CEI lauds decision overturning Arthur Andersen document-shredding conviction

CEI lauds decision overturning Arthur Andersen document-shredding conviction

Congress Should Follow by Reforming Overbroad Sarbanes-Oxley Sections
May 31, 2005

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<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Richard Morrison, 202.331.2273

 

 

Washington, D.C., May 31, 2005— John Berlau, the Competitive Enterprise Institute’s 2005 Warren T. Brookes Journalism Fellow, comments: “Today, the Supreme Court Justices stand united in their agreement that anger over investor losses and some instances of corporate wrongdoing cannot be used as an excuse to cut corners on due process. The liberal and conservative Justices should be applauded for standing up to the hysteria generated in the wake of the shady dealings of a few in the corporate world.

 

“Congress should follow the Court’s lead and revise the many flawed provisions of the Sarbanes-Oxley Act of 2002. The law’s tendency to penalize and indeed criminalize risk-taking and good faith accounting errors conflict with a free society based on the rule of law. And like the instructions to the Andersen jury that the Court characterized as too broad and too vague, Sarbanes-Oxley Section 404’s sweeping requirement that auditors must ‘attest’ to undefined ‘internal controls’ is arbitrary and unfair. It has hurt scores of legitimate businesses and their shareholders and is costing the economy and estimated $35 billion a year in compliance. Time spent on complying with the law diverts businesses from productive ventures that would create new jobs and greater returns for shareholders. Innovative small public companies are particularly hurt as many cannot afford the new costs of being public. A Wharton business school study found that the number of companies that deregistered from exchanges nearly tripled in the year after Sarbanes-Oxley was passed.

 

“And ironically, the accounting burden on businesses generated by these very mandates have made Andersen’s Big 4 accounting peers the big winners in this era of corporate risk-aversion!”