Congress touchy over Enron-spurred reforms

Legislators at odds over scope of regulation

March 17, 2002|By Richard Simon | Richard Simon,SPECIAL TO THE SUN

WASHINGTON - As Enron-triggered legislation sweeps over Capitol Hill, and with it the prospect of watershed reforms, a major battle is shaping up over how far Congress should go in riding herd on corporate America.

Nearly three dozen bills have been introduced that would affect everything from company pension plans to accounting to corporate whistle-blowers. Taken together, the legislation amounts to a rewriting of the ground rules for publicly traded companies.

But as the focus in Congress shifts from televised investigative hearings to the work of crafting legislation, sharp differences have emerged between lawmakers on a number of key issues.

Democrats want to go further in restricting accounting firms from providing consulting services for companies they audit, saying such a step is needed to prevent lucrative contracts from compromising their duty to the investing public. Republicans want to increase the budget for the Securities and Exchange Commission to pursue corporate wrongdoing; Democrats want to increase it more.

Most on Capitol Hill want to better protect workers from the fate of Enron employees who were left with near worthless company stock in their retirement accounts. But Democrats and Republicans differ - even among themselves - about the best way to do it. And then, there is the perennial disagreement between Democrats and Republicans over whether reforms are best left to regulators and corporations themselves or should be imposed by legislation.

"Although both sides want to claim the mantle of `protector of people's pensions' in time for the November elections, substantive disagreements do exist regarding what reform should look like," said Patrick Basham, senior fellow at the libertarian Cato Institute think tank in Washington. "These ... will probably forestall the enactment of any major reforms until next year at the earliest."

Others, however, expect Congress to adopt significant legislation on corporate governance reform measures sparked by abuses in the savings and loan industry in the late 1980s. There also is a political imperative: Many lawmakers would rather be remembered as reformers than the recipients of the political contributions Enron doled out.

"If we do nothing, if we don't learn the lessons of Enron and apply the steps to stop it from happening, there is nobody, Republican or Democrat, who thinks this is not going to happen again," said Sen. Patrick J. Leahy, the Vermont Democrat who leads the Senate Judiciary Committee.

On Thursday, the House Ways and Means Committee passed a bill, dubbed the Employee Retirement Savings Bill of Rights, that, among other things, would let workers sell company stock from their 401(k) plans after three years and pay for investment advice with pretax dollars deducted from their paychecks.

Other proposals with a good chance of passing include:

Creating a new board to police accountants.

Requiring corporate insiders to disclose sales of company stock in a more timely manner.

Prohibiting such stock sales when other employees are subject to a lockdown on 401(k) retirement accounts.

Requiring companies to disclose more financial information, including off-balance-sheet transactions such as the ones that helped undo Enron.

Richard Simon is a reporter for the Los Angeles Times, a Tribune Publishing newspaper.

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