[Page: S10563]
---

   Mr. LEVIN. Mr. President, one year ago today, the public first began to learn of the accounting frauds that led to the collapse of Enron Corporation. For the first time, investors learned of special purpose entities used to make Enron's financial condition look better than it was and of partnerships run by Enron's chief financial officer. One year ago today, the press first reported the $1 billion loss in Enron's shareholder equity and a $700 million loss in earnings. Less than 2 months later, Enron's reputation as a well-run company and a good investment morphed into that of a bankrupt operation with billions in unpaid debt.

   As the scandal unfolded, Enron's employees lost their jobs and their pensions. Its stockholders lost their shirts. Its accounting firm lost its credibility and its ability to operate as an auditor. About the only ones to walk away from Enron's fall intact were a number of executives who pocketed millions of dollars in compensation despite the company's collapse. Other executives are now beginning to pay the piper for their misdeeds.

   Of course, Enron was only the beginning. Within 6 months, the press was inundated with reports of multi-billion-dollar accounting frauds at other major publicly traded corporations in the United States. We learned that Worldcom had misreported $3 billion in expenses, a figure which has since doubled to more than $7 billion. We learned that Adelphia had made billions of dollars in unsecured loans to corporate insiders, especially members of the Rigas family. We learned that Tyco had made not only unreported loans to corporate executives and directors, but its CEO appears to have cheated on his taxes. The list of companies associated with accounting frauds or other corporate misconduct kept increasing, shaking not only Wall Street, but also Main Street where more than half of U.S. households are directly or indirectly invested in the stock market.

   The result is that, today, investor confidence in U.S. financial statements and the U.S. accounting profession lies in tatters. The stock market itself has compiled its worst record in years.

   The breadth and depth of this corporate misconduct galvanized Congress. Over the past year, we conducted detailed investigations into what happened. We subpoenaed documents. We held hearings. We issued reports. And during the summer, we enacted into law the Sarbanes-Oxley Act, a corporate reform law which calls for a host of changes in the way U.S. business operates, including overhauling accounting oversight, restoring auditor integrity, and strengthening investor protections. This legislation was a strong response to the corporate scandals, but the work is far from over.

   Enron's 1-year anniversary is a good time to recall what still needs to be done.

   First, the SEC needs to implement the Sarbanes-Oxley Act. The most important next step here is naming the members of the new Public Company Accounting Oversight Board. This Board is charged with strengthening auditor ethics, disciplinary proceedings, and conflict of interest prohibitions to restore confidence in the U.S. accounting profession. This work will require a frank acknowledgment of past problems, a fresh examination of what works and what has failed, and a willingness to break from past practice to increase investor protections.

   Some impressive candidates have stepped forward to express their willingness to serve on this board. One terrific candidate is John H. Biggs who is about to retire from his post as chairman and CEO of TIAA-CREF. Mr. Biggs has the stature, expertise, and backbone needed to lead this board. He is the right man at the right moment to restore integrity to U.S. financial statements and the U.S. accounting profession, and the SEC ought to immediately accept his offer to serve the public as a member of this important new board.

   The SEC also has a host of important regulations to issue over the coming year--a task that will require continued congressional oversight. One of the most important is the requirement that companies disclose all material off-the-books transactions, arrangements, obligations and relationships. While the Financial Accounting Standards Board, or FASB, has issued a proposal to strengthen accounting rules regarding special purpose entities, that addresses only a portion of the problem and the SEC can and must do much more to strengthen disclosure.

   The SEC must also set up the policies and procedures necessary to identify and administratively bar those persons who are substantially unfit to serve as officers or directors of public companies. Too many officers and directors have turned their eyes away from misconduct, failed to ask tough questions, or allowed fraudulent or questionable activities to continue unchecked at the companies that are now the subject of legal proceedings. We need stronger leadership in corporate America and to eliminate those unwilling or unable to act as fiduciaries for investors.

   These are just two of the many pressing regulatory issues facing the SEC in implementing the Sarbanes-Oxley reform law. But it will take more than Sarbanes-Oxley to end corporate misconduct and restore investor confidence in U.S. markets. The list of unfinished business includes at least the following items.

   First, Congress needs to recognize that the SEC is outgunned and outspent and give the SEC the resources it needs to police financial statements and detect and punish corporate misdeeds.

   Second, we need to give the SEC new civil enforcement authority to impose administrative fines on company officers, directors, auditors, lawyers, and others who violate federal securities laws. Right now, the only wrongdoers the SEC can fine in administrative proceedings are broker-dealers and investment advisers. My amendment to broaden its authority to fine other violators of the securities laws never received a vote during consideration of the Sarbanes-Oxley Act. I intend to keep trying until that vote takes place.

   Another festering problem involves stock options. Stock option abuses have not stopped, and dishonest accounting of stock option expenses continues. That means that Congress still needs to set a deadline for FASB to take appropriate action on the issue of expensing stock options. Over 120 publicly traded companies have announced their intention--on a voluntary basis--to begin expensing options. That is a huge and welcome change from past practice. But many other public companies have indicated they have no intention of expensing options until required to do so. It is time to level the playing field in favor of honest accounting of stock options.

   Still another continuing problem involves so-called corporate inversions, when U.S. companies pretend to move their headquarters to an offshore tax haven in order to avoid paying their fair share of taxes. These offshore shenanigans are not only unpatriotic, they are unfair to the taxpayers who have to

[Page: S10564]

   A few years ago, this country had billions of dollars in surplus and a growing economy. But that is over. One contributing cause is the corporate scandals over the last year. Those arguing for tepid reforms or the status quo will not provide the leadership needed to end the corporate misconduct and investor fears now plaguing U.S. markets. We need not only to complete the implementation of the Sarbanes-Oxley law, but also to move ahead with additional measures needed to restore investor faith in U.S. business. The one-year anniversary of the Enron scandal is a good time to renew the call for that unfinished business.

END