Clinton Likely to Sign Securities Fraud Bill : Investing: White House sources acknowledge recommendations for veto of measure to limit lawsuits, but they cite reasons for support.
President Clinton is leaning toward signing a bill that would limit investors’ right to sue for securities fraud, even though his political advisors have urged a veto, White House sources said Tuesday.
The Senate on Tuesday did, as expected, approve a House-Senate compromise version of the bill. After Sen. John McCain (R-Ariz.) switched an initial yea vote to a nay, the final tally was 65 to 30, just short of the number that would be needed to override a veto. California’s two Democratic senators split on the bill, with Dianne Feinstein voting for it and Barbara Boxer against.
The House is expected to give its assent by a wide margin in a vote today.
The securities litigation reform bill is meant to limit frivolous lawsuits against brokerage and accounting firms and companies whose stock is publicly traded.
Opponents of the bill contend that it goes too far, protecting companies that commit major fraud from legitimate suits by small investors. Investors and consumer groups, organizations of state and local government officials, and many newspaper editorials around the country have urged Clinton to veto it.
At a White House media briefing Tuesday, spokesman Mike McCurry said no decision had been made. But one White House advisor said that “although nothing is written in stone, the drift here is toward signing it.”
The aide and other sources confirmed that Clinton’s political advisors recommended a veto. They said that group argued such a move would be popular with middle-class voters and would show the president standing up to Wall Street. But the sources cited several reasons why a veto would be unlikely. One is that Sen. Christopher J. Dodd (D.-Conn.) has made passage of the bill a crusade. Dodd, who is also chairman of the Democratic National Committee, has been a crucial White House ally on Capitol Hill, and the president is said to be reluctant to disappoint him.
Treasury Secretary Robert E. Rubin and a number of the president’s economic advisors also support the bill. And the sources noted that an important obstacle was removed a few weeks ago when Securities and Exchange Commission Chairman Arthur Levitt, while not endorsing the bill, dropped his opposition after changes were made to a key provision.
Among controversial elements in the bill is one that would protect companies from suits for projections they make about expected profits and other financial matters. The bill also would limit attorneys’ fees and give the plaintiff holding the most stock in a company control over a lawsuit against the company.
A provision heavily supported by the accounting industry would eliminate current law that makes all defendants equally liable for the full amount of damages in a case.
Accounting firms, which have been sued and had to pay millions on allegations that they failed to ferret out fraud in their audits of company books, have heavily supported the bill. Media reports have noted that they made large campaign contributions to members of Congress, including some to Feinstein. The bill would make the liability proportional to each defendant’s responsibility for the wrongdoing.
In debate on the Senate floor Tuesday, Sen. Rod Grams (R-Minn.), a supporter, said, “This legislation is designed to protect workers and consumers and investors from the high cost of securities litigation.”
But Sen. Joseph R. Biden Jr. (D-Del.) said, “Under this bill, Grandma loses and all the swindled investors lose.”
