Byron Dorgan

Mr. DORGAN

Mr. DORGAN. I deeply appreciate the Senator from Maryland yielding. What the Senator from Texas misses is we are talking about incentive- based compensation. Should someone who gets incentives for running the corporation into bankruptcy be able to keep that? I don't think so for somebody that gets a big bonus while he runs the company into bankruptcy, or for someone that gets big stock options while she runs the company into bankruptcy. The Senator tried to win a debate we were not having. He says we will take compensation away from someone who is engaged in working for a corporation that went into bankruptcy. No, this is about incentive- based compensation and profits. It is not about taking away their salary. It is about saying if you are paid on an incentive basis and you are running that corporation into bankruptcy, you ought not to be getting the bonus. If you did, you ought to give it back. You ought not get stock options; if you did, you ought to give it back. This is simply about something my friend has missed. It is about incentive-compensation and the fact that you ought not walk out of a corporation you ran into bankruptcy with a pocketful of gold while you left the employees and the investors flat on their back. This is not an amendment that is hard to understand. I regret very much it has been blocked. I regret especially we were not allowed to vote on this amendment. That is the travesty, in my judgment.

Mr. DORGAN

Mr. DORGAN. How briefly?

Mr. DORGAN. Mr. President, I have an amendment at the desk.

Mr. DORGAN. I am happy to yield.

Mr. DORGAN. I ask unanimous consent reading of the amendment be dispensed with.

Mr. DORGAN. Is amendment No. 4215 called up at this point?

Mr. DORGAN. Let me describe what this amendment is briefly. There was a Wall Street Journal article on July 8 this week titled: ``Offshore- based Firm's Officials Won't Have to Swear to Results.'' The Securities and Exchange Commission's new order requiring chief executives and chief financial officers of the nation's biggest companies to swear to the accuracy of their financial results was intended to restore investors' battered confidence. But two of the companies that have promised the biggest concerns don't have to comply. Why? Because Tyco International Ltd. and Global Crossing Ltd. are based in Bermuda, even though they conduct many of their operations and have main office in the United States and are listed on the U.S. stock exchanges. Securities and Exchange Commission spokesmen said large foreign-domiciled companies over which the SEC has jurisdiction, such as and Global Crossing and Tyco, were excluded from the list because the agency wanted to issue the order ``very quickly.'' Therefore it focused only on U.S. companies. So the Securities and Exchange Commission says that the chief executives and chief financial officers of some of the biggest companies must swear to the accuracy of their financial results. But in recent times, we have had U.S. corporations decide that they want to renounce their American citizenship and they want to become citizens, for example, of Bermuda. That is called a corporate inversion. They have essentially renounced their American citizenship, saying we are now corporate citizens of another country. Guess what? Under the SEC order, they are rewarded for leaving the United States, in that their chief executives no longer have to certify financial results. The SEC says: We had to get this done quickly, and we don't expect to change it at this point. Why does a company renounce its U.S. citizenship? They do it because they don't want to pay U.S. taxes. Very simple. If they can become a citizen of another country and renounce their U.S. citizenship, they can save substantial money on their U.S. tax bill. At a time when we are at war with terrorists, is that a patriotic thing to do? No, I don't think so. I hope the Senate, and I certainly encourage my colleagues to do this, will shut that door tight and stop these corporate inversions. Stop these corporations from creating a sham of renouncing their U.S. citizenship in order to avoid paying U.S. taxes. It might be interesting to ask companies such as Tyco: If you get yourself in trouble someplace around the world, who are you going to call? The Bermuda navy? The Bermuda army? The Bermuda marines? You want the full protection of the U.S. Government and the U.S. military and all the benefits that being a U.S. citizen brings along. But then you want to renounce your citizenship and move to Bermuda, in a technical sense, while keeping your offices in the United States and saving big money on taxes. And then, under the SEC order, you don't even have to have your chief executive officers certify the financial results of the corporation. That is a shame. The SEC should know better. What could they have been thinking? I have accused them of sleeping, but this is not sleeping; this is making really dumb decisions. I have discussed my concern with the staff of the Banking Committee. They believe that their bill implicitly addresses the reincorporation problem. But Senator Graham of Florida and I said we are not satisfied with ``implicitly'' being covered. We want the issue addressed explicitly. Let me also say, the technical people smile when I talk about this, but, frankly, it took a day and a half for us to evaluate whether it was implicitly covered in the bill. So because of that, I think it is important to have an explicit provision in this bill that says those companies involved in inversions that renounce their citizenship, they, too, will be required to certify their results. Their chief executive officers and their CFOs will be required to certify their results. In a moment I will conclude and ask that this amendment be attached to the bill. As I do that, I ask for the attention of the Senator from Maryland and the manager on the other side to say that I have another amendment that I will offer. I understand, based on your process, you don't want it offered now. Let me describe it briefly. The other amendment deals with the issue of what is called disgorgement of profits. The top executives of these corporations make bonuses, commissions, and a substantial amount of compensation--some of them hundreds of millions of dollars. Then they issue a restatement of earnings and everything collapses. But they keep their profits and they keep their commissions and they keep their bonuses. This legislation says you can't do that. When you restate, and just prior to restatement you have made all these bonuses, you have to disgorge this money. It is a $2 word, but I think everybody understands what it means. The thing that is missing in this bill is that disgorgement should be required in cases of bankruptcy as well. So I have an amendment that will say: Yes, disgorgement in this bill with respect to periods prior to restatement, but also disgorgement for the 12 months prior to the filing of bankruptcy by a corporation as well. A fair number of people have had a lot to say about this. Former SEC Chairman, Richard Breeden, who was the Chairman of the SEC under President H.W. Bush from 1989 to 1993, said: We should consider disgorgement to the company of any net proceeds of stock sales or option exercises within a 6-month or a 1-year period prior to a bankruptcy filing. So he feels that way. Goldman Sachs CEO Henry Paulson has also spoken in favor of this idea. This bill will be incomplete if it does not include disgorgement in the period prior to bankruptcy. Those making a fortune, getting bonuses and commissions of tens of millions, yes hundreds of millions, as their companies are headed to bankruptcy--that is unfair. We need to do something about this. I will not ask consent at the moment because I want to get my first amendment approved, but I will, following some discussions, either this morning or else on Monday, ask consent to set aside the second-degree amendment so we can consider, in first-degree, this issue. My hope is we would have a 100-to-0 vote on this matter because, failing that, this bill will be incomplete. This bill is a great bill. I have credited Senator Sarbanes and others at length. This is a wonderful piece of legislation that I fully support. It can be and will be improved by my amendments and by the amendments of Senator Schumer and others. Let's complete this amendment process. Let me just say one last thing, if I might. I know it has taken the patience of Job to try to manage this bill on the floor of the Senate. I understand all the difficulties that Senator Sarbanes and Senator Reid and many others have had these recent days because I have been here every day when this bill has been on the floor. My aggressiveness in trying to get these amendments considered has nothing at all to do with the wonderful stewardship of the chairman. I am very proud of the result he brings to the floor, and I believe both of my amendments will improve it. I hope I can work with him from now until Monday afternoon to have the bankruptcy amendment included in this legislation.

