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Tuesday, 16 July, 2002, 07:01 GMT 08:01 UK
US Senate unveils tough fraud bill
President George W Bush
Mr Bush says he wants a bill to sign by the end of July
The US Senate has unanimously approved sweeping reforms in corporate accountability following a string of major accounting scandals that have seriously shaken investor confidence.

Corporate scandals
Enron: Inflated profits, collapsed
WorldCom: Overstated profits by $3.8bn
Andersen: Auditors for Enron and WorldCom - found guilty of obstructing justice
Also under fire: Xerox, Tyco, Global Crossing

In a 97 to nil vote, senators agreed to a bill that would establish an independent monitoring body to enforce standards, transform securities fraud into an offence with a 10-year prison term, and protect whistleblowers.

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 energy giant Enron, which had lied about profits.

The House bill was approved before the WorldCom financial scandal broke in full force.

Bush praises bill

President George W Bush welcomed the Senate bill.

"I am pleased the Senate has now acted on a tough bill that shares my goals," he said.

Traders watch prices at the New York stock exchange
US shares have plunged since the scandals

"We owe it to America's workers and shareholders to crack down on wrongdoing and fix the system to prevent future abuses."

Senate Majority leader Tom Daschle, a Democrat, suggested that the Republican-led house could skip the traditional committee to debate proposals and simply pass the Senate's bill.

But House spokesman John Feehery rejected the suggestion, while insisting that work would begin to resolve their differences on Tuesday.

On Monday, US share prices plunged to their lowest levels since the aftermath of the 11 September attacks due to fears over the scandals and poor profits.

Mixed business

One of the key differences of the two bills concerns the future activities of accounting companies, widely seen as playing an important role in the scandals by apparently failing to spot errors in company books.

The Senate bill would stop accounting firms offering consulting services to their audit clients, a practice believed by some to create a conflict of interests.

Democrat Senator Paul Sarbanes
Democrat Senator Paul Sarbanes drew up the bill

The House bill does bar accounting firms from providing certain consulting services, but falls short of calling for an absolute split between the two.

The Senate bill also includes a proposal endorsed by President Bush that chief executive officers would be required to certify that their financial statements are accurate. Company officials convicted of defrauding investors would face a 10-year prison term.

The kind of insider loans to corporate executives of the type that Mr Bush received when he was director of a Texas oil company would also be banned if the Senate bill is approved by the committee.

Mr Bush has made clear that he wants the Senate and the House of Representatives to have approved a bill for him to sign before the summer recess, which begins at the end of this month.

See also:

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11 Jul 02 | Americas
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