Accountants Attack Senate Reform Bill
As House and Senate negotiators meet today in an effort to reach speedy agreement on a corporate reform bill, the accounting industry is stepping up its lobbying to defeat provisions it regards as too restrictive.
An e-mail sent Wednesday by the American Institute of Certified Public Accountants to its members decried the Senate version of the legislation as overkill. “We cannot allow ... the fierce search for blame to taint the 350,000 CPAs in this country who stand for integrity, competence and objectivity,” the e-mail said.
The industry group complained that the bill unanimously approved by the Senate this week “opens the door for profound changes to the [Securities and Exchange Commission] and the accounting profession.”
It expressed support for a less stringent measure approved by the House this year.
As the Senate bill gathered momentum after the recent wave of corporate scandals, business lobbyists had said they would fight to change the measure during the House-Senate negotiations. What’s uncertain is whether the bipartisan push to pass reforms quickly--in order to guard against the economic and political damage from the scandals--will keep the lobbyists from having the type of influence they usually exert.
President Bush has asked Congress to send him an accounting reform bill before lawmakers adjourn for their August recess.
A major sticking point between the Republican-controlled House and Democratic-led Senate is a proposal for a new accounting oversight board.
Under the Senate proposal, the board would operate independently of the SEC. It would have the power to set auditing and ethics rules and discipline auditors. The five-member board would be appointed by the SEC, with two members--but no more--having accounting backgrounds.
The House bill delegates many of the details of the new board’s authority to the SEC, an agency that critics say has failed to move aggressively enough to combat corporate crime. House Republicans also favor a panel with four of the five members having an accounting background.
The U.S. Chamber of Commerce has expressed concerns that the board proposed by the Senate would “at best duplicate--or at worst--conflict, with existing SEC oversight, thus confusing business with respect to the body of rules and regulations to observe and with which to comply.”
Senate Majority Leader Tom Daschle (D-S.D.) said Thursday he is unwilling to compromise on the board proposal. “It has to be independent,” Daschle said.
The accounting industry group said in its e-mail that it had been working to address concerns about the accounting industry since Enron Corp.’s collapse late last year. But it said the recent revelation of accounting irregularities by WorldCom “significantly altered this landscape and set the stage for the sweeping legislation” that passed the Senate.
The group said it is particularly concerned about a provision of the Senate bill that goes beyond the House measure in restricting the consulting that accounting firms can provide to companies they audit.
The lobbying comes as a key lawmaker urged SEC Chairman Harvey L. Pitt to permanently recuse himself from agency proceedings involving former clients.
Rep. Edward J. Markey (D-Mass.) said Pitt’s participation in decisions affecting former clients “would further deepen the crisis of confidence in the securities markets and call into question the ability of the commission to be an objective and vigorous enforcer of the securities laws.”
An SEC spokesman declined comment.
Pitt is a former securities lawyer whose clients included each of the Big Five accounting firms. Sen. John McCain (R-Ariz.) has called for Pitt’s resignation, contending that his past work has made him unsuitable for the job.
Pitt agreed to sit out on matters involving former clients during his first year in office. But as that date nears, he plans to decide whether to participate in decisions affecting former clients on a case-by-case basis, a spokeswoman said.
“I intend to continue to adhere to both the letter and the spirit of the ethics rules. I don’t want to do anything that gives our critics an opportunity to raise issues,” Pitt said on CBS’ “Face the Nation” on Sunday. “But the SEC needs my leadership. Public investors need my leadership.... I’m going to make a case-by-case decision. If I think there is an appearance issue or some other problem, I may still recuse myself.”
But Markey sent a letter to Pitt urging him to extend his one-year cooling-off period, due to expire Aug. 3. “Otherwise, Aug. 3 will mark the day that the many former clients of Chairman Pitt rush to the SEC to reestablish their ‘special relationship’ with this powerful regulator,” Markey said.
The White House on Thursday continued to stand by Pitt.
“He’s running the SEC in a manner that is wise and in a manner that is tough,” said Press Secretary Ari Fleischer. “The president has strong confidence in Harvey Pitt’s judgment and discretion.”
Sen. Phil Gramm of Texas, top Republican on the Senate Banking Committee, recalled that during Pitt’s confirmation hearing, “everyone lavished praise on Harvey Pitt for all the knowledge and experience he had, and now you can hardly open a paper without a criticism being made about him.”