Mr. DORGAN. Mr. President, first of all I will offer an amendment that I believe will be accepted. I understand the process is that those who have amendments that will be accepted will be allowed to offer them and those whose amendments are not approved by both sides will not be allowed to offer them. In my judgment, this is not the kind of procedure we ought to use when considering this legislation. But I understand the Senator from Texas indicated he will object to setting aside or laying aside an amendment for the purpose of offering another first-degree amendment unless he agrees with the amendment. I will talk a little bit more about that in a couple of minutes. I had asked unanimous consent my amendment be modified. Was the consent agreed?

Mr. DORGAN. Mr. President, I have an amendment numbered 4215 at the desk. I have submitted a modification of that amendment which I believe has been reviewed by both sides. I ask for its immediate consideration and I ask unanimous consent that the amendment be modified.

Mr. DORGAN. I will be happy to yield.

Mr. DORGAN. I thank the Senator from Maryland. I ask my amendment be considered at this point and be voted upon.

Mr. DORGAN. Yes.

Mr. DORGAN. I am happy to yield to the Senator from Connecticut, provided that I am recognized following his presentation.

Mr. DORGAN

Mr. DORGAN. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. DORGAN

Mr. DORGAN. This is Celebrex, widely advertised, used for pain, particularly arthritis. It is widely advertised all across this country. The company that makes this markets it successfully, and good for them for helping produce this medicine. But let me describe the pricing strategy. If you buy this medicine, Celebrex, in Canada, you get it in this bottle, and it costs you 79 cents per tablet. Buy it in the United States, and you get it in this bottle which is essentially the same. So 79 cents for this prescription drug per tablet in Canada, but if you are a U.S. citizen, you pay $2.22. It is the same pill, made by the same company, put in the same bottle, FDA approved. The difference? The price. The U.S. consumer is told: You should pay nearly triple what a Canadian consumer is charged by the same company. Question: Why should we allow that to happen? Why should the U.S. consumer pay the highest prices in the world for prescription drugs that are sold at a fraction of the cost in virtually every other country of the world? The answer is: It should not continue to happen. We need to put downward pressure on prices in this country on prescription drugs. This is not about, as the pharmaceutical industry would allege, shutting off research and development if you put downward pressure on prices. That is nonsense. The fact is, the Europeans pay lower prices--much lower prices--for the same prescription drugs than we do, and yet there is more research and development done in Europe than in the United States by the pharmaceutical manufacturers. My only point is this: The pharmaceutical manufacturers are good companies. They are the most profitable companies in the world. Good for them. I appreciate, and all Americans appreciate the research and development they do. We, of course, do a substantial amount of it here in the Federal Government that is federally paid for as well. I am not suggesting there are bad actors here. I am suggesting the pricing policy is wrong. The pricing policy is bad. It is not fair to say to the American consumer: You pay the highest prices in the world by far for the same drug. No American should have to go to Canada to get a fair price on a prescription drug made in the United States. That ought not happen. We aim to change it, even as we debate this issue of a prescription drug benefit in the Medicare plan. Why do we want to do that? Because I believe there should be a benefit in Medicare for prescription drugs. But I believe if we do not do something to put downward pressure on prices, we simply break the back of the taxpayers and break the bank of the Federal Government. That is why reimportation goes hand in hand with the underlying legislation I am pleased to support, and I commend Senator Graham and Senator Miller and Senator Stabenow and others for their leadership. I yield the floor.

