Proposed regulations following Enron's fallout called extreme

Saturday, January 26, 2002

WASHINGTON -- Business coalitions and the nation's accounting and energy industries are moving quickly to try to head off new federal restrictions they fear will emerge from the Enron investigations. One example: tighter rules on 401(k) retirement plans.

Thousands of Enron employees -- heavily invested in Enron stock the company encouraged them to buy but barred them from selling last fall as the value plummeted -- have lost their retirement savings.

The U.S. Chamber of Commerce, National Association of Manufacturers and other business groups, contending they should not be punished because of one bad actor, have formed a coalition to urge lawmakers not to impose new 401(k) rules on employers.

The bottom line in their message: Employers don't have to offer retirement plans, and if government imposes too many restrictions, some companies may scale back.

"You have to be a storyteller on this," said Chamber lobbyist Bruce Josten, and persuade lawmakers "that what these Enron people did is despicable and that you guys need to do something about it but don't throw the baby out with the bath water here and penalize millions of other people."

The accounting industry, under scrutiny as lawmakers probe Arthur Andersen's failure to alert the Securities and Exchange Commission that Enron was in trouble, is opposing any attempt to bar accountants from serving as both consultants and auditors for a company. Enron paid Andersen at least $27 million for consulting and $25 million for auditing.

Energy interests are lobbying against any move to re-regulate portions of their industry or to regulate what had been Enron's core business, energy trading, for the first time, something Enron successfully fought. The uninterrupted flow of energy after Enron's breakdown proves the markets work, they say.

The Financial Services Roundtable, representing an industry also likely to get attention from Congress for any role its members had in Enron's ventures, contends existing law is sufficient.

Also, Andrew Quinlan, president of the Center for Freedom and Prosperity, said he expects -- and will oppose -- legislation aimed at use of offshore tax havens after reports that Enron paid no U.S. income taxes in four of the past five years.

"These low-tax countries are not the problem," Quinlan said. "I don't think people should go off the deep end on this. I think Enron was just an aberration and hopefully the people who did it will be prosecuted."

Lobbyists say there is little doubt new laws will be passed. To that end, they are advancing proposals their groups find acceptable.

Removing adviser liability

The Financial Services Roundtable and U.S. Chamber want to remove liability from companies that hire advisers to help employees develop retirement plans. They say such advice could have kept Enron workers from relying so heavily on Enron stock, but employers now are essentially blocked from providing it because they can be sued if it goes awry.

The American Institute of Certified Public Accountants is backing SEC Chairman Harvey Pitt's plan to abandon the accounting industry's self-regulation in favor of an outside oversight panel.

"He pretty much told us what he wanted to achieve and asked us to support it. And we have stepped up to the plate and supported it" to help restore credibility to accounting, AICPA President Barry Melancon said.

Melancon opposes a proposal by Democratic Sens. Jon Corzine of New Jersey and Christopher Dodd of Connecticut that would bar auditors from providing non-audit services, such as consulting, to auditing clients. There is no evidence that barring such relationships would have made any difference with Enron, he said.

On Friday, the federal government announced it would restrict the ability of firms auditing federal agencies to also provide consulting services to them.

Michael Keeling, president of The ESOP Association, which represents companies with employee stock ownership plans, or ESOPs, said his worst-case scenario is proposed legislation that would let employees diversify investments in an ESOP at age 35 and after five years of service.

"It would stymie employee ownership programs in private companies," Keeling said.

Many companies, including Enron, have strict time or age limits on when employees can sell their company stock.

The bill, sponsored by Corzine and Sen. Barbara Boxer, D-Calif., also includes provisions opposed by the Chamber of Commerce that impose new rules on use of company stock to make employer matches in 401(k) accounts.

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