WASHINGTON – House and Senate lawmakers expect to vote in the coming days on a compromise corporate fraud reform bill so that President Bush can sign it by the weekend.
House and Senate negotiators agreed by voice vote in conference Wednesday evening to approve the deal, a decision welcomed by the author of the Senate bill, Banking Committee Chairman Paul Sarbanes, D-Md.
"The legislation reflects our determination to see that the confidence of investors in our capital markets is restored," Sarbanes said.
The approval came hours after three former executives of bankrupt cable television provider Adelphia Communications Corp. were arrested on conspiracy charges and accused of looting their company.
Founder and former chairman and CEO John Rigas, 77, and former company executives Timothy and Michael Rigas could face up to 95 years in prison for defrauding the company of $3.1 billion in personal debts.
News of the deal marked a good day for the president, who expressed satisfaction with the compromise as well as the stock market's rise of nearly 500 points upon news of the deal and the arrests.
"Today was a day of action and a day of accomplishment in Washington, D.C.," Bush told reporters. "We're making progress on a piece of legislation which will enable us to say that we passed laws to help protect investors, 401(k) stockholders, from corporate fraud."
White House spokesman Ari Fleischer said the president had become familiar with most of the pact's measures and would sign it.
Most of the provisions in the compromise deal have been pulled from the Sarbanes bill. That measure, which passed the Senate unanimously last week, tightens oversight of the accounting industry, overhauls securities laws, imposes new criminal penalties for corporate fraud, creates a new independent oversight board to police the accounting profession, and bars accounting firms from providing consulting and other services to clients they audit.
The House features to be included in the compromise provide much tougher criminal penalties than both the previous statute and the Senate measure, including a maximum sentence up to 25 years and a new felony crime for corporate retribution against whistleblowers.
The House-born features also include modified language saying corporate fraud must be "knowing" to be subject to criminal charges, creation of a new fund to return to investors ill-gotten corporate gains, and real-time Internet disclosure by corporations when their financial health changes.
According to the House-Senate deal, the new independent board will have subpoena power but each subpoena will be subject to approval by the Securities and Exchange Commission, which will effectively give the SEC authority to supersede the new independent review board's inquiries.
One unresolved issue is how to fund creation of the new board. Once created, the new board will charge fees to firms it audits to sustain itself, but how its creation will be paid for is still being worked out.
Critics say some but not all fear has been assuaged that the new independent board will create massive redundancy and overlap between the Financial Accounting Standards Board and the SEC. One source close to negotiations said on condition of anonymity that that the decision has been made to create the board and sort out the problems later.
Finally, there will be no measure to force companies to account options provided to employees as expenses.
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.
The GOP-led House had been sticking to other regulations passed in April that were criticized for being too narrow, but abandoned that Wednesday, perhaps in part after realizing the rising lack of investor confidence, particularly among voting investors, accompanying the expanding corporate scandals.
Democrats too realized the political capital of the deal, and quickly claimed credit and victory for the compromise.
"We will accept surrender from the Republicans," Rep. John LaFalce, D-N.Y., said.
"I would say, General LaFalce, it will be an unconditional surrender," added House Minority Leader Richard Gephardt, D-Mo.
But Republicans shot back that the Democrat-controlled Senate did not act until two weeks ago — months after the House passed its bill.
House Majority Whip Tom Delay, R-Texas, accused Democrats of a deliberate stall to let the economy falter for political gain.
"Democrats are engaged in a cynical strategy to extend America's retirement misery. The corporate scandal was started from greed and a lack of moral leadership. This new Democratic strategy is filled with political greed, and is morally bankrupt. Dick Gephardt and Tom Daschle are practicing the politics of economic destruction," DeLay said.
Fox News' Carl Cameron, Jim Mills and the Associated Press contributed to this report.