Cox Vows Bill to Force Municipal Disclosure
Rep. Christopher Cox (R-Newport Beach) said Thursday that he expects to have legislation ready this spring that would require municipalities and other local government agencies to provide extensive and periodic financial disclosures when they issue bonds and other securities.
Cox’s bill, which he said he hopes to develop on a bipartisan basis, is likely to become the first major federal measure to emerge in response to the Orange County bankruptcy.
The law “should provide maximum disclosure in advance” and could be prepared with advice from the Securities and Exchange Commission, Cox said in a telephone interview.
Currently, disclosure by municipalities varies widely when they issue new securities, and they don’t have to issue the formal registration materials the SEC requires of corporate America.
Cox, following the conservative philosophy of less government, said his bill will mandate disclosure but then let the market--in the form of investors and analysts rather than the SEC--demand and distribute the information.
Cox, chairman of the influential Republican policy conference in the House, discussed his bill after a contentious hearing at which advocates and opponents of a GOP plan for securities law reform clashed bitterly.
Cox declared that frivolous securities lawsuits have resulted in the worst corruption of the legal system since the days of Chicago gangster Al Capone. Just as mobsters demanded “protection” money from helpless merchants and small business owners, trial lawyers are extorting money from corporations by filing unwarranted suits, he said.
“There is a lawsuit epidemic: Multimillion-dollar lawyers are lying with intent to deceive to protect their racket,” Cox said at a hearing of the finance subcommittee of the House Commerce Committee.
“This is how Bill Lerach makes his money,” Cox said, referring to the noted San Diego lawyer specializing in securities class-action suits. “This is how legalized extortion works.”
Lerach, a witness at the hearing, counterpunched hard, saying to the committee Republicans: “While you claim to be taking a swing at lawyers, you’re going to end up hitting your constituents in the nose. Don’t kid yourselves. . . . People need the protection of the anti-fraud provisions of the law.”
Cox wrote the securities section of the Republican “contract with America.” It would amend the law to require losers in federal fraud suits to pay all attorney fees and court costs and would compel investors who file suits to supply more detailed information about the alleged fraud.