Monday, July 08, 2002

Banking bill could overhaul business


        WASHINGTON — The Senate is poised this week to pass what could be the biggest changes in accounting rules since the Great Depression as President Bush and Congress seek to crack down on growing corporate misconduct.

        Congressional action, which appeared nearly dead two weeks ago, has been revived by disclosures of apparent wrongdoing by WorldCom and other major U.S. companies. The Senate legislation, to be taken up today, could include stiff penalties for corporate managers who defraud investors.

        Bush plans a major Wall Street speech Tuesday that's intended to be tough on corporate criminals and shore up investor confidence. He is expected to call for criminal penalties, including jail time, for corporate executives who misrepresent company finances. “The speech is going to focus on strong enforcement and tough punishment,” White House spokesman Ari Fleischer says.

        There was no indication whether Bush would address provisions in the Senate bill that would transfer the accounting industry's power to regulate itself to an independent board, which would be named by the Securities and Exchange Commission.

        WorldCom's disclosure two weeks ago that it had misstated $3.9 billion in expenses for 2001 and the first quarter of this year was the latest in a string of corporate confessions. The others included Enron, Tyco, ImClone, Global Crossing, Qwest, Xerox and the accounting firm Arthur Andersen.

        “The industry has been compromised,” says Nancy Smith, a former SEC official lobbying for new accounting regulations. “Every day you pick up the business section, and it reads like a crime page.”

        Senate Majority Leader Tom Daschle, D-S.D., speaking Sunday on CBS' “Face the Nation,” accused the Bush administration of a “cozy, permissive relationship” with corporate America. He called for the replacement of SEC Chairman Harvey Pitt.

        Fleischer said Daschle's charges “lack merit.”

        The accounting industry has poured more than $57 million into federal campaigns over the past decade, including $127,798 in donations to Bush's presidential race in 2000. It has spent $39 million on lobbying Washington since 1997.

        The Senate bill, sponsored by Banking Committee Chairman Paul Sarbanes, D-Md., would create an independent board to police the firms that audit publicly traded companies. It also would limit the consulting work the firms can perform for their audit clients.

        “The focus now is on making the bad actors pay a price,” Sarbanes said on ABC's “This Week.” “But what also ought to happen is .... we ought to tighten up the system of oversight and review and monitoring in order to prevent these things from happening.”

        Industry lobbyists have worked with Republicans to draft a bill. That proposal, passed 334-90 by the House of Representatives in April and endorsed by Bush, would set up an oversight board that includes accountants. Differences would have to be settled in House-Senate negotiations, where industry lobbyists believe they can shape a bill more to their liking.

        (Contributing: USA TODAY reporters Richard Benedetto and Judy Keen)


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