Thank you Senator Leahy for calling this hearing. I agree there are lessons that we can learn from Enron's collapse, particularly with respect to accountability issues. I share in my colleagues' outrage over these events, and truly feel for the workers and innocent investors who lost their jobs and life savings.
Government and Congressional investigators, as well as the media and legal prosecutors, are still hard at work trying to get at all the facts surrounding this case. But from what I read in the papers and from my staff's own investigative work, the facts don't look good. As efforts to uncover all the facts surrounding the Enron debacle proceed, there are legislative actions that we in Congress can take to ensure that similar corporate missteps, including fiduciary mismanagement, aren't allowed to fester elsewhere.
There may be other cases of misconduct that we'll need to learn more about. For example, what about the Global Crossing bankruptcy? Obviously something smells when you have the Democratic National Committee Chairman - who just happens to be a buddy of the Chairman of Global Crossing - turn a $100,000 stock investment into what's been reported to be an $18 million mega-profit, while employees and shareholders are left holding the bag when the company goes bankrupt. Who knows, there may be more than one Enron out there ready to happen. Let me be loud and clear, corporations must get their shop and books in order even before we in Congress make changes to the laws. You know what the problems are, so fix them. Common sense needs to rule. If not, the integrity of our financial markets is in big trouble.
As the senior Republican member on the Finance Committee, I've focused on doing something about a number of tax and pension related problems that have been exposed by the Enron collapse. In fact, I've been working on legislation to tighten pension protections for working and retired Americans. The failure of Enron has been such a devastating blow to the shareholders, workers and retirees who invested in Enron stock.
Furthermore, it's a real issue when the top dogs can cash out their stock options, but employees are prohibited from doing so. According to news reports, top Enron officials were allowed to sell their shares before the stock value bottomed out, while rank-and-file employees were left out to dry. This behavior smacks of mismanagement and moral disregard for the loyal workforce and retired employees. This cannot happen again.
I'm also drafting a legislative proposal that would help the IRS prevent tax cheats from shielding tax liabilities with the use of corporate tax shelters and other vehicles often used as tax-free havens. Enron may have used as many as 900 tax-haven subsidiaries to avoid taxes and mask financial debts. That's disturbing, and underscores the need for full disclosure of tax shelters so the IRS can better police their use. My investigative staff is getting to the bottom of this.
Moreover, the Enron crash raises serious ethical questions about the roles of auditors and consultants, as well as inside and outside legal counsel who make representations about a company's finances. In order for markets to work, there must be transparency and accuracy in a company's books so that investors and shareholders can get the whole picture and make informed decisions. Complete and accurate information is the foundation for a fair system, a system that Americans can have confidence in. People invest in stocks because they think they've gotten honest, open and full disclosure of a company's financial condition. We need to reevaluate the rules eliminating conflict of interests in the work of auditors, consultants, analysts and lawyers, so that any report they produce is honest, accurate and transparent, and so the work is independent and hasn't been tainted by inside interests. In addition, we should make sure that the government regulators are not asleep at the switch. They need to be ready to crack down on those who cook the books and abuse the system. Ultimately, we need to preserve the integrity of the market system by safeguarding the integrity of information given to the public.