Mikulski, Sarbanes question tighter SEC accounting

Both sent letters in 2000 on behalf of constituents

January 20, 2002|By CAPITAL NEWS SERVICE

WASHINGTON -- Maryland Democratic Sens. Barbara A. Mikulski and Paul S. Sarbanes wrote to the Securities and Exchange Commission in 2000 to question an SEC proposal to tighten corporate accounting rules.

The proposed regulations were never put in place. Critics say a lack of such restrictions on the accounting firm Arthur Andersen may be partly to blame for the collapse of Enron.

In a Sept. 28, 2000, letter to then-SEC Chairman Arthur Levitt Jr., Mikulski wrote that the proposed rules would "severely restrict the types of non-audit services that accounting firms could perform."

Mikulski said in the letter that the concerns were brought to her attention by constituents, but her office would not comment further on her position on the issue Friday.

Sarbanes, the chairman of the Senate Banking Committee, forwarded the concerns of a number of his constituents to Levitt. In one letter, on Oct. 6, 2000, Sarbanes asked that Levitt consider "the points of views and issues raised in all the correspondences" from Maryland constituents as the SEC prepared the final rule.

No support in writing

But even though he forwarded letters challenging the regulations, Sarbanes "was supportive of Mr. Levitt's proposal," said Jesse Jacobs, the senator's spokesman. Jacobs said that Sarbanes never put that support in writing to Levitt, however.

Consultant-auditor conflict

Levitt's proposal would have restricted auditors from acting as consultants for clients they were also auditing. Critics say that large consulting fees could compromise the certified public accounting firms' objectivity in their auditing duties.

According to the Center for Responsive Politics, Andersen collected $25 million in auditing fees and $27 million in consulting fees from Enron during 2001, the year it became the biggest company to file for bankruptcy protection in U.S. history.

Levitt's proposed reforms ran into stiff opposition from the accounting industry in 2000.

House Energy and Commerce Committee Chairman Billy Tauzin, a Louisiana Republican, brokered a deal between the SEC and the Big Five accounting firms, which include Andersen, to essentially drop the restrictions, according to the Center for Responsive Politics.

The center also reported that Tauzin was the top recipient in the House of campaign funds from Andersen, getting $57,000 since 1989.

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