Paul Sarbanes

Mr. SARBANES

Mr. SARBANES. Did the Senator consider dividing it only for section 804?

Mr. SARBANES. It is that division you want a separate vote on, I take it?

Mr. SARBANES. Madam President, I would like to put forward a couple of inquiries. Could the Senator outline what his division of the amendment does?

Mr. SARBANES. What does division 3 provide for?

Mr. SARBANES. And how much time is left to the Senator from Texas?

Mr. SARBANES. Mr. President, it is important, in considering this amendment, to realize there exists now, under the labor management reporting and disclosure procedure, extensive and intensive provisions for reporting by labor organizations, officers, and employees of labor organizations. If all of these provisions are not being carried out fully, the responsibility rests with the Secretary of Labor. The Secretary of Labor ought to be doing her job. If the Congress is not providing sufficient resources for that, that is an issue for the Congress. We ought to address that issue. This supposed parallelism that is being argued completely misses the mark in the sense that there is already an existing statutory scheme covering reporting and disclosure by labor organizations. I want to go through some of those provisions so Members appreciate how extensive they are and the amount of review and oversight that now exists. I am now reading from the statute: Every labor organization shall file annually with the secretary a financial report signed by its president and treasurer-- So much for this argument about they ought to sign, put their signature on the report-- or corresponding principal officers containing the following information in such detail as may be necessary accurately to disclose its financial condition and operations for its preceding fiscal year. Listen to what they have to set out: Assets and liabilities at the beginning and end of the fiscal year; receipts of any kind and the sources thereof; salaries, allowances, and other direct or indirect disbursements, including reimbursed expenses to each officer and also to each employee who, during the fiscal year, received more than $10,000 in the aggregate from such labor organization and any other labor organization. Ten thousand dollars? Ken Lay of Enron got $177 million. Twenty executives of Enron got over $3 million in salary. Here we are talking about a $10,000 figure which they have to report. I am reading from the statute that governs labor organizations on their reporting and disclosure: Direct and indirect loans made to any officer, employee, or member which aggregated more than $250 during the fiscal year, together with a statement of the purpose, security, if any, and arrangement for repayment. A $250 loan, $250. Bernard Ebbers of WorldCom got a $366 million loan. This is just to underscore in a sense the tightness of this framework governing the labor organizations--a $250 loan. WorldCom executive Ebbers, $366 million? The Adelphia situation with the Rigas family, $3 billion in loans. Let's look at the power of the Secretary of Labor to enforce these requirements: Any person who willfully violates this subchapter shall be fined not more than $10,000 or imprisoned for not more than 1 year. Any person who makes a false statement or representation of a material fact or who knowingly fails to disclose a material fact in any document, report required under the provisions of this subchapter shall be fined not more than $10,000 or imprisoned for not more than 1 year. Any person who makes a false entry or willfully conceals, withholds or destroys books, records, reports shall be fined not more than $10,000 or imprisoned for not more than 1 year. ``Personal responsibility of individuals required to sign report,'' I earlier said the president and the treasurer of the labor organization had to sign the reports. Listen to this: Each individual required to sign reports under sections 431 and 433 of this title shall be personally responsible for the filing of such reports and for any statement contained therein which he knows to be false. Of course, we have just noted from the previous provisions, that is a fine and possible imprisonment for up to 1 year. So we have a statutory scheme in place to control the labor organizations. If it is not fully adequate, it needs to be addressed in that context. But clearly, it goes well beyond many of the provisions that apply to corporate officers. It has been carefully worked out over the years. The Labor- Management Reporting and Disclosure Act dates from 1959 originally, with subsequent modifications and adjustments, as we have proceeded. There is a system in place to govern labor organizations. It has been asserted: well, the Labor Department has not been able to do everything it needs to do. That burden is on the Labor Department. In a sense, what has been raised represents a challenge to the Secretary of Labor. If, in fact, the Congress hasn't given her adequate resources, that point needs to be made to the Congress and we need to address that. But we have established a well-thought-out, comprehensive scheme with respect to the reporting and disclosure of the labor organizations, and if they are falling short of the statutory requirements, that needs to be addressed in the context of the statute. The Labor Department has enormous authority over the labor organizations. Make no mistake about it, the powers and the authorities that reside in the Secretary of Labor and the Department are quite extensive to deal with the labor organizations. I mentioned only some of them, including these imprisonment for 1-year provisions. So I am in opposition to the amendment. I think any shortcomings that one might perceive need to be addressed in the context of the reporting and disclosure provisions applicable to labor organizations; and I must say to you--and the Senator from Kentucky has outlined some of the problems--the Department needs to come to grips with them and come to the Congress, if it deems that necessary, to seek an appropriate congressional response in order to deal with them. I very much hope my colleagues, when the time comes, will not be supportive of this amendment. When all time is used, I am prepared to make a motion with respect to the amendment.

