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CNN Sunday Morning
Interview With Melissa Hart, John LaFalce
Aired July 28, 2002 - 11:15 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RENAY SAN MIGUEL, CNN ANCHOR: We're going to shift gears now and talk about Wall Street and Washington and the intersection between the two. Corporate America put on notice this week when the House and Senate passed a tough new corporate responsibility law. It imposes stiff criminal penalties for corporate fraud and some new restrictions and oversight on the accounting industry.
But did it go far enough? With us now to weigh in on the new legislation, Congresswoman Melissa Hart in Pittsburgh and in New York, Congressman John LaFalce. Thanks, both of you, for joining us this morning.
Good morning to you. Congresswoman Hart, let me start off with you. The executive director of the Council of Institutional Investors was quoted in "The New York Times" this week after the House and Senate approved this bill saying that the law was -- the bill was better than she thought it would be, but it still wouldn't make that big of a difference because the New York Stock Exchange is working on its own proposals for reform, including things like getting shareholder approval for any stock option plans that companies might have. What is your response to that?
REP. MELISSA HART (R), PENNSYLVANIA: We welcome any regulation -- self-regulation by those organizations, but I think she's wrong. the bill does the things that people have asked us to make sure happen. It stiffens penalties on corporate criminals. Twenty to 25 years in jail. Better still for those investors who lost money, it gives them their money back. All of the money that's recovered will then be returned to the investors.
And finally for the future, all of the disclosure, those investors, those executives that are investing, selling, buying stock -- it has to be disclosed immediately in real-time. I think that's going to give us a lot more confidence.
SAN MIGUEL: Congressman LaFalce, you had some issues with this independent oversight board and some of the earlier versions of these bills as they were making their way through the House and Senate. You know, who would oversee the accounting firms? That is itself overseen by the SEC. Do you have a problem with that? Are all the duties and the powers of that oversight board spelled out clear enough for you?
REP. JOHN LAFALCE (D), NEW YORK: All right, first of all, it's a very good bill that we passed, and it's good for investors, it's good for the American public, it's good for the markets, and we should rejoice in that. And we were finally able to come to closure with Republicans, supporting the initiatives, that we had advanced months and even a year or so ago.
Now, with respect to the Council of Institutional Investors and their remarks, I know Sarah Teslak (ph) quite well. She is 100 percent correct. I had offered amendments within the Financial Services Subcommittee to require shareholder approval of executive stock options, and Mr. Hart voted no and the other Republicans voted no, monolithically.
HART: There you go again, John.
LAFALCE: Just telling the facts, Melissa.
HART: We have a wonderful piece of legislation...
LAFALCE: Yeah, but Sarah Teslak (ph) is criticizing...
HART: ... and you bring partisan politics back into it.
LAFALCE: Sarah Teslak (ph) has criticized it.
HART: The bill was passed with the support of Republicans and Democrats.
LAFALCE: ... because of items that are not in it that you voted against. You can't get away from your votes, Melissa.
HART: The issue isn't me. The issue is with you, John.
LAFALCE: Now, there are a whole school of other things that can be done...
HART: The issue is all those people who invested money in their 401(k)s...
LAFALCE: ... to improve the bill tune-up.
(CROSSTALK)
LAFALCE: ... such as creating aiding and abetting liability. You're interrupting again, Melissa. This is your style. You vote wrong and you try to interrupt me when I try to point out how you voted wrong.
SAN MIGUEL: Let me interrupt...
HART: And you constantly play partisan politics.
SAN MIGUEL: Let me interrupt both of you because it seems to me...
LAFALCE: There are clear issues.
SAN MIGUEL: ... that ever since that this has been approved and it's now waiting for the president's signature, both the Democrats and the Republicans are playing this game of can (ph) as (ph) mas macho (ph) here, who can be tougher on corporate fraud, or on bad accounting. I realize we got...
