NEW YORK (CNN/Money) -
The House Thursday overwhelmingly passed a compromise version of a bill that would toughen corporate fraud and securities laws in the wake of the accounting scandals that have shaken confidence in American financial markets.
The vote was 423-3 on the bill, which represents a compromise between earlier proposals passed by the House and Senate. The compromise bill went to the Senate for its approval, which could come as soon as Friday, the Associated Press reported. The bill would then be sent to President Bush, who has pledged to sign it into law.
The bill would establish an independent body to oversee corporate accounting, toughen criminal penalties for corporate fraud and increase the budget of the Securities and Exchange Commission. Pressure to pass such a bill gathered steam in recent months with revelations of accounting improprieties at Enron, WorldCom Group and many more companies.
The sweeping changes are "a major step forward in reforming the operations of our financial market," said Rep. John LaFalce of New York, senior Democrat on the House Financial Services Committee, according to the Associated Press. "It is my hope that this legislation will help to restore the reputation of American business."
The House vote drew quick praise from Bush.
"This legislation will protect investors, crack down on fraud and wrongdoing and provide tough oversight of the accounting industry," Bush said in a statement. "I look forward to prompt action by the Senate so that I can sign this important legislation into law."
Treasury Secretary Paul O'Neill said the agreement will "nail on the wall the clear requirement for corporate accountability."
The bill closely resembles one passed by the Senate on July 15 with a 97-0 vote. That bill, sponsored by Sen. Paul Sarbanes, D-Md., was much broader in scope than an earlier bill, introduced by Rep. Michael Oxley, R-Ohio.
"It's certainly better than that creampuff legislation that was out here last April," said Rep. Maurice Hinchey, D-N.Y.
For months, Republicans, including President Bush, favored the House bill, and it seemed Sarbanes' bill would never even get out of committee.
But the news from WorldCom last month that it had misreported $3.8 billion in expenses, inflating its pretax earnings, was so dramatic that it increased the heat on lawmakers to come up with a tougher bill. After the Sarbanes bill passed, in fact, the House passed amendments prescribing some tougher criminal penalties than the Senate bill.
Under pressure to get a bill signed before the month-long August congressional recess, a conference committee, made up of members of both houses, hammered out a bill reconciling the differences between the House and Senate bills. It was that legislation that the House passed Thursday.
Separately, the accounting scandal at WorldCom could lead to an indictment of the company's former executives, including former CEO Bernard Ebbers, people familiar with the situation told CNNfn.
Under the bill passed Thursday, securities fraud becomes a criminal offense, and 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.
Other aspects of Thursday's bill include the immediate disclosure of stock sales by company executives and a prohibition against companies' giving personal loans to top officials.