ($25 million in audit fees). John Biggs is CEO of Teachers Insur- that will enable auditors to perform a range In its oversight hearing earlier this ance and Annuity Association College of non-audit services for their audit clients year on the failure of Superior Bank in Retirement Equities Fund (TIAA- and an unlimited range of non-audit services Hinsdale, Illinois, the Senate Banking CREF), the largest private pension sys- for their non-audit clients. . . . In my opin- Committee learned first-hand the risks tem in the world, which manages ap- ion, the time to act on independence legisla- associated with allowing accounting proximately $275 billion in pension as- tion is now. firms to audit their own work. In that sets for over 2 million participants in This auditor independence provision case, the accounting firm audited and the education and research commu- is at the very center of this legislation. certified a valuation of risky residual nity. Mr. Biggs was also a member of It goes to the public trust granted to assets calculated according to a meth- the last Public Oversight Board. He public accounting firms by our securi- odology it had provided as a consult- told the Committee that: ties laws which require comprehensive ant. The valuation was excessive and TIAA-CREF does not allow our public financial statements that must be pre- led to the failure of the institution. audit firm to provide any consulting services pared, in the words of the Securities The SEC’s recent actions against one to us, and our policy even bars our auditor Act of 1933, by ‘‘an independent public of the large public accounting firms from providing tax services. or certified accountant.’’ (KPMG) in an enforcement case illus- The conference report chose not to The statutory independent audit re- trates the danger of allowing an ac- follow the approach of imposing a com- quirement has two sides, a private counting firm to serve as a broker deal- plete prohibition on the provision of franchise and a public trust. It grants a er, investment advisor, or investment non-audit services to audit clients. In- franchise to the nation’s public ac- banker for a public company audit cli- stead it chose the approach of identi- countants—their services, and only ent (Porta Systems). In that case, the fying the non-audit services which by their services—must be secured before accounting firm set up an affiliate and their very nature pose a conflict of in- an issuer of securities can go to mar- the affiliate provided ‘‘turn around’’ terest and should be prohibited. Among ket, have the securities listed on the services to the issuer, including func- those supporting this approach are nation’s stock exchanges, or comply

VerDate Mar 15 2010 20:55 Jan 09, 2014 Jkt 081600 PO 00000 Frm 00042 Fmt 4624 Sfmt 0634 E:\2002SENATE\S25JY2.REC S25JY2 mmaher on DSKCGSP4G1 with SOCIALSECURITY July 25, 2002 CONGRESSIONAL RECORD — SENATE S7365 with the reporting requirements of the Mr. SARBANES. How much time is NOT VOTING—1 securities laws. This is a source of sig- remaining? Helms nificant private benefit. The PRESIDING OFFICER. The Sen- The conference report was agreed to. But the franchise is conditional. It ator from Maryland is without time. Mr. SARBANES. Mr. President, I comes in return for the CPA’s assump- There are 12 minutes for the Senator move to reconsider the vote. tion of a public duty and obligation. As from Texas. Mr. DASCHLE. I move to lay that a unanimous Supreme Court noted Mr. GRAMM. Mr. President, we have motion on the table. nearly 20 years ago: reached the hour that we set for a vote. The motion to lay on the table was In certifying the public reports that collec- I am ready to yield back the 12 minutes agreed to. tively depict a corporation’s financial status, and have the vote proceed. the independent auditor assumes a public re- Mr. REID. I suggest the absence of a I reiterate that this is a bill that was quorum. sponsibility. . . . [That auditor] owes ulti- fraught with danger in the environ- mate allegiance to the corporation’s credi- The PRESIDING OFFICER (Mr. DAY- tors and stockholders, as well as to the in- ment that we were in. Literally any- TON). The clerk will call the roll. vesting public. This ‘‘public watchdog’’ func- thing could have passed. I think, by a The assistant legislative clerk pro- tion demands that the accountant maintain combination of good work and some ceeded to call the roll. total independence from the client at all good fortune, that has not been the Mr. REID. Madam President, I ask times and requires complete fidelity to the case. We have a vehicle before us that unanimous consent that the order for public trust. I think will be complicated. It will be the quorum call be rescinded. We must cut the chord between the difficult to implement. The PRESIDING OFFICER (Ms. audit and the consulting services which I think we will probably change it in CANTWELL). Without objection, it is so by their very nature undermine the the future. But I think in terms of our ordered. independence of the audit. We must ability to prosper under the bill, and break this culture that exists, and to for the economy to survive not only f do that we need a bright line. In my the illness but the