Businesses Prepare to Mount a Concerted Attack on Regulation

Its research claimed that fewer international companies list on U.S. stock markets because of lawsuits, overly aggressive enforcers and huge financial penalties..

In the past five years, regulators have ratcheted up the consequences for engaging in fraud, topped by a $750 million settlement by WorldCom.

For his part, Paulson is mobilizing some of the nation's most high-wattage financial luminaries, including former Federal Reserve Board presidents Alan Greenspan and Paul A. Volcker and chieftains from Berkshire Hathaway, General Electric and J.P. Morgan Chase, to appear at Georgetown University tomorrow.

Two discussions are open to the public. But afternoon sessions that focus on the alleged threat of investor lawsuits, possible new legal protections for accounting firms and reining in the tough tactics of securities enforcers are for elite members only.

Among the items the U.S. chamber panelists will promote in their report Wednesday are top-to-bottom reforms at the Security and Exchange Commission, which they say is staffed with too many lawyers who create and enforce rules and too few economists who analyze costs to business.

The chamber wants Congress to instruct regulators to study the number and effectiveness of shareholder lawsuits. It also is asking lawmakers to give the SEC more authority to oversee Sarbanes-Oxley and the power to repeal its most burdensome parts such as a section that requires companies to review their financial safeguards to help prevent fraud and mistakes.

"Almost all significant laws and regulations are done in this country in times of crisis," said David Chavern, an executive at the chamber. "Maybe we should pick up our game."

But as trade groups try to seize the agenda, law enforcement authorities are firing back.

Linda Chatman Thomsen, the SEC's enforcement chief, warned executives to stop complaining and start policing their operations.

"There is substantial evidence that financial markets succeed because of strong enforcement and regulation, not in spite of it," she said in a speech last week.

The same day, on Capitol Hill, a coalition of defense lawyers, civil liberties advocates and corporate attorneys pressed lawmakers to water down a Justice Department policy on charging businesses with crimes.

Deputy Assistant Attorney General Barry M. Sabin responded that his prosecutors are mounting new probes of revenue inflation, self-dealing, insider trading and other corporate misdeeds. "Eliminating fraud is good for business," he said.

In the current environment, with both the market and the political winds blowing against them, the prospects for industry's success remain unclear.

Hal Scott, a Harvard law professor who directed the capital markets study last year, said action by Treasury and the SEC, controlled by Republican appointees of President Bush who can act with more alacrity than a Democratic Congress, is overdue.

Corporate America found cause for cheer earlier this year when regulators filed court briefs supporting limits on the ability of investors to file lawsuits, a "major philosophical shift," according to Joel Seligman, president of the University of Rochester.

But the endgame may be known fully only after the 2008 elections, political and financial analysts said .

"The focus of the general public, always ephemeral, has shifted to other issues such as the war in Iraq and affordable health care," said Joseph V. Carcello of the corporate governance center at the University of Tennessee. "And it is the mood of the general public that carries greater sway. After all, the general public has more votes than activist institutional investors."