WASHINGTON (AP) - The House on Wednesday adopted Enron-inspired legislation to tighten oversight of the accounting industry and toughen corporate disclosure rules.
The vote was 334-90, with some Democrats accusing House Republican leaders of bowing to financial interests by passing a weak bill. Houston-based Enron, which entered the biggest bankruptcy in U.S. history in December, was one of President Bush's largest corporate donors.
In House debate, the bill's GOP authors said it would bolster investor confidence - shaken by Enron's collapse and by accounting failures at other big companies - without creating needless red tape for business.
The legislation would establish a new regulatory body to oversee the accounting industry and discipline auditors, replacing the current system in which the industry largely polices itself.
"We have taken action. We've stood up to Wall Street to protect working families," said Rep. Richard Baker, R-La.
But Rep. John LaFalce of New York, senior Democrat on the House Financial Services Committee, told the Republicans they would get "a pat on the back" from corporate America and Wall Street.
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He and some other Democrats, consumer groups and the AFL-CIO said the bill lacked teeth.
Among other things, they wanted the new oversight body to have its duties and powers spelled out, warning that the body created by the bill could be dominated by the accounting profession.
"The Republican leadership, once again, is selling out to special interests. It is refusing to hold executives accountable for their actions," House Minority Leader Dick Gephardt, D-Mo., said at a news conference.
Opponents warned that the legislation relies on Wall Street's ability to police itself and companies' voluntary efforts to hold executives accountable rather than clear rules.
The House rebuffed, in a 219-202 vote, LaFalce's Democratic alternative to the bill that would have required company executives to personally certify the accuracy of corporate financial statements. It also would have enabled the Securities and Exchange Commission to strip stock bonuses from executives who falsify statements and would have mandated that companies change their accounting firms every few years.
The Democratic measure would have required rules from Wall Street's self-governing bodies prohibiting analysts from holding stock in companies they cover and from having their compensation tied to their firms' investment banking revenues.
It was the second major piece of legislation prompted by the Enron debacle to come before the House, which voted earlier this month to add more worker protections to the nation's pension laws. Thousands of Enron employees lost their retirement savings as the company's stock plunged last year, while top executives cashed out hundreds of millions of dollars of stock.
The bill approved Wednesday would prohibit accounting firms from providing certain consulting services to companies whose books they audit. Audit papers would have to be kept for seven years. The measure also would bar executives from trading in company stock during "blackout" periods in which employees were prohibited from selling the stock from their retirement savings accounts.
The White House supports the bill but says it would prefer that some of the changes, such as requiring companies to file financial reports more quickly, be made by the SEC rather than by Congress.
Bush last month proposed his own 10-point plan in the wake of Enron's collapse to make company officials more accountable, provide better information to investors and develop a stronger audit system. It rests mostly on administrative changes as opposed to legislation.
The Senate has not yet acted on parallel legislation.
Bush praised the House for passing the bill, saying it embodied three of his 10 proposals. "With 80 million Americans participating as shareholders of companies, we must ensure high standards, tough disclosure requirements and accurate information," Bush said in a prepared statement. "The House bill is a responsible approach to addressing these important issues."
The House vote came as the government and Congress delve into the Enron affair, which brought the role of accountants under public scrutiny. Last week talks collapsed between Enron's former auditor, Arthur Andersen LLP, and the Justice Department over a possible settlement of the criminal case against the big accounting firm for shredding of Enron-related documents.
Wall Street analysts also are being examined closely, as New York Attorney General Eliot Spitzer investigates alleged conflicts of interest and possible fraud by analysts at big brokerage houses.
The problem, as critics see it, is that financial analysts may give biased advice because they hold substantial positions in company stocks they recommend and their investment firms do lucrative financial work for the same companies.
The House bill is H.R. 3763.
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