Bush signs bill to stop 'book cooking'
'No boardroom in America is above or beyond the law'
CNN Washington Bureau
WASHINGTON (CNN) -- President Bush signed into law Tuesday the Accounting Industry Reform Act, a legislative recipe concocted to end so-called "book-cooking" accounting tricks that have alarmed investors.
The legislation is intended to rein in corporate wrongdoers and toughen oversight of the beleaguered accounting industry after scandals involving companies such as Enron Corp. and WorldCom Inc.
The law creates an oversight board to monitor the accounting industry, toughens penalties against executives who commit corporate fraud and increases the Securities and Exchange Commission budget for auditors and investigators.
"Today I sign the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt," Bush said during a White House ceremony.
Bush said the law sends a message on several levels. To corporate executives the president said the law says: "'No boardroom in America is above or beyond the law.'
"This law says to accountants: 'The high standards of your profession will be enforced without exception. The auditors will be audited, the accountants will be held to account,' Bush said.
"This law says to workers: 'We will not tolerate reckless practices that artificially drive up stock prices and eventually destroy the companies and the pensions and your jobs.'"
The House and Senate passed a final version of the legislation Thursday. The House vote was 423-3, while the Senate approved it 99-0.
After the legislation's passage, Senate Minority Leader Trent Lott, R-Mississippi, said he hoped it will send a strong signal that corporate wrongdoing won't be tolerated.
The White House, pressured by falling stock prices and a public irate over the state of affairs in corporate America, had pushed Congress to approve a bill before it leaves for its August recess.
The GOP-controlled House passed a weaker bill in April, but daily disclosures about corporate malfeasance led lawmakers to toughen it and bring it more in line with a version the Democratic-controlled Senate had passed.
Under the act, a chief executive officer or chief financial officer who certifies false financial reports could get 20 years in prison and be fined $5 million. Shredding of documents could result in a 20-year sentence.
The law sets up an independent private-sector oversight board to watch over the accounting industry and restricts the ability of accounting firms to perform consulting work for companies they are auditing.
In addition, the law calls for the immediate disclosure of stock sales by company executives and prohibits companies from giving personal loans to top officials.
Last week's votes came after House and Senate negotiators reached a deal on competing versions of the bill, deciding to proceed with legislation that largely mirrors what was crafted in the Senate. That version was widely seen as the tougher of the two.
But House Republicans, who followed up on their original bill with one that called for stiffer penalties, said they added a few measures that strengthened the Senate legislation further.
"I am proud of the bipartisan process that produced this legislation," said U.S. Rep. Michael Oxley, the Ohio Republican who chairs the House Financial Services Committee.
"Corporate responsibility is an investor and retiree issue. It is not a partisan issue, and those who would attempt to make it so do a real disservice to all of us."
But Democrats criticized Republicans, saying they were slow to crack down on corporate abuse.
"It's certainly better than that cream-puff legislation that was out here last April," said U.S. Rep. Maurice Hinchey, D-New York.
A key sticking point was the independence of a newly created accounting industry oversight board. Oxley said the senators agreed to a House demand that the board remain under the control and oversight of the SEC.
Senators also agreed to include stiffer criminal penalties for corporate malefactors that the House passed and to create a restitution fund for investors from the penalties paid by corporate wrongdoers.
In addition, the Senate agreed to require instant disclosure of stock sales by corporate executives, Oxley said.
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