Senate Set to Introduce Bills to Prevent Another Enron
Senate Democratic leaders promised Thursday to draft a series of comprehensive bills addressing the causes and consequences of Enron Corp.’s failure, and to push for their passage by year’s end.
Senate Majority Leader Tom Daschle (D-S.D.) said four committees would attempt to improve on existing law in the areas of investor protection, retirement security, corporate tax shelters and securities fraud.
A fifth committee will pursue a wide-ranging investigation of Enron’s rise and fall in an effort to “hold the culprits accountable,” in the words of Sen. Carl Levin (D-Mich.), who will help direct the probe.
“It’s our intention to pass whatever new laws are needed before the end of this Congress,” Daschle said. “We can’t afford to wait....We cannot allow what happened to Enron employees to happen to the rest of America.”
The energy company--one of the largest corporations in the United States last year--filed for bankruptcy protection Dec. 2, shredding billions of dollars in shareholder equity and costing many employees their jobs and their retirement savings. Because of a change in retirement plan administrators, employees were locked out of selling their shares in the weeks before the bankruptcy protection filing.
Sen. Edward M. Kennedy (D-Mass.) said the Senate’s efforts to help former Enron employees would go beyond the pension reforms proposed by President Bush, possibly by requiring greater diversification of assets in 401(k) retirement plans.
“The legislation will make sure that workers are never again forced into being captive investors who risk their retirement savings on the fate of a single company,” said Kennedy, chairman of the Health, Education, Labor and Pensions Committee.
Roughly 60% of the total value of Enron’s 401(k) plan at the end of 2000 was invested in company shares, and many employees lost the bulk of their savings when the stock price collapsed. Although mandatory diversification would limit such losses, it is a controversial concept because it restricts the ability of workers to choose their investments.
Republicans also are offering legislative remedies, including a proposal to prohibit executives from buying or selling company stock during any period where 401(k) participants are unable to do so. They also have introduced legislation to mandate increased financial disclosure by corporations and provide for greater oversight of accounting firms. Enron has claimed that its auditor, Andersen, raised no objections to Enron’s aggressive accounting practices.
Daschle said Enron’s failure has revealed the “dark side” of requiring workers to assume more pension-plan risk, a trend that could accelerate if Republicans manage to privatize a portion of the Social Security system.
“Privatization is just a fancy word for shifting more retirement security risk onto average Americans,” he said. “We believe that’s the wrong direction.”
Judiciary Committee Chairman Sen. Patrick J. Leahy (D-Vt.), whose panel is interested in increasing criminal penalties for securities fraud, cited Enron’s elaborate network of off-the-books investment partnerships as evidence of the need for reform.
“Talk about a spider’s web of deceit, that’s what Enron did,” Leahy told reporters. “The criminal code is not adequate for it. We’ll make it adequate.”
Sen. Joseph I. Lieberman (D-Conn.), chairman of the Governmental Affairs Committee, expressed confidence that the Senate could begin drafting legislation even though about a dozen congressional panels are still in the initial stages of assessing Enron’s collapse.
“We see the outlines of the loopholes in the law that Enron went through,” Lieberman said. “I think we know enough to begin the process of legislating.”
The senators met with reporters at a joint news conference.
In the House, meanwhile, Minority Leader Richard A. Gephardt (D-Mo.) said he was drafting legislation to create a universal pension system that workers could take with them from one job to another.
The measure would consolidate 16 existing pension programs, Gephardt said.
Also Wednesday, Sen. Dianne Feinstein (D-Calif.) joined two other senators in introducing a bill to give regulatory oversight to the Commodity Futures Trading Commission over derivative transactions--which are essentially contracts based on the future price or performance of an underlying asset.
Congress has heard testimony suggesting that Enron used its clout in this market to artificially boost power costs, a charge the company has denied.
