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25yr penalty for fudgen the books!

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    Congress agrees corporate reform bill
    By Edward Alden in Washington
    Published: July 24 2002 16:58 | Last Updated: July 24 2002 19:27


    The US Congress on Wednesday reached an agreement on sweeping legislation aimed at restoring investor confidence in corporate financial statements, clearing the way for President George W. Bush to sign it into law.

    The bill, which would usher in the biggest changes in Washington's regulation of corporate accounting since the depression of the 1930s, largely mirrors tough legislation passed unanimously by the Senate earlier this month.

    In line with the Senate bill, it would restrict accountants from providing certain consulting services to their auditing clients, a provision intended to end conflicts of interest in the country's largest accounting firms.

    It would also create harsh new criminal penalties for corporate executives involved in financial fraud, and would require chief executives and boards of directors to take direct responsibility for the accuracy of financial statements. It establishes a new crime of securities fraud with a maximum penalty of 25 years, and doubles the jail terms for other white collar crimes, making them tougher even than the Senate bill.

    House Republicans had originally preferred less onerous measures, but their hesitation was swept away by the mounting crisis in investor confidence. John LaFalce, a House Democrat, said on Wednesday that Democrats "will accept surrender from the Republicans" on the bill.

    Mr Bush is trying to regain the initiative from congressional Democrats on economic issues by promising quick approval of the corporate reform bill and launching a renewed push to win congressional authority to negotiate new trade deals.

    Harvey Pitt, the embattled chairman of the Securities and Exchange Commission, immediately praised Congress for agreeing legislation that he said would help "restore integrity to the nation's financial markets and to serve the interests of US investors."

    Paul O'Neill, the US treasury secretary who has faced criticism over his handling of the markets crisis, said on Wednesday he would postpone a trip to Brazil, Uruguay and Argentina in order to help complete work on the corporate reform, trade and homeland security bills. He called them "three important components of the president's agenda to strengthen our economic recovery."

    The House and Senate lawmakers were scheduled to meet late on Wednesday to give final approval to the deal, which was worked out in negotiations late Tuesday night.

    The centrepiece of the legislation is the creation of an independent board that would oversee the auditing of public companies, and would have the power to investigate and punish accounting firms if they certify inaccurate financial statements.

    The five-man board would come under the oversight of the SEC. Michael Oxley, the House Republican who chaired the negotiations on the bill, said on Wednesday the SEC and the new board would co-ordinate any investigations.

    The legislation will also toughen disclosure requirements on many of the off-balance sheet transactions that have been at the centre of the financial scandals gripping Wall Street.

    The final package could anger European countries, however, which had been trying to kill a controversial provision in the Senate bill which would force foreign companies listed on a US exchange to comply with the new rules.

    Fritz Bolkestein, the European Union internal markets commissioner, sent Senate negotiators a letter on Wednesday opposing the provision, saying it would interfere with the ability of the EU to set regulations for its own companies. But the letter arrived after the deal had already been concluded.

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