(CROSSTALK)
SAN MIGUEL: ... midterms coming up, and I realize we have the 2004 election two years away. What does it matter as long as things are taken care of for the average investor?
HART: That's right.
LAFALCE: And we've taken care of a good many, but there are a good many issues that have not been addressed. We have not addressed stock options; we have not addressed aiding and abetting liability, and the Republicans have consistently voted against that. And we have to tell the American public that we've done a job that needs to be done, but not the entire job, and the reason we haven't done the entire job is because the Republicans have fought us tooth and nail on each and every issue.
HART: There he goes again.
LAFALCE: There you vote again. Voting wrong again. And the party is voting again wrong, Melissa, and you can't get away from your bad, terrible record.
SAN MIGUEL: Congresswoman Hart, I'll give you a chance to respond to that.
HART: You know, as a result of our record, the legislation that was passed in the House and the legislation that was passed in the Senate was strengthened in the conference committee between the House and Senate, between Senator Sarbanes, a Democrat, and Representative Oxley, a Republican. They got together. They addressed the concerns of the American public as a bipartisan unit, and it was supported bipartisan -- in a bipartisan way by both the House and the Senate.
I don't know why Representative LaFalce continues to argue Democrat/Republican. The issue is the American investor who lost millions of dollars during these scandals. The issue now is the requirements, fortunately, placed on every CEO in America to certify their audits. They must look at those audits.
(CROSSTALK)
HART: So the reality now...
LAFALCE: There are good many other standards that the New York Stock Exchange is imposing upon their members, and, again, the Republicans voted against applying those standards to all of corporate America. There are less than 3,000 publicly traded corporations on the New York Stock Exchange. There are 17,000 in the country. Their standards will apply to fewer than 3,000. We should apply those standards to all 17,000 publicly traded corporations, and again, the Republicans have opposed that. HART: Again, the partisan politics is not necessary. The real issue here...
LAFALCE: Sure, it's not, if you would vote for good legislation, but you consistently...
(CROSSTALK)
SAN MIGUEL: Both of you, we have about a minute left here, and there is one issue that I want to address that...
(CROSSTALK)
SAN MIGUEL: Just a point by point of this particular legislation. The idea here is that the bill does not require companies to switch out their auditors. Yes, it does bar them, the accountants from also getting into the consulting side of the business, but wouldn't it have been better for the companies and their shareholders, for these auditors that you have to switch auditors?
LAFALCE: And that was in my bill, too, and that was voted against by the Republicans.
HART: The issue is...
LAFALCE: Mandatory rotation of auditors every four, five, six years, we could negotiate that. I think that would be highly desirable.
HART: The issue is the concerns are...
(CROSSTALK)
SAN MIGUEL: Congressman Hart, let me go ahead and I'll give you the last word.
HART: Thank you very much.
SAN MIGUEL: What he said about that not making it into the final version of the bill, why wasn't that in there?
HART: Well, it wasn't the focus of the legislation. The focus of the legislation was to make sure the consulting and auditing functions were separated, and that those who committed the crimes would go to jail. That those who committed the crimes and stole the money will now have to give up their yachts and their houses and their boats, and all of that money can be returned to the investors who lost it.
SAN MIGUEL: But the idea being if you can go ahead and guarantee that there is no auditing tricks here whatsoever, what would be wrong with a different auditor coming in every two or three years?
HART: Nothing is wrong at all, but they are required...
LAFALCE: Well, then why did you vote against it? (CROSSTALK)
SAN MIGUEL: ... we're about to run out of time.
HART: (UNINTELLIGIBLE) was bipartisan, thanks.
SAN MIGUEL: You know what? We will leave it there. We have a feeling that we're going to be revisiting this issue again. Congresswoman Melissa Hart of Pennsylvania, Republican from Pennsylvania, Representative John LaFalce, Democrat from New York, thank you both for being on CNN this morning. Thanks a lot.
LAFALCE: Thank you very much.
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