Mr. DORGAN. Mr. President, I join my colleagues in saying that the piece of legislation we are considering, authored by Senator Graham, Senator Miller, and others, is a good piece of legislation. I am proud to support it. But let me talk just for a few minutes about this issue that brings us to the floor of the Senate, the issue of prescription drugs, and prescription drug pricing especially. Last year, the cost of prescription drugs in the United States rose 18 percent; the year before that, 16 percent; the year before that, 17 percent. So 16, 17, 18 percent: relentless increases in the price of the cost of prescription drugs. What does that mean to the American people? It is devastating to all Americans who must access these lifesaving, miracle prescription drugs but cannot afford them. It is especially devastating to senior citizens. They make up 12 percent of our population in this country, and they consume one-third of all the prescription drugs. They have reached those declining income years and discover that miracle and lifesaving drugs they need to take are beyond their reach. A woman in North Dakota, at a meeting 1 day, came up to me and said: May I speak with you a moment? She was a thin, frail-looking lady close to 80 years of age. She grabbed me by the arm and said: Could you help me? I said: I'll sure try. She said: I have problems--diabetes, heart disease--and need to take medicine that the doctor has prescribed, but I can't afford that medicine. Could you help me? And then her eyes filled with tears and her chin began to quiver and she began to cry. All over this country there are men and women--particularly senior citizens, but others as well--who need access to these prescription drugs and cannot afford them. We are going to pass a prescription drug benefit, and we are going to put it in the Medicare Program. I support that. Senator Graham, Senator Miller, and others have done wonderful work in that area. We are going to do two other things as well. We are going to pass a piece of legislation, I hope, that deals with the issue of generic drugs, which is another way to bring down costs; for if we do not do something about driving down costs, or at least putting downward pressure on drug costs, then we will simply break the bank. We will attach a drug benefit to the Medicare Program but if we don't lower drug costs we will suck that tank dry, and break the back of the American taxpayer. We have to put downward price pressure on prescription drugs. One other piece of legislation that we are going to consider next week is the issue of reimportation. Senator Stabenow and I, and others, have worked on the issue of reimportation, not because we want Americans to buy their prescription drugs from Canada--and that is what our bill will allow to happen; pharmacists and distributors will be able to access from Canada the FDA-approved drugs and bring them to this country and pass the savings along to the consumer--it is because we want to use this mechanism to put downward pressure on drug prices in this country and force the pharmaceutical manufacturers to reprice their prescription drugs in the United States. That is exactly what will happen. With unanimous consent, I would like to show two pill bottles on the floor of the Senate.

Mr. DORGAN

Mr. DORGAN. Mr. President, continuing on my reservation--and it is not my intention to delay the Senator from West Virginia--I want to try to understand what is happening. First, my comments should not in any way suggest that the chairman of the committee hasn't done an extraordinary job. I have great respect for him. But it has been difficult to get amendments up and get votes on them in the last day or two. There are a good number of very important amendments. Under the reservation, I say that we know what has happened to the stock market in the last few days. We know this is a critically important issue--this legislation and the amendments to it. We ought not to treat this lightly. This piece of legislation ought to be on the floor and open for amendment, having a robust discussion on the very important issues dealing with corporate responsibility. Instead, what is happening is we have a couple people on the floor who seem to want to stall this process and prevent amendments from being considered in order. I hope--and I will come back after lunch today--to offer at least two amendments. I want to debate them and get them voted on. At least as a Senator I have a right to do that. It is very important to me that I be able to add these amendments. If the Senate doesn't like them, fine, we will vote. But it is important to me to have that opportunity. I shall not object to the unanimous consent request with respect to the tabling motion. I wanted to say to the Senator from Nevada and the Senator from Maryland, who have done everything humanly possible to try to make this process work, that there are others in the Chamber who are trying to drag this process out and prevent others from offering amendments. I am going to assert my rights, to the extent I can, to say that before this bill is completed we need to have the best ideas everyone in the Senate has to offer about how to do this job. The economy in this country is in significant trouble. We know it. The confidence the American people have in this economy and corporate governance has been shattered in many ways. It rests upon the shoulders of this institution to pass this legislation and do everything we can to make it the best piece of legislation possible to restore that confidence and give some lift to this economy. I wanted to make that point. I appreciate the indulgence and the patience of the Senator from Nevada. If the Senator from Maryland will give me a chance to say this once again: In no way am I saying the chairman hasn't done everything humanly possible to move this along. He wants to move quickly. I shall not object.

