Pete Hoekstra

Mr. HOEKSTRA

Mr. HOEKSTRA. I would also like to commend my colleague, the gentleman from New Mexico (Mr. Skeen), for his tremendous service to the House, to the people of his district and to his State. He is a great colleague and has done tremendous work here and I think has done tremendous work on the Committee on Appropriations. As we take a look at putting the pieces together for these 13 appropriations bills, we see that the House has put a marker out there of $748 billion. The other body has yet to pass a budget. President Bush has endorsed the House-spending level and indicated in numerous speeches that he will use his veto if necessary to enforce the House discretionary spending level. Why is this important? It is important because this year we are back in deficit. What we really want to do is we want to move back into surplus as quickly as possible. The House spending level that we have approved is almost identical to President Bush's fiscal year 2003 request. Any increase above the President's request in one bill will need to be offset by a decrease in another bill. As we take a look at the schedule for this week, we see that three out of the first four bills that have been reported from appropriations are going to be above the President's request. The interior bill today is $775 million above the request. That does not include the $700 million in emergency firefighting. Treasury-Postal is $538 million above the request. The agriculture bill is $550 million above the request. The legislative branch looks like it will be reported out at the President's requested level. Collectively, these bills then are about $1.8 billion above the President's request. If we are going to plus-up these early bills, it means that at the later end of the process, we are going to have to have reductions in some very difficult bills. Is this House ready for a $400 million-plus reduction from the President's request for Commerce-Justice-State? Are we ready for a $1.8 billion reduction from the request for Veterans, HUD and FEMA? These bills are currently scheduled to move at the end of the appropriations process. If we are going to be cutting from the President's request, which is going to be a very difficult process, those should be the bills that we move first to show that we are disciplined and we are willing to make those choices. If the House passes the first appropriations bills at levels significantly above the request, I think then we will be forced at the end of the process to break the bank to pass the veterans, HUD and FEMA bill at levels significantly higher than what the Committee on Appropriations might otherwise report them here. We need to get back to surplus. We need to get back to surplus, and one of the ways, the most direct way that we can do this through this body is by controlling spending. That is 100 percent within our control. We should lower these bills to the President's request, or we should move the other bills first to show that we have the discipline to pass spending bills that are below the President's request. This bill is about $1 billion above last year, a more than 5 percent increase. That is more than twice the rate of inflation. The Committee bill is $775 million above the President's request. If we had held over the last 8 years' spending on this bill at roughly the rate of inflation, this bill would be 30 percent smaller than what we see today. The administration has also clearly indicated that the best way to get back to surplus is to control spending. We cannot continue to increase spending at 5 plus percent per year. If we increase spending at that kind of level, it is unlikely that we will be back in surplus any time soon.

Mr. HOEKSTRA. We were pointing it over here so our colleagues could see it more, but we would be more than willing to have you see it as well.

Mr. HOEKSTRA. I yield to the gentleman from Michigan.

Mr. HOEKSTRA. Mr. Chairman, reclaiming my time, I think what my colleague points out is the fallacy in this process if we increase over the President's spending.

Mr. HOEKSTRA

Mr. HOEKSTRA. Mr. Speaker, it is kind of interesting, when I come back and we do our next Special Order on this topic, I will bring along a copy of an op-ed piece written by Jack Colson, because that is exactly the question that he asked, which is who is training these clowns? Because the message that clearly is being taught in many of our business schools, it is okay, as long as you do not get caught. No harm, no foul. I sell you $1 billion worth of energy, you sell me $1 billion back, immediately after that, we are now both a $1 billion company. If we do it twice, we are each a $2 billion company. If we do it 4 times, we are a big company now. We have not created any profit, we have not created anything, and no harm, no foul, but we have now just presented to the American public that we are both a $4 billion company. That is what these folks did, and for one of these companies, it was 80 percent of one of their division's volume, bogus trades, just trading it back and forth and 2 companies saying, wow, look how big we are. Somewhere in the business schools, they said, well, as long as you are not breaking any laws, it is okay. Game the system, and do not worry whether it is really not right, but game the system and you are okay as long as you do not get caught. And the bottom line is, for many of these people, it has gotten to be an issue of greed. This head of the TYCO, and I have a passion about this TYCO company. They came into my district a few years ago and they bought a nice little small company, 400, 500 employees, and they said, we are going to keep it the same, we are going to keep it the same, we are going to keep it the same. They finished the sale and the next day, they locked the doors. Now we know what kind of man was running that company. He did not care about the employees, because he let them go the day after. He did not care about the business. He walked away with $334 million, and the biggest insult of all was when it came to paying sales tax, he said, I am not going to pay sales tax, because you know what I can do? I can buy something through the company, I can buy it in New York City, but if I ship it to Connecticut or somewhere else and then they can ship it back to me in New York because I shipped it to Connecticut, I do not have to pay any sales tax. And it is kind of like, when is enough enough? It was $334 million. If he worked 7 days a week, 24 hours a day, he made about $10,000 an hour every waking hour. By January 1, at 6 o'clock in the morning, he had made $60,000 already, much more than most Americans will make in a year, and probably within the first 2 weeks of a year would have made more money than most Americans would make in a lifetime, and it appears that he was unwilling to pay a sales tax. It is kind of like, whoa. And that is the leadership of our, at least in this case, of one of our major corporations. He is leaving the company in ruins. The market lost $86 billion. We ought to talk about the other issue that the gentleman and I both have a passion for, which is education. The gentleman and I both serve on the Committee on Education and the Workforce. We have spent a lot of time going around America taking a look at what works. We have analyzed the bureaucracy here in Washington, recognizing that in many cases the Department of Education could not give us a clean set of books. That has now improved with the Bush administration. They are on track to give us a clean audit, we hope, this year. But we have a system that funds about $40 billion through the Washington bureaucracy, and what the gentleman and I are advocating for is a system that allows people to directly invest in their schools at home through an education tax credit based on what many of the States have done. It is really a unique and an exciting way to get more money into all of our schools for all of our kids, where the decisions to contribute and where the decisions as to how that money will be spent are made by people at the local level. Maybe the gentleman just wants to expand a little on that.

