Citizen Works - Press Release

Washington, D.C. --- Today Ralph Nader and leading citizen advocates and scholars, called for a Citizens Reform Agenda to address the Enron/Arthur Andersen scandals. The agenda proposes reforms for the accounting industry, the banking and lending industry, pensions, campaign financing, securities reform, and energy deregulation.

Noting that the Enron/Andersen swindles were "a supermarket of corporate crime, fraud, and abuse," Nader stated that, "Congress - whose members are marinated in campaign contributions from Enron and Arthur Andersen -- cannot just hold hearings and return campaign donations. The members need to adopt a series of reforms responding to similar corporate crimes, fraud and abuse across many industries to look out for the best and rightful interests of the public. Deeply embedded and recurring patterns of corporate crime, fraud and abuse -- impervious to media exposure -- require larger corporate crime prosecution budgets for the Department of Justice and the Securities and Exchange Commission, as well as enhanced regulatory authority to place the federal cop on the corporate beat as both an apprehender and deterrer of corporate crime."

Nader called for:

· State passage of model legislation like the Corporate Decency Act, including measures that:

- Make it unlawful for any corporate official to destroy or falsify documents or to negligently allow the destruction of documents pertaining to hazards to the public or the corporate entity's employees or agents;

- Strengthen whistleblower protections;

- Require corporate entities organized or doing business in the state to have good corporate character to obtain or retain their state charters;

- Require annual reporting requirements on large shareholders, political action committee campaign contributions, and civil infractions and criminal violations;

- Allow shareholders to review transactions that involve the purchase, sale, lease, merger, consolidation, financing, refinancing, dissolution or liquidation of assets equal to ten percent of the corporate entity's total assets or the sale or redemption of ten percent of the company's outstanding stock or the authorization of corporate stock or securities in any amount;

- Require shareholder notification of long-term debt and revolving credit agreements of the corporate entity in excess of one million dollars;

- Require the majority of the board of directors of each corporation doing business or incorporated in the state to be independent;

- Establish strong remedies and sanctions for corporations in violation of the act.

· State Boards to rigorously use their authority to revoke the licenses of accountants who perform as some accountants did in Arthur Andersen;

· A complete investigation of whether multi-billion dollars loans were advanced by insured banking corporations to Enron in an attempt to gain the company's favor and, thereby obtain large fees and other income from investment banking activities - rather than basing credit decisions on sound banking criteria;

· Higher fines and penalties for banks that fail to maintain high lending standards for investment banking partners; and

· Restoration of the 1933 Glass-Steagall protections which the Congress shredded in 1999;

Nader said that, "clearly the financial deregulation movement of the past two decades has not worked. Among other consequences, deregulation has become a license to profiteer and steal from innocent workers, pension holders and shareholders."

Dr. Ralph Estes, professor emeritus of accounting at American University, who once served as a senior auditor with Arthur Andersen & Co., said that, "Enron shows vividly how, by shunning public accountability, Corporate America is fouling its own nest. We propose legislation that will make corporations accountable to their workers, customers, communities - all stakeholders - and not just to financial investors. And we propose strong legislation that will make certified public accountant accountable to the public, and not merely to the clients that reward them with millions in consulting fees."

Professor Estes proposed four reforms:

· Auditing must be separated, with an absolute firewall, from management and tax consulting practices.

· The "revolving door" between CPA firms and audited companies must be firmly closed, with a minimum five-year prohibition against joining a former client.

· Auditors and auditing must be effectively regulated.

· An independent, government-established agency must be created, possibly as a unit of the Securities Exchange Commission, to collect audit fees from large companies based on standard formulas, and to appoint, compensate and dismiss the external auditors.

"The Enron situation also illustrates the potential abuses in the 401(k) system and shows the need both for additional protections for workers and the need to reexamine our retirement income policy in this country," said Karen Friedman, policy director, Pension Rights Center. The Pension Rights Center proposed three reforms:

· At a minimum, the Center supports the Boxer-Corzine legislation that would restrict how much of employee money can be invested in company stock in their 401(k) plans, and that ensures that if employers put their matching contribution in company stock, employees will be free to move out of those investments within a reasonable amount of time. Certainly there is a need to ensure that workers diversify investments and are not locked into employer stock.

· Congress should move to require independent fiduciaries in 401(k) plans that are invested in company stock.

· Congress should require adequate insurance for plan fiduciaries.

Carl J. Mayer, a securities and environmental lawyer, and former law professor on corporations and securities at Hofstra University, said that 71 Senators and 188 Representatives have received Enron funding. Moreover, 94 Senators and more than half of the members of the House have received campaign donations from Enron's auditor, Arthur Andersen since 1989. Mayer called for:

· An Independent Counsel unrelated to the two parties to investigate and determine the root causes of the Enron debacle;

· The repeal of the Securities Litigation Reform Act, passed by Congress over a veto from former President Clinton, which removed joint and several liability for accountants and resulted in the lack of enforcement from the private bar; and for

· Full public financing of public elections, with free television time, to curb the influence and appearance of influence of companies like Enron and Arthur Andersen that have given millions of dollars of campaign contributions.

To protect consumers and shareholders, Tyson Slocum from Public Citizen's Critical Mass Program on Energy and the Environment, proposed three reforms:

· Congress should re- regulate the trading of energy futures; It should order the Commodity Futures Trading Commission to regulate energy derivative contracts and close unregulated power auctions by repealing sections 103 and 106 of the "Commodity Futures Modernization Act of 2000";

· Congress should strengthen regulatory oversight and enforcement power of the Securities and Exchange Commission by extending jurisdiction over power marketers; Congress should order the SEC to classify power marketers as "facilities" under the Public Utility Holding Company Act of 1935 (PUHCA).

· Congress should amend the Federal Power Act, forcing the Federal Energy Regulatory Commission (FERC) to revoke market-based rates and reinstate cost-based pricing in all wholesale electricity markets.

"Without these essential measures, this corporate crime wave will continue to enrich the Ken Lays of the world at public expense," he said.

Katie Fitzgerald, the president of the DC chapter of ACORN, the Association of Community Organizations for Reform Now, the nation's largest community organization of low and moderate income families, after quoting Dr. Martin Luther King, Jr., said that President Bush has created an energy policy aimed at boosting profits from energy wholesalers like Enron at the expense of consumer and has refused to help remedy a crisis manufactured by these corporations which has put thousand of people at risk of sickness and death from the lack of utilities. "Today of all days, let us try to envision a policy of compassion," as she urged a "nationwide moratorium on utility shutoffs for the elderly and families with children, and the release of the $300 million for LIHEAP (the Low-Income Home Energy Assistance Program) that Congress has appropriated."

Citizen Works, a non-profit, non-partisan organization, strengthens citizen participation in power. We give people the tools and opportunities to build democracy and advance justice. For more information contact Theresa Amato, 202.265-6164.