In an election-year political scramble, the House of Representatives rushed through H.R.5118, a tough reform bill containing criminal penalties for corporate fraud that are even harsher than the ones passed unanimously by the Senate a day before.
The man behind the rush, the bill's sponsor, Rep. James Sensenbrenner, is suggesting that the fastest way to get a bill to the President is for the House and Senate to act on corporate penalties -- and leave the negotiations over a new accounting oversight board for later. After all, the penalties are only a potential threat (that could theoretically someday be imposed on a corporate executive). The accounting reforms involve more immediate and substantive issues, resulting in more political risk.
Rep. Sensenbrenner, managed to get the bill pushed through under a suspension of normal rules. Democrats said the bill was rushed to the House floor so fast, they learned of the plan only 30-60 minutes before it came to the floor. But they were reluctant to vote against it due to the effects of recent accounting scandals on the economy.
Supporters of the House tactics quote Federal Reserve Board Chairman Alan Greenspan as saying stiffer criminal penalties for corporate malfeasance are "the most important part" of the legislation being considered by Congress. Critics note that Mr. Greenspan also endorsed the Senate bill and even offered a rare mea culpa on the need for accounting reform. Specifically, he said, "My original view was that taking accounting standards and moving them out of the private sector was utterly unnecessary. I was wrong."
The bottom line is an uneasy vigil for the accounting profession. In an artfully-worded statement on the passage of the Senate bill, the American Institute of CPAs said, "We are at a serious juncture in the history of our financial markets, one that demands a serious response... Legislation passed by the Senate today and previously by the House provides the framework for constructive reform. It is critical to the American economy that we get it right." A spokesperson for PricewaterhouseCoopers, whose predecessor firm Price Waterhouse was known to have one of the accounting profession's most active and respected Washington liaison offices, said the firm has "no comment."