The House voted 391-28 on Tuesday to impose tough consequences on corporate criminals, the Boston Globe reports.
The vote came after the Senate passed a similar plan on Monday. The legislation was rushed onto the floor and approved in less than two hours, using a procedure that allows undisputed legislation to be expedited.
According to the Globe, the House's measure surpasses the Senate version in harshness by doing the following:
Quadrupling the current penalty for mail and wire fraud to 20 years. The Senate measure only calls for a penalty of 10 years.
Imposing a sentence of up to 25 years for violators of a proposed law against securities fraud.
Requiring executives to certify the accuracy of their companies' financial statements. The proposed penalties for violators are a maximum of $5 million in fines and 20 years in prison.
Imposing fines of up to $25 million for companies that falsify statements to the Securities and Exchange Commission, a penalty that is 10 times stiffer than that sought by the Senate.
Though most of them voted in favor of the bill, House Democrats called it a "sham," saying it does not include provisions for protecting corporate whistle-blowers or for investors seeking to recover losses from the criminal executives, the Globe reports.
The House bill, in conjunction with previously approved House legislation on accounting standards, will have to be coordinated with the Senate legislation in order to reach the President's desk.
Economist Kevin Hassett likened the atmosphere on Capitol Hill to Bastille Day, referring to the peasant revolt in France that spawned the French Revolution. Hassett told the Globe that although Congress hopes that the new legislation will quell fears on Wall Street, "the hysteria on the Hill right now is anything but calming."
President Bush asked Congress to reach an agreement on the accounting package before the August recess. However, a quick resolution seemed unlikely on Tuesday as both parties and both houses disagreeing over which bill should be the primary mechanism for reform. While the House believes that the Senate should ratify the House bill, the Senate wants the House to adopt the Senate legislation.
"The country has sent a clear signal to the Congress, and the Congress has listened, both to the country and to the president, that we need to toughen the laws," said White House spokesman Ari Fleischer, according to the Globe. "The recent scandals have given rise to a speeded up action in the Senate on some of the criminal penalties against corporations engaged in wrongdoing."
According to the Globe, the House Republicans are "playing catch-up football. They are embarrassed at the position they took" in April, after the Enron collapse but before other corporate scandals were exposed, said Rep. John LaFalce, D-NY, author of a competing, Democratic package rejected by the House in the spring. Some House Republicans agreed and circulated a letter Tuesday urging the House to approve the Senate bill so Bush can sign something quickly.
If the Sarbanes bill must be reconciled with the tamer measure the House approved in April, negotiations would take two months, and the markets could deteriorate further, House Minority Leader Richard Gephardt, D-Mo. warned.
But getting a final bill before the August recess "is a heavy lift," said Representative Michael Oxley, R-Ohio, chairman of the House Financial Services Committee. It would be "rather unprecedented for a major bill" to be approved in a House-Senate conference and sent to the President so quickly, he told the Globe.
Oxley's hope and Gephardt's fear is that the Senate bill will be watered down in a House-Senate conference. House Republicans do not oppose increasing penalties for existing infractions, but they are generally wary of what they see as overregulation and micromanaging of the accounting industry.
The Senate bill, for example, gives too much power to an independent board to monitor accounting firms, and could undermine the statutory role of the SEC, Oxley said. The Senate bill is also more restrictive in dictating what services an accounting firm can provide for its audit clients.