Mr. SARBANES. I move to reconsider the vote.

Mr. SARBANES. I suggest the absence of a quorum.

Mr. SARBANES. Mr. President, I move to table the McConnell amendment, and I ask for the yeas and nays.

Mr. SARBANES. Mr. President, I only observe that if they file a false statement of representation, they can be fined and sent to jail for up to 1 year. That is a pretty heavy remedy if you stop and think about it. Mr. President, I yield back the remainder of my time.

Mr. SARBANES. Mr. President, I think under the agreement there are 15 minutes allotted to Senator Gramm, 5 minutes to Senator McConnell, and I have reserved 10 minutes before we go to a vote on or in relation to the McConnell amendment.

Mr. SARBANES. Will the Senator yield on that point?

Mr. SARBANES. Could I ask what the time situation is?

Mr. SARBANES. Mr. President, I thank the able Senator for his very kind comments. I underscore, as I said last night on the floor when Senator Dodd was here, my deep appreciation for the very positive and constructive contribution which Senator Dodd and Senator Corzine have made to this legislation. Early on, they introduced S. 2004, the Dodd-Corzine bill that formed the basis of a great deal of what is now before the Senate. I really appreciate the tremendous effort on the part of the two Senators. I think it is very important that I make it very clear how much I appreciate the Senator's continuing, very strong contributions in the committee and now as we consider this legislation.

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

Mr. SARBANES. Mr. President, I ask unanimous consent that following Senator McCain, who will speak later, Senator Corzine be recognized to speak for up to 15 minutes.

Mr. SARBANES. If the Senator will yield, I thank him for that observation because he is absolutely on point. The bad apples ought to be punished. There is no question about it. They ought to be punished severely. But it is very clear, as this issue has unfolded, that we need to make structural changes. We need to change the system so that the so-called gatekeepers are doing the job they are supposed to be doing. That has not been happening. That is why we need to remove these conflicts of interest on the part of auditors who are also consultants for the same company, collecting huge fees. And they are supposed to come in as outside auditors and be very tough on the company, which at the same time is giving them large fees for consultancy. The Senator is absolutely on point. We have to put in place a framework, a system which tightens up and begins to screen out these things. Furthermore, if you go after the bad apples, fine; but the damage has already been done, as the Senator just observed, for instance, WorldCom and the collapse of the whole pension program and pension provisions. Punishing a bad apple may have something of a deterrent effect, but there is nothing like putting a system into place that gives a heightened assurance that you are going to be accountable. That is what investors are looking for.

Mr. SARBANES. That was an effort, of course, to deal with the idea that somehow it might bring causes of action from outside, or somewhere else. So it is limited to the SEC. The SEC, as I understand it, had something like this in place in the past. Is that correct?

Mr. SARBANES. If the Senator will yield, we have people lined up to speak once the Senator has concluded, Senator McCain and then Senator Corzine. After that, I anticipate then dealing with the McConnell amendment.

Mr. SARBANES. Will the Senator yield for a moment?

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

Mr. SARBANES. Mr. President, while we are all waiting for further business, I will take just a moment to speak to the amendment that has been offered by the very able Senator from North Carolina. In fact, I would like to put a couple of inquiries to the Senator, if I might. It is my understanding that this amendment, which places responsibility upon the lawyer for the corporation to report up the ladder, only involves going up within the corporate structure. He doesn't go outside of the corporate structure. So the lawyer would first go to the chief legal officer, or the chief executive officer, and if he didn't get an appropriate response, he would go to the board of directors. Is that correct?

Mr. SARBANES. Would the Senator mind if I made a very short statement?

Mr. SARBANES. Does the Senator yield the floor?

Mr. SARBANES

Mr. SARBANES. I thank the Senator from Minnesota.