WASHINGTON -- Sen. Paul S. Sarbanes said yesterday that the corporate accounting law he co-authored helped avert a crisis in U.S. securities markets, and that critics pushing to ease some of its regulations have forgotten the recent spate of corporate scandals.
In remarks to a group of consumer advocates, Sarbanes said the bill fixed "systemic and structural defects" in overseeing company conduct. Critics have "short" memories of the accounting troubles that drove Enron Corp., WorldCom Inc. and other companies into bankruptcy.
"That legislation came in direct response to a crisis whose dimensions in retrospect are all too easy to play down," said the Maryland Democrat. "Critics who now attempt to minimize the seriousness of the situation should not go unchallenged."
The U.S. Chamber of Commerce and other business groups have urged the Securities and Exchange Commission to relax requirements that outside auditors verify companies' internal controls. The 2002 law is also being challenged as unconstitutional in federal court in Washington.
Along with stronger internal controls, the law increased penalties for corporate fraud and required chief executive officers to certify that their companies' books are in order. It also set up a new regulatory body to police the accounting industry.
Sarbanes, who wrote the law with Republican Rep. Michael G. Oxley of Ohio, took issue with a plan by an SEC advisory group to exempt about 80 percent of U.S. public companies from complying with the internal controls rule.
The advisory panel, made up mostly of small-business executives and their lawyers, wants companies with less than about $750 million in stock market value to be exempt from the rule, which critics say is costly and doesn't help investors.
"Regrettably, its membership is not as balanced as one would have wished," Sarbanes said of the panel, noting that only one member represents investors. He said internal controls, the checks and balances that companies use to find bookkeeping errors and fraud, are necessary for all public companies.
"I don't think they ought to be exempted," Sarbanes said in an interview after the speech. "Public companies ought to have a system of internal controls for the protection of themselves and the investor."
Sarbanes and Oxley are retiring from Congress in January.