Mr. HOEKSTRA. Mr. Speaker, that is exactly right. If corporate America does not step up and deal with these abuses, or if we do not stand up here on the floor of the House and highlight these abuses and push the business community to come up with solutions through the private sector, the end result will be massive new government regulations, which will not have much of an impact, except putting many more costs on our businesses, driving away jobs, driving away creativity and productivity. This is about honesty, decency, and it is about the survival of the free market system, the capitalistic system, based on trust and us standing up and acknowledging that this is based on trust, it is not based on government regulation, and we need to move forward and we need to put pressure on the business sector to step up and deal with this. I have been absolutely amazed. I came out of the business community. I worked for a Fortune 500 company. But I have been amazed by the deafening silence of the business community speaking out on these kinds of issues. I mean think about it. Companies that are involved in bogus trades, auditing companies that do not audit, sales that are not there, profits that are not there, excessive salaries, and the rest of the business community has basically been quiet. As this one analyst said, well, people are fidgety. Yes, because for many of our constituents, for many of my constituents who work at CMS probably have some kind of a profit-sharing plan or have some of the retirement put into CMS stock. Since January 1, the stock is down 35 percent. Yes, those people are fidgety, because their company had bogus sales, the company deceived their employees, got them to invest in that stock on a false premise, and they have now lost 35 percent. Yes, I would be fidgety too, because these are people who are near retirement, some of them maybe are on retirement, and they have looked at their nest egg just kind of shrink and evaporate, and now people are saying, well, they are just fidgety, they are overreacting. No, they are reacting exactly the way we would expect them to act, when the leadership of their company has failed them and lied to them and when the leadership of their company walks away with millions and they have lost 35 percent. That is not right.

Mr. HOEKSTRA. Mr. Speaker, I thank the Chair, and I thank my colleague for joining me. I just want to close on this issue, because I know we want to talk about another issue that the gentleman and I both have a passion for but, like I said, I really thank the gentleman for being down here. This is an issue that Republicans need to take head on. We recognize how important this private sector is; we also recognize how fragile it is. Our system is based on trust. And when these folks break the trust and they walk away with millions or billions and are not held accountable, they weaken the entire system, and we are going to need to put in place, and I hope it happens in the private sector because we really cannot do it very effectively through Congress; but the boards of directors need to stand up and recognize their accountability to the shareholders, to their customers, to their employees; not to their colleagues on the board and not to senior management. They have to get a renewed appreciation for their role, and I think it is our job to point out what is going on here.

