Congress to vote on corporate reforms

House, Senate negotiators reach deal

final approval is expected by tomorrow

July 25, 2002|By Julie Hirschfeld Davis | Julie Hirschfeld Davis,SUN NATIONAL STAFF

WASHINGTON -- Congress is preparing to send a sweeping corporate accountability measure to President Bush by the end of the week, ensuring that it will become law in time for members to campaign on it when they return to their districts for the August break.

Mounting public pressure to finish the accounting overhaul produced a final agreement last night between House and Senate negotiators that merges the legislation each has passed, with Republicans ceding to Democrats on most points.

The House is expected to pass the agreement today, with the Senate expected to follow suit by tomorrow. Bush indicated yesterday that he would sign the measure in short order.

Unwilling to leave Washington without acting on the corporate accountability issue, which has been gaining momentum as financial scandals persist and investor confidence flags, Republicans backed down from most of their objections.

The result apparently will be a law that closely resembles the measure the Senate passed last week that was written by Sen. Paul S. Sarbanes, the Maryland Democrat who is chairman of the banking committee.

The measure would create an independent oversight board for the accounting profession and prohibit accounting firms from simultaneously providing auditing and consulting services to the same company.

"The legislation reflects our determination to see that the confidence of investors in our capital markets is restored," Sarbanes said. "When trust is lost, the markets falter, with serious consequences for our economy."

The agreement also includes provisions pushed by Republicans that would create a fund to provide restitution to defrauded investors, impose longer prison sentences for corporate crimes, and require insiders to immediately disclose sales of company stock.

It incorporates House-passed provisions that would require pension plans to give workers 30 days' notice before "blackout" periods during which they cannot adjust their 401(k) retirement accounts and would bar corporate insiders from selling their company stock during those times. The Senate has not acted on a pension reform measure, but plans to do so in September.

"The fact that we got anything was kind of a miracle," said Rep. John A. Boehner, an Ohio Republican. "We're in the middle of a stampede by politicians who are up for election in the fall while the stock market is crashing. It's a recipe for bad policy, but excellent politics."

Bush took credit for the deal. His spokesman, Ari Fleischer, said: "Today marks a day of action and accomplishment in the president's fight against corporate corruption, in his effort to vigorously enforce the laws that protect employees and investors against corporate wrongdoing."

The accomplishment was vital for Bush. Despite repeated efforts to calm investors' nerves by publicly expressing confidence and pushing for tough measures against deceptive executives, he has watched the financial markets endure violent swings and seen his conduct as an executive questioned.

In private and in public, Republicans said the sharp drop in stock prices and the persistent criticism of Bush and his economic team were among the reasons they were eager to dispense with the accounting measure quickly.

In election years, the president and his party generally shoulder the blame for a faltering economy. Republicans are eager to inoculate themselves on the issue because Democrats need to gain just six seats to take control of the House.

"It's clear just from the confluence of events that the pressure was to pass a bill. The focus in this kind of debate is more on the sort of rhetoric and media response than it is on practicality," said Republican Sen. Phil Gramm, who said he will vote against the agreement.

He is bitterly opposed to the provision that would prevent accountants from offering auditing and consulting services to the same client, arguing that it would hurt smaller companies with limited resources.

But Gramm sounded resigned. "It's hard to argue logic in a feeding frenzy," said the Texan, who is retiring at the end of this session. "It's hard to get people to focus on detail when they're waving to a crowd."

Lawmakers will soon be doing just that during a monthlong break, which marks their last chance to visit extensively with their constituents before the election.

"It's all going to be corporate accountability," Rep. Peter T. King, a New York Republican, said of his party's strategy for next month's recess. On his way out of a closed-door GOP conference session yesterday, a binder outlining his party's campaign themes tucked under his arm, King said, "That's the main thrust: The Republican bill is tough; Republicans are doing something about this."

Democrats savored their legislative victory.

"It was one of the great conversions in religious history, and they did it because they didn't want to lose the election," Rep. Barney Frank, a Massachusetts Democrat, said of Republicans.

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