Mr. DORGAN. Mr. President, reserving the right to object, I would like to engage in a brief discussion with my colleague from Nevada under my reservation of an objection, if I might. I shall not object to the specific request of the Senator, but I have just visited with the chairman of the committee and you know there exists a list of amendments that Members of the Senate wish to offer to this legislation. As I have watched this process over the last couple of days, it appears to me that we have set up a gatekeeper of sorts for determining who will offer amendments and whether there will be votes on the amendments, and it appears to me we are not making very much progress. I would like to get some sense of whether we have a clear process beginning this afternoon, so that this afternoon and this evening we might be able to move through 6, 8, 10 amendments and get time agreements so Members of the Senate have the opportunity under the rules to offer and have considered amendments that they consider important in this legislation.

Mr. DORGAN. Mr. President, reserving the right to object.

Mr. DORGAN

Mr. DORGAN. Will the Senator yield?

Mr. DORGAN. Let me explain to the Senator what my hope was. The Senator asked to testify, quite properly. The Missouri River manual issue is a highly controversial issue. The Senator has been involved with it for some long while. We are having a hearings. The Corps of Engineers and many others are testifying. My hope had been we could hold a hearing with all of those groups, then have a separate meeting, hearing from all Members of Congress who want to testify. It appears that that will not be the case. We will hear from Senators at the front end of that hearing. I assume it will take some time. As the Senator from Missouri knows, having indicated, yes, we would entertain his testimony, there are a number of other Senators who have already gotten in line saying, if that is the case, please hear my statement, as well. Of course we will. It was never a case where we would not hear testimony. The question was whether we would have a separate hearing and hear Members of the Senate. I understand the Senator's concern. Senators Daschle, Johnson, Conrad, Carnahan, and many, many other Senators have great concerns about this issue. I will lose some sleep Tuesday night with great anticipation hearing your testimony on Wednesday morning.