Mr. HOEKSTRA. Mr. Speaker, last night I came to the floor, and I talked about an issue that I have a passion for. It is about integrity and honesty in the corporate and business world. I talked a little bit about some of the revelations that have gone on in the last few months, really beginning with the scandal at Enron, Arthur Andersen and those types of things. And I want to talk a little bit more about that tonight because the stories in the papers today just keep building on this issue. Today, USA Today: ``Stock Markets Sink to New Lows for 02.'' The bottom line is that this lack of integrity and this breaking of the public trust by corporate business and business leaders has had a real and a dramatic impact in our economy. The public is losing faith and trust in our corporations because of these many examples. Why is this? Let us go back and take a look at what our system is based on. I have quoted a former boss of mine at Herman Miller Corporation who has written a number of books talking about leadership. One of his latest books, ``Leading Without Power,'' Max De Pree, a Fortune 500 CEO, wrote about the importance of people having trust and confidence in the American economic system in order for it to work. He states: ``When you stop to think about it, it is astounding that anything as complex as the trading of stocks, bonds, commodities and futures ultimately depends on trust, a value, not a statute, not an SEC regulation, not even a government mandate. The system works on trust.'' Where are we today? Again, USA Today, front page of their money section, the top headline is'' ``Wait for Verdict Raises Fear of Hung Jury,'' but here is a story that really just builds on exactly what I was talking about last night, and actually they say it much better than I do. Their cover story on their money section is ``How did Business get so Darn Dirty? Experts blame greed. Reforms come slowly.'' Double dealing Wall Street analysts. Sleazy accounting. Cooking the books to goose corporate profits. Bogus stock trades. Greed and corruption have always lingered at the edges of corporate America, from Civil War profiteers to inside-trading scandals of the '80's. Yet the new millennium has ushered in a wave of fraud, corporate malfeasance, investment scams, ethical lapses and conflicts of interest unprecedented in scope.'' The end result: a lack of public trust, shareholders, customers and employees feeling devastating financial consequences, and stock markets sink to new lows for 2002. The fallout is a prime reason stocks continue to flounder. And despite calls among politicians, regulators, and Wall Street for sweeping reforms, little is being done to change rules for corporate conduct. That has to change. What are some of the examples out there as to why the American public is losing their confidence in the corporate business world? Here are some examples: Baltimore currency trader John Rusnak indicted for bank fraud for allegedly hiding nearly $700 million in losses. Alan Bond, former regular on ``Wall Street Week'' with Louis Rukeyser, convicted Monday of defrauding clients of $56 million. There is a nuttiness that we're seeing. Boost performance by any means. The temptation to cash in grabbed lots of people. Here is an interesting one: Dennis Kozlowski, think about it. Here is a guy that over 3 years made over $300 million as compensation as Tyco CEO, forced out over an indictment for tax evasion. $300 million, over $100 million a year, and the guy appears to be unwilling to pay sales tax. Let the rest of the American people pay sales taxes, because $300 million, $100 million a year, I just cannot afford to pay sales taxes. The question to this individual, Mr. Kozlowski, if this is an accurate portrayal, when is enough enough or when does it simply become greed? You just go on. Software provider MicroStrategy, trading at $333 per share. Today, it is trading at $1.15. The CEO, Michael Saylor, and other executives later paid $350,000 in fines to settle SEC allegations of accounting fraud and paid $10 million to settle shareholder lawsuits. I am not sure exactly what the CEO walked away with, but I would guess that he walked away with a lot more than the $350,000 that he paid in fines. Enron executives sold millions. The real tragedy and the real shame here in America is that as these executives lead their companies down a road of shady dealings, activities to deceive and hide the true viability of their business from their customers, their shareholders and their employees, it seems that for some of these as their employees and shareholders face financial ruin, for these few executives it has come to mean a golden parachute. In this kind of world, lower standards prevail. Honor and trust continue to falter elsewhere, but they are really faltering in the business community. I want to just highlight one other example. This is from our State of Michigan. This impacts and shows how again individuals, shareholders and employees get hurt when leadership breaks the public trust. CMS Energy shares drop. Suspect trades help drag Detroit- based firm's stock down more than 35 percent since January. CMS Energy Corporation's stock fell 10 percent Tuesday after its former accounting firm said its opinions on the energy company's financial results for the last 2 years can't be relied on. Excuse me? It can't be relied on. Here is something that I find really ironic: ``Last month CMS fired Andersen because of the accounting firm's link to the Enron Corporation scandal.'' What is the problem with CMS? CMS simultaneously sold power to and bought electricity from other energy companies to artificially boost the volume of its deals. CMS, this is like the pot calling the kettle black. They are doing bogus sales to boost the volume, deceive their employees, their shareholders and their customers; and at the same time they are firing Arthur Andersen because of the accounting firm's link to the Enron Corporation scandal. And here is now a response from an analyst. They have engaged in bogus trades, their auditing company says we cannot really support the opinions for the last 2 years on our audits, and here is one analyst's response: ``The market is overreacting to Andersen's statement. People are really fidgety these days.'' No kidding. What would you think they would be? Let us see, they have invested a ton of money, the stock is down 35 percent, the auditors are saying, the last 2 years of financial statements, we can't vouch for those anymore. And, by the way, the company has admitted that it has engaged in a bunch of bogus trades to inflate the health and the vitality of its business. And people are fidgety. They have a right to be fidgety. The leaders of this company broke the public trust. The auditors did not do their job and people are fidgety. I would guess so. Because their stock has dropped by 35 percent, and my guess is that the executives of this company are going to walk away with a bundle of money. Just a few more examples. This is what happens when the companies go down, employees and shareholders and customers are hurt. What happens to the executives? Enron, Ken Lay. Ken Lay is doing all right. He sold $1.8 million shares for $101 million. Jeff Skilling, he sold 1.1 million shares for $66.9 million. They sold those shares for around $50 to $60 a share. Rebecca Mark. She only walked away with about $80 million. She sold her shares at about $60 a share. Robert Belfer, he is a director. He only made $51 million. He sold 1 million shares for $51 million, $51 a share. If any of you want to buy Enron, I bought some a while back. I just wanted to see how these people explained their behavior to their shareholders. I think I bought 50 shares. I did not pay $51. I did not pay $60. I did not pay $70. I paid exactly what you can do if you call your broker, unless maybe the stock has doubled. I bought it for about 20 cents a share. If I made a good investment, you may have to pay 40 cents a share. I am not sure what happened to the stock price. But these guys walked away with a bundle of money. Mr. Kozlowski, the individual from Tyco, $100 million a year was not enough. He did not want to pay sales tax. Under Mr. Kozlowski's leadership, quote, unquote, Tyco lost $86 billion in market value. According to Reuters, ``A pattern of lucrative payouts to board members and top executives at the troubled manufacturer raises questions about whether they had incentives to keep tabs on the spending of disgraced former chairman Dennis Kozlowski. The question is now whether he will receive less than $135 million in a severance package than if he had been fired.'' Mr. Kozlowski has been indicted and the question is whether it will trigger a wider probe into Tyco. CEO, Lucent Technologies. Mr. McGinn, former CEO, will receive $5.5 million in cash. They are going to pay off a personal loan of $4.3 million. His performance at Lucent, the Securities and Exchange Commission is investigating possible fraudulent accounting practices while Lucent employees are suing the company for a breach of fiduciary responsibility by inappropriately allowing employees to add company stock to their retirement plans. WorldCom. Mr. Ebbers will receive $1.5 million a year for life. His performance, WorldCom is being investigated by the SEC for possible fraudulent accounting practices. Its credit rating has been reduced to junk status and has been removed from the Standard & Poors 500 index. Good job. Congratulations under your $1.5 million per year. It is a disgrace. I hope that the business community steps up, because the bottom line is that millions of American businesses who practice honesty and really do lead with integrity and maintain the public trust and recognize that it is a public trust, will most likely pay the penalty for the failed leadership of these executives. These people walked away with golden parachutes, and many of them left their companies in shambles and left their employees' and shareholders' financial conditions in shambles. They walked away with a golden parachute. Their legacy to American business is this Congress and the business community is now going to have to face a mandate and a multitude of new business regulation. The problem is, let us not forget that in the end, this is about integrity, it is about trust, it is about common sense, and it is about decency, all leadership qualities that cannot be legislated, and in many cases leadership qualities that were expected of these individuals, because they hold the public trust and they walked away from it. I yield to my colleague from Colorado.

