WASHINGTON (CNN) - Responding to a slew of headlines detailing corporate fraud and sinking stock prices, the Senate unanimously passed legislation Monday aimed at reforming the accounting industry and enacting new tough penalties for chief executives convicted of cooking their companies' books.
By a vote of 97-to-0, the Senate approved a bill authored by Senate Banking Committee Chairman Paul Sarbanes, D-Md., which was originally written in reaction to problems associated with the fall of Enron but was pushed through with rare speed as stories of scandals at other companies, like WorldCom and Imclone, put pressure on lawmakers to act.
It creates a new independent accounting board to police the accounting profession and prohibits accountants auditing a company from also providing consulting advice.
The bill now also contains new penalties for securities fraud. An amendment sponsored by Sen. Patrick Leahy, D-Vt., creates a 10-year securities fraud felony for anyone who knowingly defrauds shareholders, and provides whistleblower protections for employees of publicly traded companies.
The legislation also includes a measure offered by Senate Minority Leader Trent Lott, R-Miss., which incorporates several proposals President Bush offered in a speech last week on Wall Street, including increasing jail time for corporate wrongdoing from five to 10 years, and allowing the SEC to freeze payments to corporate executives under investigation.
In addition, the bill will prohibit excessive loans to corporate executives from company funds, another proposal Bush advocated last week but has come under fire from Democrats for after it was revealed he was given a loan from Harken Energy when he was chairman more than a decade ago.
The House passed a Republican-backed bill sponsored by Rep. Michael Oxley, R-Ohio, in April which does not go as far as the Senate bill in reforming the accounting industry and does not include new penalties for executives. Although it had the tacit support of the Bush administration, Lott predicted Congress will send a bill to the President that looks more like the Senate's.
"This bill is stronger in several aspects than the House-passed bill, but I think a lot of it has been done thoughtfully and that they will move through a conference relatively quickly," said Lott, "I've discussed this with the president ... and I've discussed it with the speaker [of the House] ... and they both feel like the Sarbanes bill is within the range that they can support."
The bill still needs to be reconciled with a more modest corporate reform measure that has already passed the House of Representatives before it can be sent to President George W. Bush for signing into law.
One thing not addressed in this bill is the controversial question of whether companies should list their stock options on their balance sheets, which they currently do not have to do and which many say leads to inaccurate or overblown listing of assets.