Mr. DORGAN. Mr. President, I begin by saying the Senator from Maryland has done this Senate and this country a great service, along with his colleagues, including the Presiding Officer, by writing legislation that addresses a critically important topic at a very important time in this country. As much as I appreciate the work done on this bill, I would still like to speak about a few ways in which we can strengthen it. I listened with some attention in the last hour or so as I presided in the Senate to the suggestion that we ought not change it much. I do not disagree with that assessment, but we ought to change it some, in my judgment. There are some areas we can strengthen, and I hope we can strengthen this legislation and send it on to the President and have the expectation the President will sign it. This Chamber has long been the site of debates about excesses and abuses, especially in America's poverty programs. We have heard over a couple of decades, and appropriately so, anecdotal stories about the Cadillac welfare queen who spends food stamp money to buy cigarettes. Congress has clamped down on all of that and said: Shame on you, you cannot do that, that is abusing the public trust. And it is. So we have taken aggressive action as we have seen these abuses. Today this discussion is not about the abuse of the poverty program or the abuse at the bottom, this is about fraud in the boardroom; it is about abuse at the top. It is important for all of us to understand that accountability and responsibility do not just apply to poor people in this country, accountability and responsibility apply to everyone, and that includes the people at the top of the corporate structure. I wish to talk about fraud in the boardroom, about deceiving investors, about cooking the books, about accounting firms that cannot account, about law firms that turn a blind eye. I wish to talk about the situations the country has seen in recent weeks and months that we have not seen for many decades in this country. The victims, of course, are the people in this country who have invested in stocks, who believed in the certification of financial statements by some of the biggest accounting firms in the country that these were good corporations, that they had good income, that they were moving in the right direction, taking steps so that the funds in corporations were accounted for properly. And now we discover that was not necessarily the case in all too many instances. Of course, there are a lot of wonderful corporations in this country, wonderful companies with terrific top executive officers who do the right thing, always do the right thing. Yes, they take some risks, but they do it in anticipation of gain for the stockholders. We ought not tarnish with the same brush all American corporations, but we ought to determine what is happening within some of these corporations that has caused the collapse and the devastation of a lifetime of savings for many Americans. Let me use Enron as an example. We spent a fair amount of time with Enron hearings in the Commerce Committee. We had top executives of that company who had been cashing out prior to Enron going bankrupt. I have a chart that shows the way in which the top management of Enron made fortunes on the sale of Enron stock, from 1998 to the present, at the same time that they were driving their company into the ground. Contrast this with a call I received from a fellow in North Dakota one day who said: I worked for Enron for a good number of years. I had a retirement plan, and all my retirement plan was in Enron stock. Mr. Lay and others repeatedly encouraged us to do that. My retirement plan was in Enron stock. It was worth $330,000. Now it is worth $1,700. He said: That is what happened to my life savings--$330,000 to $1,700. What happened to the folks at the top of the ladder in Enron? Mr. Lay, the chairman of Enron, from 1998 to the present, sold $101 million worth of stock. That is what he received. Mr. Rice, $72.7 million; Mr. Skilling, $66.9 million; Mr. Fastow, $30 million. Mr. Fastow was able to have an equity role in the special purpose entities, the off-the-books partnerships, and in one of them he actually invested $25,000 of his own money. He invested $25,000, and 2 months later paid himself $4.5 million. I do not know anybody who gets returns like that anywhere in America, except by cheating. In the year 2001 in American corporations, the average pay for top CEOs increased by 7 percent, despite falling profits and stock values. Is there a relationship at the top between people who run the companies and the performance of the companies themselves? It does not look like it, does it? In 1981, the average executive compensation of the top 10 highest paid CEOs was $3.5 million. In the year 2001, the average was $155 million. So we can see what has happened in this country at the top in the boardroom. Let's look at the number of times that CEO pay exceeds average worker pay: In 1980, they made 42 times the pay of the average worker in the company. In 1990, they made 85 times the pay of the average worker in the company. But in the year 2000, it was 531 times. So forty-twofold to five hundred and thirty-onefold. That is what has happened to executive compensation at the top of the corporate ladder. We have seen story after story about what is happening in some of the boardrooms. There are a lot of wonderful companies, and I do not think this ought to tarnish all American corporations, but we ought to be very concerned about what is happening inside some publicly traded corporations and why the safeguards have not been able to provide early warning to investors and others. Adelphia: The drop in their stock value is 99 percent. The question is whether it failed to properly disclose $3.1 billion in loans and guarantees to the family of the founder. Dynegy: Whether the Project Alpha transactions served primarily to cut taxes and artificially increase cashflow, 67 percent of their value lost. Enron lost 99.8 percent of its value. In fact, as I have mentioned before, the Enron board of directors commissioned a report called the Powers Report which looked at only three partnerships, and they described what was happening inside this company was ``appalling.'' The board of directors of the company itself said what was happening inside the company was appalling. They said that in one year they reported $1 billion of income they did not have. Global Crossing: Whether it sold its telecom capacity in a way that artificially boosted 2001 cash revenue, 99.8 percent loss in value. Halliburton: Whether it improperly recorded revenue from cost overruns on big construction jobs. The list, of course, goes on. Qwest: Whether it inflated revenue for 2000 and 2001 through capacity swaps and equipment sales. On the weekend talk shows, I heard a panel discussion about this, and one of the panelists who is kind of an academician said the market is just adjusting. That is an antiseptic way, by an economist I suppose, to ignore the fact that families are losing their life savings. Sure, the market is adjusting, but it means families are losing everything they have. It means investors with 401(k)s see that 401(k) shrink so their life savings are disappearing right before their eyes. The question with all of these issues is: What has changed? Why, with big accounting firms taking a look at what is going on--and today there is a hearing on WorldCom in the House of Representatives--why, with big accounting firms looking over their shoulder, has this sort of thing occurred? With Arthur Andersen and Enron, they had a $25 million relationship by which Arthur Andersen audited the Enron Corporation, and Arthur Andersen was also paid $27 million by the Enron Corporation for consulting services. That is one of the things that is at the root of this bill: Is that not a clear conflict of interest? Is there not enormous pressure on the accounting firm then to become an enabler for that corporation? The answer clearly is yes, and that is why this legislation takes action to deal with some of those issues. I was driving in the car over the weekend in North Dakota and saw that the Xerox Corporation had a substantial restatement of earnings. It indicated that the SEC had previously taken a look at it and fined Xerox $10 