Mr. HOEKSTRA. The gentleman and I have talked about this. I appreciate my colleague's support. What we have said is in some ways these people are accomplishing, these business leaders, because of their failure to exercise true leadership, are accomplishing what the terrorists could not. We bounced back after September 11, believing that we could rebuild America, and we are. They put the final piece back on the front of the Pentagon, I think, this week. We are strong and we are going to overcome that and are going to know we can move forward in the face of this terrorist attack. But people are questioning the strength of our system, and stocks are down, not because of the terrorist attack on September 11, but because of the scandals in the business community.

Mr. HOEKSTRA. It is very much that way at the State level.

Mr. HOEKSTRA. Mr. Speaker, I want to really reinforce the point my colleague made, which is that this system shrinks the taxpayers' dollar; that when we put a dollar at the top of that funnel, by the time it gets down to the student, that dollar has shrunk from $1 to something like 65 cents. In the education tax credit model, with the tax credit model, we actually grow the dollar. The person puts in $2, but it only costs, or the reduction in Federal income taxes is only $1, so we actually grow it. So if we invest $1 there, we end up with 60 cents in the classroom. If we invest $1 here, we end up with $2 directly going to the student in local communities with, in this case, the local school board deciding how this money is going to be spent. In that case----

Mr. HOEKSTRA. Mr. Speaker, the end result is the shared vision that we have with the President, that we have with our Speaker, and with the chairman of the Committee on Education and the Workforce to make sure we leave no child behind; that every child in America gets a first class education, and that they can compete on a worldwide basis.

