WASHINGTON – The Senate on Monday approved with a 97-0 vote the most sweeping changes in corporate accountability since the Depression.
"It is high time we call corporate executives on the carpet and hold them responsible," Sen. Max Cleland, D-Ga., declared on the Senate floor before the vote.
The bipartisan bill creates stiff penalties and jail terms for company fraud and tightening oversight of the accounting industry.
The bill was designed to counter a rising tide of unease over a string of corporate accounting scandals that have shattered Americans' confidence in business and the markets and threatened the fragile economic recovery.
Sen. Charles Grassley, R-Iowa, denounced "the crooks running these corporations."
As the Senate neared passage of the legislation after nearly a week of debate and votes on amendments, President Bush told business leaders, "We intend to hold people accountable."
"We can't pass a law that says, 'You will be honest,'" the president said in a speech at the University of Alabama at Birmingham. "We can pass laws that say, 'If you're not honest we'll get you.'"
Bush urged Congress to get him a bill to sign before adjourning for its summer recess. Congressional leaders indicated they would try to do that.
"I am pleased the Senate has now acted on a tough bill that shares my goals," Bush said in a statement issued after the vote. "We owe it to America's workers and shareholders to crack down on wrongdoing and fix the system to prevent future abuses."
A spokesman for House Speaker Dennis Hastert, R-Ill., said lawmakers would try Tuesday to take initial procedural steps toward resolving differences between the bill in the Democratic-controlled Senate and a version passed in April by the GOP-led House.
Senate Majority Leader Tom Daschle, D-S.D., asked Republican leader Sen. Trent Lott, R-Miss., to join him in a request to Hastert to have the House to vote on the newly passed Senate measure.
Senators voted last week to add a series of new penalties, including 10-year prison terms for securities fraud. Chief executive officers and chief financial officers who certified false company financial reports would be slapped with prison terms of five to 10 years and fines of $500,000 to $1 million.
"Americans must know that they can save with confidence for their children's education or for retirement — that they can look ahead confidently to the future," said Sen. Paul Sarbanes, D-Md., chairman of the Senate Banking Committee and the bill's chief sponsor.
The measure drew praise from groups as diverse as the Business Roundtable, representing CEOs of major corporations, and the Consumer Federation of America.
Bush's Birmingham speech was his second attempt within a week to restore investor confidence, but the markets dropped even further after his remarks. The Dow Jones industrials were down about 400 points in early afternoon trading but rallied late in the session to close down 45 points.
The Senate bill would ban personal loans from companies to their top officials and directors, and would require company insiders to notify the SEC more promptly when they buy or sell company stock.
The measure creates a new private-sector oversight board for the accounting industry with disciplinary powers, to replace the current system in which the industry polices itself. The board would be overseen by the SEC, which also would appoint members in consultation with the Treasury Department and the Federal Reserve Board.
The legislation restricts a wide range of consulting and other nonauditing services that accounting firms would be allowed to provide to their audit clients, including bookkeeping, financial systems design and personnel and legal services. The move has been fiercely opposed by the accounting industry, a major contributor to lawmakers' campaign funds.
Investor confidence has been shaken since a series of corporate accounting scandals, beginning with the collapse of Enron Corp. Its longtime auditor, Arthur Andersen LLP, recently was convicted of obstructing justice by shredding Enron audit documents. WorldCom Inc., Xerox Corp. and Global Crossing Ltd. also are under investigation.
Bush and the Republicans have been on the defensive as Democrats have made corporate accountability a political issue in this congressional election year. Presidential spokesman Ari Fleischer said Monday, "The closer it gets to the election, it's going to be expected that some people are going to engage in statements that are political in nature."
Bush's SEC chairman, Harvey Pitt, remained under fire because of his past work representing the accounting industry and big corporations before the agency. Fleischer shrugged off calls for Pitt to step down, saying "the president stands by his team."
Even Sen. Phil Gramm, R-Texas, who had opposed the legislation in recent months while it was bottled up amid heavy lobbying against it by financial industry groups, ended up voting for the final, even stricter, measure.
Three senators, all Republicans, did not vote: both of Idaho's senators, Larry Craig and Mike Crapo, and the ailing Jesse Helms of North Carolina.
The Associated Press contributed to this report.