million, which seems to me like pretty much a slap on the wrist when you consider the billions of dollars involved in the restatement. Then we hear this big story this weekend about yet another restatement. So what we have is a restatement, and then a restatement of the restatement of earnings. What is the cause of all of this, and what is enabling it? With Enron, for example, it was an accounting firm that became an enabler; it was a law firm that became an enabler; it was CEOs who became greedy, officers of the corporation who did not pay much attention, who also, incidentally, were making a great deal of money selling stock, board members selling stock. It all became a carnival of greed. I indicated, after having spent a lot of time looking at Enron, that there was a culture of corruption inside that corporation. The CEO of Enron took great exception to that, but it is clear every passing day, with more and more evidence of what happened inside that company, that there was in fact a culture of corruption. How do we respond to that, and how do we deal with that? I think that, first of all, the rules have to be changed some, and that is what this legislation attempts to do. Second, even if there are changes in the rules, there must be an effective referee, a regulator. In this system of ours, we have to have effective regulation. And frankly, that has been lacking. Mr. Pitt, who is the head of the SEC, I know has taken great exception to statements that have been made by my colleagues and myself. But the fact is that a system like this cannot work unless there is effective oversight and regulation, and that has been lacking. Consider some of the statements that Mr. Pitt has made. This is Mr. Pitt speaking at the AICPA, which represents the accounting industry: For the past two decades, I have been privileged to represent this fine organization and each of the big five accounting firms that are among its members. Somewhere along the way, accountants became afraid to talk to the SEC. Those days are ended. That was to the American Institute of Certified Public Accountants. Then Mr. Pitt, who is, again, the head of the SEC, said: The agency I am privileged to lead has not, of late, always been a kinder and gentler place for accountants; and the audit profession, in turn, has not always had nice things to say about it. So Mr. Pitt was concerned about ensuring a ``kinder and gentler'' SEC. The New York Times did a story as a result of the initial speeches Mr. Pitt gave when coming to the SEC. It noted that Pitt ``spoke favorably of pro forma earnings reports in ways that no doubt heartened accountants who have worked so hard to find ways to make even the worst profit figures look pretty.'' It also noted that ``A major embarrassment for accountants is having the SEC force a client to restate its numbers. Mr. Pitt and his chief accountant, Robert Herdman, are sending signals that fewer such demands will be made.'' We can change the law, but if we do not have a tough, no-nonsense regulator, then it will not work. We all watch basketball games, and we see referees. They are the ones who enforce the rules in basketball. We see a game from time to time where it is quite clear right at the start the referees are not going to call them close, and then pretty much it is ``Katy bar the door,'' and things get out of hand. Then we see other games in which it is quite clear they are going to call up close, and nothing gets out of hand. The same is true with the attitude and mindset of Federal regulators. We have regulatory agencies for a purpose. That purpose is to enforce the rules. Fairly, yes, but also aggressively. If someone who comes from that industry and says, I represented all of you, and suggests it will be a kinder and gentler place, I wonder whether that is the regulator we ought to have. No matter who is heading the SEC, I want that person to be a fierce advocate on behalf of the rules that protect investors. I want someone that can make this system work and require everyone to own up to their responsibilities. So people who never enter a corporate office or know nothing about a corporation but who want to invest in American business, can buy a share of stock, having never met an officer of the company, having never visited the company, and can have confidence that what the accounting firm has said about that company, what the financial statements represent about that company, are absolutely fair and accurate. That is the only way in which the American people can participate in the raising of capital for America's business. If we do not do that and do that quickly, we undermine the entire system by which we raise capital in this country. We undermine the entire system. That is why this piece of legislation is important and timely. There are several amendments I would like to have considered, some I hope will be accepted, and some, perhaps, we will discuss at some length, and I may or may not prevail. There are some amendments that can strengthen and improve this legislation. One of the provisions in the legislation calls for CEOs to return profits and bonuses they wrongfully reaped in the 12 months following a published earnings report that require a restatement. I would propose that this provision apply when a company goes bankrupt, as well. This idea has been endorsed by former SEC Chairman Richard Breeden, Goldman Sach CEO Henry Paulson, and others. There also ought to be some provision with respect to loans to CEOs by corporate boards of directors. I don't know what that limit ought to be, but I mentioned one corporation where over $3 billion was loaned to one family of the founder. This is a publicly traded corporation. I believe we ought to discuss that. I may offer a provision dealing with something called inversion, a mechanism whereby some American corporations have decided they want to renounce their American citizenship and move their official headquarters to another country--Bermuda, for example. I want to be certain that CEOs of such companies cannot escape the requirement of this bill that they certify the accuracy of their financial statements. I do not think that, in addition to avoiding their fair share of U.S. taxes, these companies ought to be held to a lesser standard of reporting accuracy than U.S.- based firms. So I will offer an amendment, if needed, and visit with the chairman and the ranking member about that subject. Another issue, one requiring disciplinary proceedings to be open to the public was discussed in committee. Transparency and having those hearings open to the public are important. I hope we can consider an amendment on that. The other issue that was discussed in the committee at great length: What is the definition of the division of responsibilities between auditing and consulting? That definition, determined by the SEC or the Congress, is critical to determining whether there is a conflict. Having said all that, let me say to the Senator from Maryland, we are in the Senate the first week after the Fourth of July. I listened to the Senators from Texas and Wyoming and Connecticut and others speak about this bill. This is a good start. If this legislation passed without one word changed, it would make a magnificent contribution to a problem we face, a gripping problem in this country. Having said that, I do not subscribe to those on the committee who say not to change anything. That is not what the chairman said. There are some suggestions that will come from other parts of the Senate that can strengthen and improve this legislation, a couple of which I suggested. When it goes to conference with the House, we will have something we can be proud of. The most important thing is to show to the investors in this country who have lost, in many cases, their life savings, that we are taking action to respond to the conditions that caused this to happen. When we talk about the people at the top getting rich and the people at the bottom losing their life savings, the American people have every right to ask: By whose authority can this happen in this kind of economy? It cannot happen if the rules are fair. It cannot happen if the rules are enforced. The American people have a right to expect the regulators, the SEC, and the Congress to take action now to address these issues. I yield the floor.