Mr. HOEKSTRA. There are about 10 different steps, and a Washington bureaucrat telling us how to spend the money. Quite often when we go through that process they tell us what to do and it is going to cost $2 million, $3 million, but they do not give all the money to do it. This is a much more efficient and a much more effective system. As the gentleman and I point out consistently, we are not talking about doing away with that system. We would love to reform it, to make it more efficient, but we recognize that there is a lot of built-in support for that system. It is going to stay. We are going to keep increasing funding. What we are trying to do is to develop a complementary, a companion system that allows for more local control and local flexibility in terms of raising and spending money.

Mr. HOEKSTRA. Mr. Speaker, as the gentleman indicated, there are six States that are using some type of variation of this, whether it is Arizona, Minnesota, Pennsylvania, I think Florida, and they are all working on some type of plan like this. But the exciting thing here, this is kind of like a voluntary decision by people at the local level that says I want to put more money into my local school, and they have the option of doing it. It builds that trust between a local parent, a local constituent, and their local school system. If the school system can come up with a compelling need that says, hey, in Michigan we get money on a formula basis, and some of my school districts have some special needs, and they are saying, the money we are getting from Lansing just is not enough, and they have no alternative way to get some additional dollars, under this plan, they could go to the constituents in Holland and say, you know, we really want to keep this school open. This is in one of our target neighborhoods. We really think it is important. We know that this is not the most efficient way to run the school, but this is not necessarily always about efficiency. We want the best results. We think the best result is by leaving this school open. Are you willing to contribute a little bit to our school system to make that happen? Under this system, there is an incentive for people to contribute and help build their school system to be one of the best school systems in the State, if not the country.

Mr. HOEKSTRA. And assuming they are not trying to evade their taxes.

Mr. HOEKSTRA

Mr. HOEKSTRA. Mr. Speaker, I move that the House do now adjourn.

Mr. HOEKSTRA

Mr. HOEKSTRA. The other people that really do get excited are the school officials at the local level, because under the bureaucratic model, the dollars that come from the Treasury come with strings attached saying, ``you are getting a dollar and you will spend it this way. And, as a matter of fact, we are going to monitor you to make sure you spend it the way we want you to spend it. When we send you the money, we are going to require you to report back to us that you spent it exactly the way that we mandated that you do, and because we don't really trust you, we will send in auditors on a periodic basis to audit your reports, because we don't trust you are going to tell us exactly the truth.'' So you get this whole bureaucracy in here that does nothing, that totally does not consider the child. With this model, local officials, they have got an accountability, but they have only got it to the taxpayer, their local taxpayer, in that they have to convince a local taxpayer that says, ``For our school or district or our kids, this is what we want to do. Would you please support us?'' And if the money comes in and they have made a compelling case, it will come in. That is what my colleague learned in Arizona, that when local school districts make a compelling case that says we get this money from the State and Washington, but our district is just a little bit different and we have got some special needs, at that point people at the local level will step up with the tax credit or the folks will step up and write that extra check and these school officials can meet some very specific needs for their school district, for their kids. They recognize the accountability is not to some faceless bureaucrat in Washington, D.C., but their accountability is to the kids, to the parents of the kids, and to the local taxpayers; and that is exactly where our schools need to have the primary focus, is back into their communities.

Mr. HOEKSTRA. If the gentleman will yield, again on the oversight committee, we finally I think are getting a handle on this, but for much of the nineties, this Department of Education that gets about $40 to $45 billion per year could not even give us a clean audit. They could not tell us where the money was going or how it was being spent. That is interesting. If you get to a local school board, those things are audited. If there is a problem with the books, immediately there is a State takeover. Here you have got a $40 billion agency, like I said, that now I think finally under the Bush administration, there is accountability here, they know where the money is going; but for the longest period of time, they did not even think enough about $40 billion to actually account for where the money was going.

Mr. HOEKSTRA. If the gentleman will continue to yield, Mr. Speaker, when we met with the Treasury, great folks, but it was not about what is best education policy. It was what is best tax policy.

