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Corporate America Having Tough Time in Capitol This Year

Congress passes accounting crackdown but leaves bankruptcy, terrorism bills in limbo.

October 21, 2002|Susan Cornwell | Reuters

WASHINGTON — Business lobbyists had trouble finding the welcome mat this year on Capitol Hill as a string of corporate scandals drove the 107th Congress to pass the biggest crackdown on executive fraud since the Great Depression.

Lawmakers in August gave the White House so-called fast-track trade negotiating authority backed by most businesses, but industries including airlines and financial services providers saw Congress leave key legislation unfinished last week when it adjourned to campaign for Nov. 5 elections.

Driven by swooning markets and angry investors, Congress cracked down on shady accounting practices, banned insider loans and quadrupled jail time for crooked executives in the landmark Sarbanes-Oxley Act.

Congress also humbled major players in corporate scandals, including those of Enron Corp., WorldCom Inc. and ImClone Systems Inc. Executives, accountants, bankers and stock analysts were investigated, subpoenaed and castigated in packed hearing rooms on Capitol Hill.

But critics say Congress still failed to address how to account for stock options, which may skew the judgment of chief executives.

They also say lawmakers failed to pass legislation to protect pension plans or to bar U.S. firms from incorporating in offshore havens to avoid taxes.

"Year in and year out, business lobbyists have held enormous sway over Congress. This year they didn't get their way all of the time, just much of the time," said Dave Butler, a spokesman for consumer advocacy group Consumers Union.

Congress disappointed lenders, insurers, mortgage bankers and property developers when it came within inches of passing a bankruptcy law overhaul and terrorism insurance but left both measures unfinished before leaving town.

The razor-thin political majorities in the Senate and the House have kept Congress from doing much except in a perceived crisis, said Bruce Josten, executive vice president of the U.S. Chamber of Commerce.

The bankruptcy reform would make it harder for dead-beat borrowers to use bankruptcy laws to erase debts.

It gained momentum after the Enron scandal highlighted the potential for executives of failed companies to shield multimillion-dollar residences from creditors.

But the legislation foundered on a dispute over abortion-related provisions.

Under the terrorism insurance bill -- backed by insurers, developers and mortgage bankers -- the government over the next three years would become the insurer of last resort for damage from a Sept. 11-like attack.

But a dispute over limitations on legal liability held up final passage.

Still, observers give good odds that Congress will pass both measures in a post-election "lame duck" session expected in mid-November.

"The [congressional] leaders say they're committed to passing these bills. A powerful array of interests is behind both of these bills," said Travis Plunkett of the Consumer Federation of America, which opposes the bills.

The airline industry, which reported another round of staggering losses last week, failed to persuade lawmakers to sign off on a new aid package worth $4 billion a year -- although supporters hope that this bill can be passed in the lame duck session.

Unlike last year, when the industry received a government bailout that included $5 billion in cash, airlines this time are seeking tax breaks and help with meeting security costs and premiums for "war-risk" insurance.

Legislation in both houses would freeze war-risk premiums and lift some security restrictions to boost revenue. Lawmakers have rejected pleas by chief executives from big airlines to lift a security tax imposed this year.

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