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Senate okays tough corporate fraud bill

By Sridhar Krishnaswami

Washington JULY 16. In a major show of bipartisanship, the United States Senate has unanimously approved sweeping reforms in corporate accountability.

Following a string of major accounting scandals that have rattled the markets and seriously shaken investor confidence, the Senate, by a vote of 97 to 0, set in motion a plan for one of the most sweeping changes in the business world. "It is high time we call corporate executives on the carpet and hold them responsible," the Democratic Senator, Max Cleland of Georgia said before the formal vote. The Republican Senator, Charles Grassley, denounced the "crooks" running corporations.

The Senate legislation, which is tougher than what the House of Representatives passed in April, calls for prison terms of up to 10 years for securities fraud. Chief executives and chief financial officers who certify false financial statements could look at a 10-year jail term and fines between $500,000 and $1 million.

But the proposed changes, the biggest in corporate regulation since the 1929 stock market crash, must be reconciled with a weaker Bill passed by the House of Representatives in April after the collapse of Enron. The House Bill was approved before the WorldCom financial scandal broke in full force. Pressure is mounting on the House Republican leaders to pass a Bill that matches the Senate Bill. That process will start today itself.

"I am pleased the Senate has now acted on a tough Bill that shares my goals," the President, George W Bush, said in a statement. "We owe it to America's workers and shareholders to crack down on wrongdoing and fix the system to prevent future abuses," he said.

The White House has faced criticism over the last several weeks from the Opposition, which alleged that since the President and the Vice-President were themselves senior corporate players at one time, they might be reluctant to act against corporate executives. Mr. Bush's speech on the subject in Wall Street last week was brushed off as mere rhetoric. Mr. Bush is under scrutiny over a decade-old insider trading investigation by the Securities and Exchange Commission on the sale of stock in Harken Energy Corporation. The Vice-President, Dick Cheney's former company, Halliburton, is being investigated for accounting practices when Mr. Cheney was its chief executive.

In many ways, this has not been easy going for lawmakers who, on the one hand, have to keep in mind their constituencies and, on the other hand, the two parties have to consider the impact of tough legislation on donors.

The Republicans, especially, are in a spot as the Democrats are likely to focus on the issue of corporate fraud as an election theme in the Congressional elections this November.

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