Mr. DORGAN. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. DORGAN

Mr. DORGAN. Mr. President, the Board of Trustees for the Social Security Trust Fund issued its annual report in March describing the financial health of the Trust Fund and its outlook for the future. The report shows that the financial condition of the Trust Fund over the next few decades has improved somewhat since last year, that is, the Social Security program is now expected to remain solvent for three additional years through 2041. This is welcome news for the tens of millions of baby boomers who will depend on this program in the coming decades. However, this latest Trustees' report also makes clear that the Social Security program still faces significant long-term financial challenges. This finding was not unexpected. In fact, there is already bipartisan agreement in Congress that we will need to make some careful changes to the Social Security system in order to guarantee the solvency of the Social Security Trust Fund beyond 2041. Today, Senator Corzine of New Jersey and I are introducing legislation that we think should be part of those reform discussions. Our legislation, called the Social Security Plus Account Act, builds upon two fundamental principles: One, the underlying guaranteed defined benefit approach of the current Social Security program should not be scrapped or weakened. Social Security has become the foundation of the Nation's retirement system, something that people can always count on. At a time when private employers are shifting more retirement saving risks onto the shoulders of their employees through the use of defined contribution plans like 401(k) plans rather than traditional defined benefit pension plans, the need to retain Social Security's basic guaranteed payment is paramount. Second, this legislation recognizes that Congress must do more to encourage families and individuals, especially those of modest means, to increase their savings and to build a retirement nest egg. Specifically, our legislation provides for the creation of new tax- favored retirement savings accounts that individuals and families could access to supplement, but not replace, their expected future Social Security benefits. Unlike many reform proposals, this legislation leaves the Social Security program intact. Many privatization plans force you to choose between individual accounts and the loss of Social Security's guaranteed benefit at current levels. Our proposal calls for personal accounts as an ``add-on'' to Social Security. This is an important distinction from the ``carve-out'' accounts featured in privatization plans. Privatization plans will inevitably reduce traditional guaranteed benefits. Our approach would not. Under this legislation, eligible individuals can set up and make tax- favored contributions of up to $2,000 to a new Social Security Plus Account, SSPA. To provide an extra savings boost for low- and moderate- income families, our legislation would require the Federal Government to provide matching contributions between 25 and 100 percent for married couples with adjusted gross income below $100,000, $50,000 for singles. The $2,000 limit applies to the total of the individual's own contribution and the Federal match. This will make it much more affordable for low and moderate earners to fully fund their accounts. Like traditional individual retirement accounts, SSPAs can grow tax- free. For example, if an individual aged 30 who files a joint return and has annual earnings of about $25,000 contributes $500 to a SSPA, the Federal Government would match that contribution with a $500 contribution to the account. If that individual contributes $500 in cash each year to the account for 32 years, earning 5-percent interest per year, until retirement at age 62, he or she would have some $80,000 available for distribution from the account. This amount grows to $160,000 if the individual is able to contribute the maximum in each year. Let's take another example. Assume that an individual who is forty years old, files a joint return and has annual adjusted gross income of $80,000. If he or she could make the maximum permissible contribution each year until reaching age 62, along with an annual government match of $400, he or she might expect to have at least $160,128 available at retirement. Under our legislation, the accrued amounts that are paid out or distributed when the holder of a SSPA retires, dies or becomes disabled are treated like Social Security benefits and a portion of the distributions would be taxed only above certain threshold amounts. Now I fully understand that we may not be able to enact this legislation this year or next. Regrettably, last year's highly-touted projected budget surpluses have vanished for at least the next several years and resources are now scarce. The massive tax cuts put in place in the summer of 2001, and scheduled to take full effect over a period of years, will make finding adequate funds for many of the Nation's critical spending priorities even more difficult. However, many of the privatization proposals would require massive infusions from the Treasury general revenue fund to offset the transition and other costs for even partial privatization initiatives. If such resources are available, it seems to me that we would better serve our citizens by using these scarce resources to enact Social Security Plus Accounts that will help them save for retirement but not put the underlying Social Security program at risk. The current Social Security system has served us well for many years and will continue to do so if we make some adjustments. Still we all know that Social Security reform is needed. I remain committed to working on a bipartisan basis to address the long-term solvency issues facing Social Security and to improve retirement savings. And we do need to implement appropriate Social Security reforms as soon as our resources will allow us. Needlessly delaying efforts to shore up Social Security for the long term would likely require more severe action. We certainly can't afford to make matters worse in the interim. A number of us in the Senate are concerned by the proposals offered by President Bush and some in Congress to eliminate the guaranteed basis of Social Security and replace it, in part with private accounts. The suggestion to ``privatize'' Social Security, or to invest a portion or all of the trust funds in the stock market, has been supported by the large investment banking houses and many others who believe that doing so would produce higher returns and improve the solvency of the system. Several of the President's Commission on Social Security privatization plans would divert some of the payroll taxes that are currently being collected. Some of the proposals would use well over $1 trillion from the Social Security Trust Fund. This would immediately and adversely impact the financial well-being of the Social Security Trust Fund, putting in jeopardy both current and future Social Security benefits I do not believe that investing the proceeds of the Social Security system in the stock market through individual accounts provides the kind of stability and certainty we need for the management of the Social Security program. Social Security is intended to provide what its name suggests, security. Stock market investments do not provide this secure foundation. They increase, on average, over certain time periods. But people don't retire at average times. They retire at particular times. This point is mostly glossed over by the President's Commission to Strengthen Social Security. The Commission issued its final report last December that included several reform options that would allow workers to invest in personal retirement accounts, but reduce their traditional guaranteed Social Security benefit. In my judgment, no one, including the President's Commission, has provided a satisfactory answer to the question of what happens to people who retire when the market is down if we change Social Security, even partly, from a social insurance program to a stock market investment program. This is not mere polemics. The Enron debacle, the boom and bust of the dot com companies of the late 1990s, and the declining stock prices of recent weeks all serve as stark reminders to all of us about the perils of investing in the stock market. Again, I will be working for appropriate reforms to extend the life of the Social Security Trust Fund so future generations can rely on Social Security. Social Security Plus Accounts can provide a much- needed supplement to the basic program, but would do so without undermining it. They do not reform the program by themselves, but are designed to be part of a responsible reform package. For many of our nation's seniors, Social Security is the difference between poverty and a dignified retirement. When President Franklin D. Roosevelt signed the Social Security program into law in 1935 he said ``We can never insure one-hundred percent of the population against one-hundred percent of the hazards and vicissitudes of life. But we have tried to frame a law which will give some measure of protection to the average citizen and his family against poverty ridden old age.'' The importance of his words and his new social insurance plan are reflected in Social Security's overwhelming success today. Let's make sure that the promise and security of Social Security is kept for many generations to come. I urge my colleagues to consider supporting this proposal in the context of comprehensive Social Security reforms considered by the Senate. Below I've provided a detailed summary of the Social Security Plus Account Act to more fully explain how the new savings accounts would work. I ask unanimous consent that a summary of the bill be printed in the Record.