Mr. HOEKSTRA. Mr. Speaker, I thank the gentleman for taking the leadership position on this education tax credit proposal. A few years ago, the gentleman and I embarked on a process with members of the Subcommittee on Select Education of the Committee on Education and the Workforce, to talk about education at a crossroads. What we wanted to do was identify what the Federal role in education was, and we also wanted to go around to America and find out what is really working in education. What we discovered in terms of what happens to the Federal dollars and what happens in terms of decisionmaking is that we found that the person who is doing the work and paying the taxes by April 15, they send their money to the Treasury Department. We in Washington, whether it is H.R. 1, or any series of education bills here in Washington, will allocate that money and say we are going to spend this much money here and this much there. Politicians get into the debate where exactly the money is going to go. As we found out in the welfare reform debate recently, that debate, pretty much the way that the debate on education went, we forget about how we are trying to serve. In the welfare reform debate, the debate was not whether the policies and programs would help the people on welfare, the debate was where the decision would be made as to how those dollars would be spent. Some of the politicians here in Washington were scared because we were actually going to make some of the decisions not here in Washington, but move some of the decisionmaking down to lower levels. So it was not worrying about what worked and what did not, but who gets to make the decision. We had some of those same debates on education as to what policies are we going to mandate in Washington to make sure that people at the State level, people at the local school district level, and people at the local schools make the right decisions. So it goes through this process of politicians in Washington deciding what we are going to do. The money flows down to the States and the States decide how it is going to be allocated, and it goes down to the local school. What we find is we have this whole bureaucracy in place deciding how we are going to spend the Federal education dollar, forgetting about who paid the taxes in the first place and forgetting too often about the child that we are trying to educate. What we found out was a couple of things. Number one, when you put a dollar into the top of the funnel, at the end you only get about 65 cents into the classroom actually educating the child. The other thing that we found is the most effective programs at the State and local level. When we talked to parents, when we talked to principals, when we talked to superintendents, when we talked to teachers, and said, what is really working in your schools, we were hoping that they would come back and say, well, you know, we only get 7 percent of our money from Washington, but, boy, that English as a second language, man, that is the right program, that is the program that is really making a difference, or any one of the alphabet type of programs that we have here. That was not what we got. They said all we get from Washington is bureaucracy, mandates, paperwork, and those types of things. What really works is local innovative programs because those can be tailored to an individual school. So as the gentleman from Colorado (Mr. Schaffer) said, we are not talking about changing the system. We tried that. We tried to move more decision-making to the State and local level, tried to move more decision-making to parents. We did not win on that. The bureaucracy and the folks who wanted control here in Washington, they won that battle. So we are just saying, okay, this system stays in place. For those who want those controls and those types of things, it is going to stay here. It is well funded. This is a healthy budget. It continues to get healthy increases, and we are not going to try to slay that dragon. What we want to do is we want to create another mechanism to get more dollars to the student, and maybe my colleague would like to take us through exactly the difference between this model and how a tax credit complements this in terms of growing our investment, moving decision- making down to a local level, and it really forms a very nice complement to what this system is not able to do.

Mr. HOEKSTRA. Remember, this is the model that says the taxpayer puts in a dollar and 60 to 65 cents makes it to the classroom. On the other hand, this model says we have gotten rid of all this stuff in the middle and the taxpayer puts in $2, and it only costs the government a dollar. So here we grow our investment in education and we grow it for all students, public schools, private, parochial schools, we grow the dollar. In this one we shrink it. What a sharp contrast.

Mr. HOEKSTRA. Mr. Speaker, my colleague was talking about what is a simpler process for the taxpayer. This is fairly simple to begin with, but the gentleman is right. Having your taxes withheld every week makes this a very attractive, or not attractive, but it is the process that is there, and they have been doing it for years. But this process is very, very difficult for our local school district. They have to clamor with the State, they have to raise a ruckus with us to make sure that they get their fair share, and then they have all the bureaucracy that goes with it. I mean when we are talking about what is the easiest and what is the fairest method for kids and for local taxpayers, this is the posture that clearly works. There is no bureaucracy, there is a lot of flexibility with how the money is spent to make sure that at the end of the day, what do we want? We want this American child to be the best educated child in the world. It does not mean that we do not want other kids and the rest of the world to be as educated as well as they are; we do. But at the end of the day, this kid cannot come in fifth, tenth, fifteenth, seventeenth, nineteenth like they are on some of the tests today on math and science and those types of things. Our goal and our objective is to have ours to be the best educated kids in the world. We want to make sure that every child has an opportunity for a great education; that we cannot have 60 percent of our kids getting a good education, we want all of our kids to get a good education. We want all of our kids to be in safe and drug-free schools. As one of my friends said, the only thing we want our kids to be afraid of when they go to school is the exam tomorrow afternoon, that is it; not fearful of walking from the classroom to the locker to the lunch room or anything like that. So we have a great vision for education. This really empowers taxpayers at the local level to help build that vision into a reality at the local level.

Mr. HOEKSTRA. I think that is why, for a lot of our public school folks, this is a very exciting proposal, because they only get about 7 percent of their money from Washington to begin with. A lot of that money comes with the strings attached and very little flexibility, but when they see this tax credit proposal, they see it as another avenue to get money to come into their schools, because they are confident that they have built the relationship with their constituents, with the corporations back in their districts, with the parents and the taxpayers in their district, that they have got confidence in their local schools, and with this incentive we are providing through a tax credit, they believe they can go into their community and raise the funds necessary to do some of the special things that they would like to do for their schools. In a lot of places today, the State of Michigan, it is very difficult for a school district to raise any extra money for operating expenses. I guess it is next to impossible for them to raise operating money for their schools. It all comes on a formula basis out of our State capital. So what they are saying is this is now a new revenue source for us. They do see it is more money coming into their schools, because they have got a high degree of confidence that the programs and the efforts that they wanted to put in place will be supported by the people in their local districts. So it really is a good complement, one set of funds coming through the bureaucracy, and another set of funds for their operating coming directly from the taxpayers in their community. It creates a new accountability stream, the one that I think they treasure the most, which is their accountability, number one, to the kids, number two, to the parents of those kids and their schools, and, thirdly, to their communities, because a lot of our communities recognize that their future depends on the quality of the education that their kids are receiving today.

