WASHINGTON – Stiff new penalties for corporate fraud and document shredding have been adopted by a unified Senate insistent on adding enforcement teeth to President Bush's plan to stem a wave of accounting scandals.
In a series of unanimous votes, senators added the penalties Wednesday to an accounting oversight bill moving toward passage against a backdrop of eroded public confidence in corporate America.
Underscoring that sentiment, the Dow Jones industrials lost more than 280 points and closed below 9,000 for the first time since October on Wednesday, a day after Bush delivered a speech on corporate responsibility aimed at shoring up investor confidence.
A stream of revelations of accounting misdeeds at big corporations in recent months has scared investors and prompted concern about the fragile economic recovery. Tens of thousands of workers have been laid off — 17,000 at WorldCom alone — and millions of people have lost retirement savings, putting Bush and his Republican Party on the defensive with congressional elections approaching.
The Senate measures would create new 10-year prison terms for securities fraud and give federal protection to company whistle-blowers.
Chief executive officers and chief financial officers who certify false company financial reports would be slapped with prison terms of five to 10 years and fines of $500,000 to $1 million.
``These people deserve to go to jail. They've ruined the lives of thousands of people,'' Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., declared on the Senate floor, pointing to executive excesses at Enron, WorldCom and other big corporations.
Democrats said they wanted tougher penalties than those Bush proposed in his speech Tuesday.
Among other changes, the Senate extended the period of time in which defrauded investors can bring lawsuits against companies — a move praised by Consumers Union.
``Fraud is fraud,'' the group said. ``A realistic time period to bring cases will help deter corporate misconduct.''
The Senate also rolled Bush's own legislative proposals — notably doubling sentences for mail and wire fraud, and blocking payments to company officials suspected of wrongdoing — into its package of sanctions.
``The Senate has moved one step closer to providing America more confidence knowing that when corporate executives commit crimes and mislead investors, they will be brought to justice,'' said Minority Leader Trent Lott, R-Miss.
Bush, who traveled to Wall Street to deliver his speech, also called for aggressive policing to stem fraud and corruption in corporate America, promising to do ``everything in our power to end the days of cooking the books.''
Most of Bush's proposals 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.
Treasury Secretary Paul O'Neill voiced the administration's objections, warning in a speech to the U.S. Chamber of Commerce that the oversight board called for by the Senate bill would compete with the Securities and Exchange Commission and create confusion, potentially allowing wrongdoers to escape punishment.
The legislation ``gives the power to enforce securities law to an unaccountable private body,'' he said.
As the bill inched toward passage, Bush told legislative leaders he was sure ``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 said. But he said it was still too soon for Bush to commit to signing the legislation.
If the Senate passes the bill, possibly this week, the measure still would have to be reconciled with a version that passed the Republican-led House in April. That measure has been criticized by consumer groups and some Democrats as too weak to bolster investor confidence.
The overall 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.