prescription of the ORDER OF PROCEDURE view granting broad exemption author- doctor in this case, I think it is doable. Mr. REID. Madam President, I ask ity to the Oversight Board or the SEC I yield the remainder of our time. unanimous consent that immediately to permit these non-audit services The PRESIDING OFFICER. The after the cloture vote on the nomina- would undermine the separation the question is on agreeing to the con- tion of Julia Smith Gibbons, all time conference report is intended to estab- ference report. postcloture be considered used, and lish. Mr. SARBANES. Mr. President, I ask that on Monday, July 29, at 5:30 p.m., I wanted to underscore the fact that for the yeas and nays. the Senate proceed to executive session there was a very reasoned, intense dis- The PRESIDING OFFICER. Is there a to vote on the nomination of Julia cussion of these issues. There is reason sufficient second? Smith Gibbons, to be a U.S. circuit on both sides. I thought the Senator There is a sufficient second. judge; that upon confirmation, the made a very strong statement. I want- The clerk will call the roll. President be immediately notified of ed to give the counterstatement here. The assistant legislative clerk called the Senate’s action and that the Sen- I share Senator DODD’s view about the roll. this exchange of ideas and its impor- ate return to legislative session; fur- Mr. NICKLES. I announce that the ther, that on Friday, July 26, imme- tance to the functioning of this institu- Senator from North Carolina (Mr. tion. The Senator from Texas has cer- diately following the cloture vote on HELMS) is necessarily absent. tainly made an important contribution the nomination, the Senate return to I further announce that if present in that regard. legislative session and resume consid- and voting the Senator from North I wish to take a moment to recognize eration of S. 812; that Senator GREGG Carolina (Mr. HELMS) would vote the terrific work of the staff. Senator or his designee be recognized to offer a ‘‘yea.’’ GRAMM referred to Wayne Abernathy second-degree amendment; that during The PRESIDING OFFICER. Are there and Linda Lord, and of course Mike Friday’s session, there be up to 3 hours any other Senators in the Chamber de- Thompson and Katherine McGuire of for debate with respect to the amend- siring to vote? Senator ENZI’s staff; Laura Ayoud of ment, with the time equally divided the legislative counsel who worked day The result was announced—yeas 99, and controlled between Senators KEN- and night to put this thing in legisla- nays 0, as follows: NEDY and GREGG or their designees; and tive language; the staff of the Banking [Rollcall Vote No. 192 Leg.] that whenever the Senate resumes con- Committee led by Steve Harris, Dean YEAS—99 sideration of S. 812, the Gregg or des- Shahinian, Steve Kroll, Lynsey Gra- Akaka Dorgan Lugar ignee amendment remain debatable. ham, Vincent Meehan, Sarah Kline, Allard Durbin McCain The PRESIDING OFFICER. Without Allen Edwards McConnell objection, it is so ordered. Judy Keenan, Jesse Jacobs, Craig Baucus Ensign Mikulski Davis, Marty Gruenberg, Gary Gensler, Bayh Enzi Miller Mr. REID. I suggest the absence of a and, as I said, all led so ably by Steve Bennett Feingold Murkowski quorum. Harris. Biden Feinstein Murray The PRESIDING OFFICER. The Bingaman Fitzgerald Nelson (FL) clerk will call the roll. We had the very able staff of the Sen- Bond Frist Nelson (NE) ators on the committee: Alex Boxer Graham Nickles The assistant legislative clerk pro- Sternhell, Naomi Camper, Jon Berger, Breaux Gramm Reed ceeded to call the roll. Brownback Grassley Reid Mr. REID. Madam President, I ask Jimmy Williams, Catherine Cruz Bunning Gregg Roberts Wojtasik, Leslie Wooley, Margaret Burns Hagel Rockefeller unanimous consent that the order for Simmons, Matt Young, Roger Hollings- Byrd Harkin Santorum the quorum call be rescinded. worth, and Matt Pippin. Campbell Hatch Sarbanes The PRESIDING OFFICER. Without Cantwell Hollings Schumer objection, it is so ordered. I thank again all my colleagues who Carnahan Hutchinson Sessions participated. I think I recognized most Carper Hutchison Shelby f of them in the course of the day, and I Chafee Inhofe Smith (NH) want to say just a word about Chair- Cleland Inouye Smith (OR) UNANIMOUS CONSENT AGREE- Clinton Jeffords Snowe MENT— EXECUTIVE CALENDAR man OXLEY and Congressman LAFALCE Cochran Johnson Specter on the House side, who made it possible Collins Kennedy Stabenow Mr. REID. Madam President, we have for us to work through this conference Conrad Kerry Stevens spent considerable time this evening in Corzine Kohl Thomas and with whom we have worked so co- Craig Kyl Thompson a quorum call, but in spite of that, we operatively on so many issues that Crapo Landrieu Thurmond have had a very productive legislative have come before our committee. Daschle Leahy Torricelli day. We have passed the conference re- The PRESIDING OFFICER. The time Dayton Levin Voinovich port on corporate governance; the Ap- DeWine Lieberman Warner of the Senator has expired. Who yields Dodd Lincoln Wellstone propriations Committee this afternoon time? Domenici Lott Wyden reported the final four bills out of the

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