Senate bill to crack down on fraud

THE US Senate has approved the most sweeping changes in corporate accountability since the Depression, creating stiff penalties and jail terms for company fraud and tightening oversight of the accounting industry.

The Senate voted 97-0 last night to pass the bipartisan bill after nearly a week of debate and votes on amendments as a string of corporate accounting scandals shattered confidence in business and the markets and threatened the fragile economic recovery.

In a separate speech, President George Bush told business leaders: “We intend to hold people accountable. We can’t pass a law that says, ‘You will be honest,’ ” the president said at the University of Alabama at Birmingham. “We can pass laws that say, ‘If you’re not honest we’ll get you.’ ”

Bush urged Congress to get him a bill to sign before adjourning for its summer recess.

“I am pleased the Senate has now acted on a tough bill that shares my goals,” Bush said in a statement issued after the vote. “We owe it to America’s workers and shareholders to crack down on wrongdoing and fix the system to prevent future abuses.”

Work was due to begin today to resolve the differences between the bill in the Democratic-controlled Senate and a version passed in April by the Republican-led House, said John Feehery, a spokesman for House Speaker Dennis Hastert.

The House measure is widely considered weaker because it lacks penalties for corporate fraud and does not go as far toward reining in accountants.

In rare shows of unanimity, senators voted last week to add a series of new penalties, including 10-year prison terms for securities fraud. Chief executive officers and chief financial officers who certified false company financial reports would be slapped with prison terms of five to 10 years and fines of $500,000 to $1 million.

In his Birmingham address, Bush coupled an upbeat assessment of the economy with a warning to corporate leaders to “behave responsibly” in an attempt to restore market confidence.

Bush has been dogged in recent weeks by a decade-old insider-trading investigation by the Securities and Exchange Commission into his $848,000 sale of stock in his former oil company, Harken Energy Corp, where he was a director. Additionally, US Vice President Dick Cheney’s former company, Halliburton Co, is being investigated by the SEC for its accounting practices while Cheney was its chief executive.

The bill would ban personal loans from firms to their top officials and directors, and would require company insiders to notify the SEC more promptly when they buy or sell stock.