Mr. HOEKSTRA

Mr. HOEKSTRA. Mr. Speaker, I want to talk about a little bit different issue. I want to talk about what happens in America when corporations violate the public trust. Max De Pree, a former Fortune 500 CEO, my former boss at Herman Miller, wrote in his book, ``Leading Without Power,'' about the importance of people having trust and confidence in the American economic system in order for it to work. He states, ``When you stop to think about it, it is astounding that anything as complex as the trading of stocks, bonds, commodities, and futures ultimately depends on trust; a value, not a statute, not an SEC regulation, not even a government mandate. The system works on trust.'' We have been rocked during the last couple of months with revelations about corporate management and some of the activities that they have been engaged in. It all started with the actions of Enron Corporation and certain employees of Arthur Andersen, where the actions at Enron and Arthur Andersen I believe were clearly designed to do one thing: to deceive shareholders, customers, and employees of the true nature and health of the business. After that we had Merrill Lynch. Merrill Lynch just settled a lawsuit in New York after allegations that their brokers were advocating investors purchase certain stocks while at the same time acknowledging in internal memos that these were potentially bad investments. Enron, Arthur Andersen, Merrill Lynch, each of these cases, I think, are classic examples of where leaders in the business community violated the trust that was placed in them by the public, including their customers, their shareholders, and their employees. The other thing that goes on here is that in my State of Michigan, there is even more examples. CMS Energy, a long-established and well- respected business in Michigan, conducted round trip sales of electricity. My belief is that the sole purpose of this phony business activity was to artificially elevate the sales of one of its business divisions of up to 80 percent, again deceiving shareholders, customers and employees of the true health of the business. What is round- tripping? Round-tripping is I will sell you $1 billion of energy at 9 o'clock in the morning, a billion dollars of electricity at 9:00 in the morning, and at 9:01 you sell it back to me for exactly the same price, and all of the sudden you and I are now both billion dollar companies in the electricity commodities market. And in reality it was a phony sale. Take a look at this headline recently. Another Michigan company. Kmart, employees at Kmart recently allege that they were forced by management to adjust financial statements to hide the true viability of the business in 2001. The company filed for bankruptcy in 2001. Kmart accused of lying. Whistleblowers came, execs misled, and accountants knew. What happens when corporations betray the public trust? As we have seen in almost each of these cases, the financial ramifications have been devastating. These companies have even seen their stock values drop; some have been forced into bankruptcy. Worse, innocent people, tricked by these deceptions, have lost their retirement savings, employees have been laid off and investors have seen their investments evaporate. The end result may be that millions of honest businesses in America may be forced to pay a heavy price in new government regulations. It is really time for the business community and leaders in the business community to become self-policing and to bring forward proposals to address this breaking of the public trust by people in the business community. Remember, the system works on trust. And then the other thing that happens here is you almost add injury to insult. Many, if not most, of the management people involved in these deceptive activities have not only gone unpunished, they have been rewarded with huge severance or compensation packages. There is something wrong in America when business leaders break the public trust and harm many but they walk away with a golden parachute. What do I mean here? Well, we know what happened at Enron, deceptive business practices. Ken Lay, former chair, chief executive and director, sold 1.8 million shares for about $50 a share. Jeffrey Skilling, former chief executive, director, sold 1.1 million shares for $66.9 million, roughly $66 a share. Rebecca Mark, vice chairman, director, 1.4 million shares. She sold them for about $58 a share. Robert Belfer, director, member of executive committee, sold a million shares for $51 dollars a share. Steven Kean sold 64,932 shares for around $70 a share. John Duncan, director of the executive committee, sold 35,000 shares, netted $2 million or around $60 a share. They walked out very, very wealthy. We know that many did not do as well. After the Enron collapse, to track exactly the dialogue that Enron management would have with their shareholders, I bought 50 shares. I did not have to pay $50. I did not have to pay $66. I did not have to pay $68. I think I paid around 20 cents a share. I bought 50 shares for $10. Lots of investors were hurt because of the deceptive practices at Enron and at Arthur Andersen. But the people at the top, 101 million, 66 million, 79 million, 51 million, 5 million, 2 million, they did not end up selling their shares for 20 cents a share. The president of CMS Energy, here is how one shareholder described what happened here. Referring to the resignation of the lower ranking Pallas, the shareholder said it was analogous ``to kicking the cat when the dog messed on the carpet.'' Again, the share prices declined. I think the executives are going