Mr. DORGAN

Mr. DORGAN. Mr. President, during England's darkest hour in 1940, Winston Churchill spoke of an unwavering sense of purpose. ``You ask, what is our aim? I can answer in one word: it is victory, victory at all costs, victory in spite of all terror,'' he told members of Parliament. Sixty years later, we here in the United States are fighting a different kind of terror, terrorists who hide in caves and plan the murder of thousands of innocent Americans, but our resolve to defeat it matches that of Churchill. Some have expressed concerns that the investigations of how our intelligence and law enforcement authorities handled information prior to 9-11 will weaken our efforts to defeat terrorists. Frankly, I think the questions that are being raised will strengthen our efforts to defeat terrorism. We have a lot of good men and women working in the CIA, the FBI and other agencies. But evidence, we have learned in recent months, suggests that there is a layer of bureaucracy and resistance in the management of some of these critical agencies that stifles the efforts of good law enforcement and good intelligence when tracking terrorists. We have to fix that. Our job is to prevent the next act of terror and if the bureaucracy is clogging the arteries of our intelligence and law enforcement agencies, then we have to get rid of it. Consider this: six months after Mohammed Atta and MarwanAl-Shehhi flew huge jets into the World Trade Center, the U.S. Immigration and Naturalization Service inexplicably sent notice their visa status had been changed from travel to student. In recent weeks, reports indicate a Phoenix FBI agent alerted headquarters of his suspicions about Middle Eastern men taking flight lessons. Minneapolis agent Coleen Rowley has complained bitterly that her office's efforts to obtain a search warrant about a suspected highjacker were ignored. Now the CIA says that it was tracking two of those who committed terrorist's acts on 9- 11, but there is controversy over whether the FBI was actually notified. As a result the terrorists moved in and out of our country with ease. These and other reports, in recent months, raise real concerns about how these federal intelligence and law enforcement agencies are working to prevent future acts of terrorism. When people begin to raise questions about these issues, some claim that the intent is to criticize President Bush. President Bush, indeed any President, would have moved heaven and earth to prevent the catastrophe of 9-11 if he had received any advance warning. These inquiries are not about the President or the White House. They are about the effectiveness of our Federal agencies in the war against terrorism here at home. The information disclosed in recent months about some of the failures of these agencies has come from people working inside the agencies. These are employees of the FBI and other agencies who are blowing the whistle on agency managers who fail to see the gravity of this situation and refuse to take appropriate actions. For example, Minneapolis FBI agents were admonished by their superiors for sharing information with the CIA in the case of suspected terrorist, Zacarias Moussaoui, who had links to Osama bin Laden. That is unacceptable. These agencies need to work together. Preventing the next terrorist act is a tough job, and we will succeed only if we have all of the resources working full time and cooperating fully. In recent months and weeks, the head of Homeland Security has warned our country the terrorist attacks against the Untied States could happen at any time. That's why these agencies and their officials have to be fighting the battle against terrorists, not turf battles between their agencies. Big, bureaucratic and slow doesn't get it anymore. We deserve better from these agencies. What if there is critical information right now in the possession of one agency that is not sharing it with another? Are those who dropped the ball last year in these agencies. The same ones we now rely on to prevent another terrorist nightmare? The answer to these questions is why this is such an urgent matter. We, the President, the Congress and the American people, deserve the unvarnished facts so that we can move ahead and protect our country, so I say let's do these investigations. Let's make sure that they don't turn into a circus. As Sergeant Joe Friday used to say, ``Just the facts, ma'am.'' Let's use those facts to make the changes these agencies so that the men and women of the FBI, the CIA and other agencies who are very capable and serve America well, are able to do their jobs successfully. Only then, as Winston Churchill did, can we finally win the war against terrorism.