Grassley said the overall bill ? S.2673, the Public Company Accounting Reform and Investor Protection Act of 2002 ? represents an opportunity for Congress to help restore public confidence and help the economy, workers and retirees after a series of corporate scandals involving alleged accounting and tax fraud.
"I spent the congressional recess week holding town meetings across Iowa. People are mad about what's happened, and they want Congress to respond swiftly to prevent future abuses by corporate officers and auditors that devastate working Americans and their families," Grassley said. "With these amendments, I want to improve the committee-passed version of this legislation and enhance the accountability of publicly traded corporations to their shareholders and employees."
Grassley's amendments include:
1)Oversight Auditor Amendment ? This amendment establishes an oversight auditor within the Securities and Exchange Commission. In each of the recent corporate accounting scandals, the problem has not been incompetency or lack of rigorous training of accounting professionals, misguided auditing standards or ill-considered accounting rules. Instead, each appears to have stemmed from egregiously bad behavior by corporate insiders and internal accountants with varying degrees of complicity by those companies' external auditors. Grassley said that targeting such wrongdoing requires oversight of the internal accounting function, along with oversight of the companies external accountants. His amendment would reinforce the structures established in S.2673, the Sarbanes proposal, which now focus exclusively on monitoring external auditors. Grassley's initiative would also provide direct oversight of internal corporate accounting.
Specifically, this Grassley amendment would establish within the SEC a division charged with responsibility for conducting limited scope oversight audits or "spot audits" of public companies. The division would be run by the Chief Accountant of the SEC who would be appointed by the President and confirmed by the Senate. The division would be charged with reviewing the financial statements of issuers and focusing its resources on highest-risk audit areas and questionable accounting practices of which it is aware from the SEC Division of Enforcement regarding issuers and the new Public Oversight Board regarding accounting firms. The division would refer findings of accounting or auditing irregularity to the Division of Enforcement, the Public Oversight Board or other appropriate federal and state enforcement officials and would report annually its findings to the Division of Enforcement, the Public Oversight Board, and the General Accounting Office. The division would be funded in the same manner as the public oversight board created in S.2673, which is through the assessment of an accounting support fee on issuers proportionally based on the relative value of securities in circulation in the market by each issuer.
2)Whistleblower Amendment ? This amendment prohibits discrimination against corporate whistleblowers for providing information or assisting an investigation of alleged violations of certain federal securities laws or any other federal law relating to fraud against shareholders. The whistleblower is protected for going to a federal agency, any individual member or committee of Congress, or one of the whistleblower's supervisors with knowledge of the wrongdoing.
If the whistleblowers is retaliated against, he can file a complaint with the Secretary of Labor to seek relief. If the Secretary has not issued a final decision within 180 days, the whistleblower may bring an action in federal district court. The whistleblower may be awarded reinstatement with the same seniority, back pay, and compensation for special damages, including litigation costs and attorney's fees.
This Grassley language was included in S. 2010, the Corporate and Criminal Fraud Accountability Act of 2002, approved earlier this year by the Senate Judiciary Committee.
3)Corporate Bankruptcy Amendment ? This amendment seeks to clarify that the bonuses and other high-dollar compensation of corporate directors and wrongdoers can be brought back into a bankruptcy estate when a company declares bankruptcy. Grassley said corporate officers and those who engage in wrongdoing should not be able to make off with huge sums of money while employees, shareholders and creditors carry the burden of the corporate bankruptcy. Moreover, corporate officers and those who engage in illegal activity should not benefit where their actions have contributed to the downfall of the company.
4)Limitation on Auditors Selling Tax Products Amendment ? This amendment prohibits public auditors from rendering an audit opinion on the financial statement effects of any tax shelter arrangements that the auditing firm sells to an audit client. This initiative targets shelters that have the potential to manipulate financial statement results, such as overstating profits or understating liabilities.
5)Amendment to Expand the SEC's Return of Ill-Gotten Gains Remedy ? This amendment is based on an SEC proposal to clarify that in actions brought by the SEC, courts may impose any equitable relief necessary or appropriate to protect and mitigate harm to investors. The Grassley amendment expressly clarifies that the remedy of disgorgement may reach any compensation or other financial benefits obtained in connection with a violation, including compensation and financial benefits received by officers and directors in the course of carrying out their duties while they are also committing or causing a violation.
Grassley said he also hopes to have a version of the pension protection legislation he introduced in February ? S.1971, the National Employee Savings and Trust Equity Guarantee ? incorporated in the accounting standards legislation during floor debate. A similar version of his proposal will be marked up on Thursday by the Senate Committee on Finance. Grassley's pension protection initiative tightens protections for retirement plan participants in the future in light of the collapse of the Enron Corp., Global Crossing and other similarly situated companies. It includes new diversification rights for company stock in plans; new disclosure requirements for transaction suspension periods, or blackouts; and new disclosure through periodic benefits statements and retirement savings information.
During the last week, Grassley has sought to enhance corporate accountability with greater transparency. Last Tuesday, Grassley asked the SEC and the CEO of WorldCom to provide lists of all the senior managers at WorldCom who received bonuses of $100,000 or more during the last three years. On Monday, Grassley asked the Securities and Exchange Commissioner and the Treasury Secretary to consider making tax return information for publicly traded corporations public to help regulators and the investors, big and small, better understand the workings of such corporations.