Legislators suggest changes to bankruptcy law

WASHINGTON -- In the shadow of election-year politics, Republican and Democratic members of Congress are squabbling over what changes should be made to bankruptcy and other laws to prevent new Enron-style corporate collapses.

"You can't legislate against greed, but you can stop greed from succeeding," said Judiciary Committee Chairman Patrick Leahy, D-Vt., opening a hearing Wednesday.

But Leahy wants the 1995 Private Securities Litigation Reform Act changed to allow defrauded investors to sue under racketeering statutes.

"This version of 'reform' contributed to the loss of professional discipline and enacted restrictions making more difficult for the victims of securities fraud to bring civil actions and recover their losses," Leahy said.

His counterpart, ranking committee Republican Orrin Hatch of Utah, says allowing civil racketeering charges in class action suits would expose defendants to paying extraordinary damages.

"This provision does not exempt any person from being criminally convicted under the racketeering statute in connection with securities fraud," Hatch said.

Lawmakers also are bickering over a provision in similar versions of a bankruptcy bill being ironed out by House and Senate negotiators. The so-called "safe harbor" provision would provide ways for debtors facing bankruptcy to remove some assets from their books.

Democrats say this is one practice that led to Enron's failure.

Shield from scrutiny

"This section is a deeply misguided effort to shield from the scrutiny of the bankruptcy courts transactions that move certain assets off the books of a company so that they cannot be reached by other creditors," said Sen. Russell Feingold, D-Wis.

Hatch said the provision would not lead to "Enron-style abuses" because it would impose strict limits on those transactions.

"Most companies that engage in securitization transactions do not end up in bankruptcy, nor do they engage in the alleged fraudulent acts we have read about Enron's dealings," Hatch said.

A Depression-era law that restricts large holding companies from purchasing electric utilities also is getting caught up in the uproar over Enron's freewheeling financial practices.

Critics of the 1935 Public Utility Holding Act say it has outlived its usefulness in today's competitive power markets and hoped to gain swift approval for its repeal. But supporters of the law argue that in light of Enron's misdeeds, lawmakers should think twice about approving more deregulation.

Sen. Jeff Bingaman, D-N.M., said Wednesday at a Senate and Natural Resources hearing that he will still press for repeal of the law, but added that he wants to "take one last look" at what might be needed to ensure that investors and consumers are protected.

Responded Sen. Frank Murkowski, R-Alaska: "To meet consumers needs, we must get rid of unnecessary regulations that prevent companies from responding to changing market circumstance."

Enron's long-standing political ties to Washington are evident as a dozen committees and subcommittees hold hearings into the company's bankruptcy.

The General Accounting Office, in response to congressional Democrats, has threatened to sue Vice President Dick Cheney for records on his meetings regarding Enron.