to do just fine. Bernard Ebbers, chairman and CEO, WorldCom. Worldcom is being investigated by the SEC for possible fraudulent accounting practices. Its credit rating has been reduced to junk status and it has been removed from the Standard and Poors 500 index, the Wall Street Journal, 6/5 of this year. Bernard Ebbers will receive $1.5 million a year for life. If his wife survives him, she will receive $750,000 a year for life as long as she lives. The company's credit rating has been reduced to junk status. Bernard Ebbers resigned under pressure in April, but I believe he may do better than the rest of the company. Richard McGinn, CEO, Lucent Technologies. The SEC is investigating possible fraudulent accounting practices while Lucent employees are suing the company for breach of fiduciary responsibility by inappropriately allowing employees to add company stock to their retirement plans. Richard McGinn, ousted in October of 2000, will receive $5.5 million in cash, pay off a personal loan amounting to $4.3 million, annual pension of $870,000 for life. Here is an interesting one. CEO for TYCO. TYCO is a company that we in my district are fairly familiar with. They came in and bought a healthy small little business in Zeeland, Michigan, said we will leave things the same. The day after the sale was consummated, the doors were locked. The employees were gone. Dennis Kozlowski made about $334 million over a 3-year period. He resigned earlier this month, indicted on charges of evading $1 million in sales tax. Think about it, making more than $100 million per year, and you got to ask the question, when is enough enough, or does it simply just become greed? $100 million a year and you would do anything to evade $1 million in sales tax so that the rest of us could pick up his tax burden. TYCO is negotiating a severance package that experts believe will be less than the $135 million he would have received if he had been fired. Let us talk about the performance of TYCO under Mr. Kozlowski's leadership. TYCO lost $86 billion in market value, faces $27 million in corporate debt. It is now under investigation. Here is a quote, according to Reuters, ``A pattern of lucrative payoffs to board members and top executives at the troubled manufacturer raises questions about whether they had incentive to keep tabs on the spending of disgraced former chairman Dennis Kozlowski and others.'' Reuters continues citing the Wall Street Journal: ``The criminal indictment has triggered a widening probe into whether Tyco paid for homes and artwork for several corporate officials without telling shareholders.'' Wall Street Journal, series of articles, 6-4 through 5- 2. It is just sad that that is what we are seeing in so much of the business world today. People who are entrusted by the public with a certain element of responsibility have taken that, and in many cases have enriched themselves, while their shareholders, their employees and their customers are paying the long-term price. Here is another case that just came up in the last couple of days. This is The Washington Post via the Dow Jones, publication date June 2002. A company that was looking for FDA approval for a drug, ImClone, learning that the Food and Drug Administration would not accept its application for a promising cancer drug, driving its share price down. It appears that that word leaked out through the corporation to a number of individuals. The end result is they sold their stock before it collapsed. They came out all right. The American public has a right to expect and demand more. Companies need to be held accountable. The business community should step up and make recommendations as to what should happen, because when public officials or corporate officials abuse the public trust, the whole sector suffers. In this case, corporate America suffers because of the excesses of a few. It is a painful process to watch and to observe. The end result now will be that either the private sector will come up with recommendations in how to effect change in the private sector or government will step in. I am not real optimistic about that. I believe that more government regulation of business is a poor replacement for integrity and trust. However, we must face the fact that some in business have abused this trust. The end result is millions of honest businesses in America may be forced to pay a heavy price in new government regulations. I believe that we must hope that the individuals who failed in their leadership responsibilities are held accountable by their management, their board of directors, their shareholders, or by the laws of our land. They need to be held accountable. This whole list of companies where millions of individuals got hurt but a few walked away with a golden parachute, here is a quote out of the Wall Street Journal that I find kind of appropriate: ``I don't know that anyone gave a bonus to the captain of the Titanic.'' In many of these cases, that is exactly what we saw, that after the misdeeds and the wrongdoing, whether it is at Enron or any of these other companies or Tyco, their market value plummeted. They sank like the Titanic. Yet their captains, their CEOs, walked away with a bonus. We need to make sure that we prevent that from happening in the future. Yet the systems or laws do not exist to exercise true accountability. Then systems and laws will need to be changed, but let us not forget that, in the end, this is about integrity and trust, common sense and decency; all leadership qualities that cannot be legislated.

Mr. HOEKSTRA

Mr. HOEKSTRA. Mr. Speaker, I move that the House do now adjourn.