Corporate Corruption Bill
The East Room
The White House
July 30, 2002
10:15 A.M. EDT
Thank you very much. Welcome to the White House, and welcome to this historic
During the past year the American economy has faced several sudden challenges,
and proven its great resiliency. Terrorists attacked the center and symbol of
our prosperity. A recession cost many American workers their jobs. And now corporate
corruption has struck at investor confidence, offending the conscience of our
nation. Yet, in the aftermath of September the 11th, we refuse to allow fear
to undermine our economy. And we will not allow fraud to undermine it either.
With well-timed tax cuts we fought our way out of recession and back to economic
growth. And now with a tough new law we will act against those who have shaken
confidence in our markets, using the full authority of government to expose
corruption, punish wrongdoers and defend the rights and interests of American
workers and investors.
My administration pressed for greater corporate integrity. A united Congress
has written it into law. And today I sign the most far-reaching reforms of American
business practices since the time of Franklin Delano Roosevelt. This new law
sends very clear messages that all concerned must heed. This law says to every
dishonest corporate leader: you will be exposed and punished; the era of low
standards and false profits is over; no boardroom in America is above or beyond
This law says to honest corporate leaders: your integrity will be recognized
and rewarded, because the shadow of suspicion will be lifted from good companies
that respect the rules.
This law says to corporate accountants: the high standards of your profession
will be enforced without exception; the auditors will be audited; the accountants
will be held to account.
This law says to shareholders that the financial information you receive from
a company will be true and reliable, for those who deliberately sign their names
to deception will be punished.
This law says to workers: we will not tolerate reckless practices that artificially
drive up stock prices and eventually destroy the companies, and the pensions,
and your jobs.
And this law says to every American: there will not be a different ethical standard
for corporate America than the standard that applies to everyone else. The honesty
you expect in your small businesses, or in your workplaces, in your community
or in your home, will be expected and enforced in every corporate suite in this
I commend the Congress for passing a strong set of reforms. I particularly thank
Senator Paul Sarbanes and Congressman Mike Oxley. Both are very thoughtful,
and were persistent voices for reform. They are true advocates of corporate
integrity. I appreciate their working together to send a signal to the rest
of the country that it's possible in Washington, D.C. to set aside partisan
differences and to do what's right for the American people. I also appreciate
the bipartisan leadership in the Congress, and I particularly thank Senator
Daschle and Senator Lott who are with us here today.
I want to thank members of my Cabinet who worked on this bill: Secretary of
Treasury O'Neill and Attorney General Ashcroft, Secretary Evans, Secretary Chao.
I appreciate the FBI Director being here, along with the Chairman of Securities
and Exchange Commission, Harvey Pitt. I appreciate the Corporate Fraud Task
Force members who are here. I want to assure the American people, they're just
America's system of free enterprise, with all its risk and all its rewards is
a strength of our country, and a model for the world. Yet free markets are not
a jungle in which only the unscrupulous survive, or a financial free-for-all
guided only by greed. The fundamentals of a free market -- buying and selling,
saving and investing -- require clear rules and confidence in basic fairness.
The only risks, the only fair risks are based on honest information. Tricking
an investor into taking a risk is theft by another name. Corporate executives
must set an ethical tone for their companies. They must understand the skepticism
Americans feel and take action to set clear standards of right and wrong. Those
who break the rules tarnish a great economic system that provides opportunity
Their actions hurt workers who committed their lives to building the company
that hired them. Their actions hurt investors and retirees who placed their
faith in the promise of growth and integrity. For the sake of our free economy,
those who break the law -- break the rules of fairness, those who are dishonest,
however wealthy or successful they may be, must pay a price.
Today, we are taking practical steps to encourage honest enterprise in our nation.
Under this law, CEOs and chief financial officers must personally vouch for
the truth and fairness of their companies' disclosures. Those financial disclosures
will be broader and better for the sake of shareholders and investors.
Corporate officials will play by the same rules as their employees. In the periods
when workers are prevented from buying and selling stock in their pensions or
401(k)s, corporate officials will also be barred from any buying or selling.
Corporate misdeeds will be found and will be punished. This law authorizes new
funding for investigators and technology at the Securities and Exchange Commission
to uncover wrongdoing. The SEC will now have the administrative authority to
bar dishonest directors and officers from ever again serving in positions of
corporate responsibility. The penalties for obstructing justice and shredding
documents are greatly increased. Corporate crime will no longer pay. CEOs who
profit by betraying the public trust will be forced to return those gains to
investors. And the maximum prison term for common types of fraud has quadrupled
from five to 20 years.
For the first time, the accounting profession will be regulated by an independent
board. This board will set clear standards to uphold the integrity of public
audits, and have the authority to investigate abuses and discipline offenders.
And auditing firms will no longer be permitted to provide consulting services
that create conflicts of interest.
This law gives my administration new tools for enforcement. We will use them
to the fullest. We will continue to investigate, arrest and prosecute corporate
officials who break the law. The Corporate Fraud Task Force I established is
now hard at work, overseeing investigations of alleged fraud and insider trading.
More than 200 federal prosecutors are at work detecting and punishing corporate
crimes. Every corporate official who has chosen to commit a crime can expect
to face the consequences. No more easy money for corporate criminals, just hard
As the work of enforcement proceeds, I hope Congress will join me in other important
efforts to protect the savings and investments of Americans preparing for retirement.
We've seen how workers can lose a lifetime of savings overnight, locked into
pension plans without adequate choices and information.
Workers should be able to sell company stock and diversify into other investments
after three years in their own company's plan. They should receive updates on
their retirement accounts, not once a year, but every three months. They should
have access to sound investment advice. I have proposed pension protection reforms;
the House has passed them. I hope the Senate takes them up soon.
We must also work together to promote more growth in the economy and jobs for
the American people. The fundamentals of our economy are sound. After all, sales
of automobiles and new houses are on the rise. New unemployment claims have
been falling since April. Inflation is low, productivity is increasing, and
growth continues. Those are signs of strength in our economy, and with the right
policies we can build on it.
We must continue to work to control federal spending, and make the tax cuts
permanent, so Americans can save and plan for their own future. We must tear
down trade barriers, so people everywhere can buy American. We must make terrorism
insurance available to spur more construction.
And on energy, we must encourage conservation through new technology and produce
more energy at home, to give our economy safe and steady sources of power, and
make our country less reliant upon foreign sources of power.
The attacks against our economy in the last year have caused deep hardship,
and highlighted the economy's fundamental strength. The American economy is
more diverse and more innovative than ever before. And its greatest strength,
the people who make it work, are better trained and more productive and more
highly skilled than ever before.
Whenever we face challenges, from the fear that threatened our economy after
September the 11th to the fraud that threatens investor confidence today, we've
tackled them head on. The American economy depends on fairness and honesty.
The vast majority of businesses uphold those values. With this law, we have
new tools to enforce those values, and we will use those tools aggressively
to defend our free enterprise system against corruption and crime.
It is now my honor to sign the Sarbanes-Oxley Act of 2002. (Applause.)