Report on Corporate Rules Is Assailed
Friday, December 1, 2006
Investor groups sounded alarms yesterday after it emerged that a foundation with ties to a pair of well-heeled business donors and an executive battling civil charges had funded a controversial new report seeking to slash corporate regulation.
The Committee on Capital Markets Regulation, which argues that U.S. markets are suffering under overzealous enforcement and unwieldy rules, said it received $500,000 in financial support from the C.V. Starr Foundation. The charity has longstanding ties to Maurice R. "Hank" Greenberg, the former American International Group chief who was ousted from his post last year and is contesting civil charges filed by the New York attorney general.
Two committee members, Wilbur L. Ross Jr., a private investor, and Citadel Investment Group manager Kenneth C. Griffin, contributed "a few hundred thousand dollars" more, Ross said in an interview. The panel was formed this year with support from Treasury Secretary Henry M. Paulson Jr., a former chairman of the Wall Street firm Goldman Sachs.
The lengthy report released yesterday recommended that businesses and boards of directors get increased protection from private lawsuits. Panel members also urged Congress to curtail the power of state officials to charge financial and audit firms with crimes. Businesses should face criminal charges only as a "last resort," the study says.
Consumer advocates seized on the issue to question the study's conclusions and the motives of the panel's members, who include top executives from some of the nation's largest accounting and investment firms as well as people with close ties to the Bush administration.
The report marks the first push in a powerful lobbying drive by business interests that had been silenced after frauds at Enron and WorldCom ignited investor outrage and prompted Congress to pass stringent corporate accountability legislation four years ago.
The group's 32 recommendations include rethinking the mission of the Securities and Exchange Commission to make it less antagonistic to business to adopt a more cooperative regulatory approach favored by British authorities. SEC commissioner Roel Campos, a Democrat, warned yesterday that rolling back a system of regulation that has protected U.S. investors for decades could have profound and costly consequences if it went too far.
"We can't be guilty of throwing the baby out with the bathwater," Campos said in an interview. "It's a dangerous thing to start talking about dismantling something that has worked so well for our country for so long and has produced great benefits in our capital markets."
Leaders at the nonprofit pension fund group Council of Institutional Investors said the proposals would "undermine the effectiveness of market watchdogs and weaken critical investor protections."
Barbara Roper, director of investor protection at the Consumer Federation of America, went even further, asserting that the capital markets group had preordained its conclusions and carefully selected statistics to make its case that more companies were listing their stocks on foreign markets because of burdensome U.S. rules.
"You could take every single step on their list, and when you were done, you would have done nothing to reverse recent trends, and in the meantime you would have made it significantly more difficult to hold corporate criminals accountable for their crimes," Roper said.
R. Glenn Hubbard, the former leader of President Bush's Council of Economic Advisers who co-chaired the capital markets panel, told reporters that "this commission was entirely independent of any donor."