WASHINGTON – The Senate, moving against a wave of company accounting scandals, voted Wednesday to adopt new criminal penalties for corporate fraud and document shredding.
The vote was 97-0 to approve the amendment to an accounting oversight bill moving toward Senate passage, possibly this week.
The criminal penalty measure, written by Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., creates new 10-year prison terms for securities fraud and gives federal protection to company whistleblowers.
"These people deserve to go to jail. They've ruined the lives of thousands of people," Leahy declared on the Senate floor, pointing to executive excesses at Enron, WorldCom and other big corporations.
Democrats said they wanted tougher penalties than those President Bush proposed in a speech Tuesday on corporate responsibility.
Bush, who traveled to the heart of New York City's financial district to deliver the speech, called for doubled prison terms and aggressive policing to stem fraud and corruption in scandal-tarred corporate America, promising to do "everything in our power to end the days of cooking the books."
Most of Bush's initiatives don't call for new laws; many just urge companies and executives to adopt them.
Bush has given only qualified support to the bipartisan accounting bill, which would create an independent private body with authority to discipline auditors and establish auditing and ethics rules.
"I don't think the president or the administration gets what this is really about," Sen. Paul Wellstone, D-Minn., said before Wednesday's vote. The need for the legislation "goes way beyond Enron, goes way beyond WorldCom," he said. "The American investing public has lost its confidence in this corporate system."
A stream of revelations of accounting misdeeds at big corporations in recent months has eroded public confidence in corporate America. Tens of thousands have been laid off — 17,000 at WorldCom alone — and millions have lost retirement savings, handing Democrats a key issue just months before the congressional elections and putting Bush on the defensive.
As the bill to tighten oversight of the accounting industry moved toward passage, Bush expressed confidence to legislative leaders "that Congress will be able to get this done," White House spokesman Ari Fleischer said.
Bush also stressed "the importance of working together to do it," Fleischer told reporters as the Senate debated the legislation. However, he said, it is still too soon for Bush to commit to signing it.
Earlier Wednesday, the Senate rejected on a 55-43 vote a Republican amendment that would have required top labor union officials to certify the accuracy of unions' financial statements in the same way the government is now requiring chief executives of big corporations to do.
The measure's sponsor, Sen. Mitch McConnell, R-Ky., decried what he called "the pervasiveness of union corruption."
Republicans have long bristled at the substantial campaign contributions flowing from unions to the Democratic Party.
The accounting oversight legislation also would limit the consulting work that accounting firms can do for their audit clients — a step fiercely opposed by the accounting industry, a major contributor to lawmakers' campaign funds.
If the Senate passes the bill, it still has to be reconciled with a version that passed the Republican-led House in April. That bill has been criticized by consumer groups and some Democrats as too weak to bolster investor confidence.
Democrats scoffed at Bush's proposal to give the Securities and Exchange Commission — pursuing civil investigations of several big corporations — an extra $100 million.
It "hardly puts a cop on the street," said Sen. Christopher Dodd, D-Conn. The accounting bill, written by the Senate Banking Committee chairman, Sen. Paul Sarbanes, D-Md., calls for an additional $300 million or so for the SEC to hire some 200 auditors and investigators.