AFL-CIO chief demands reforms in accounting

Grace Leong

Thursday, June 20, 2002 | 11:15 a.m.

AFL-CIO President John Sweeney called Wednesday for affordable prescription drug plans for the elderly and legislation to protect investors and employees from "crooked" accounting practices demonstrated by Enron Corp. and its auditor Arthur Andersen.

Sweeney, at the 64th annual convention of the Communications Workers of America in Las Vegas, said voter attitudes have changed as people demand "a return to the values of responsibility and accountability" and warned that government leaders would be held accountable on the Enron debacle and prescription drugs issues during the fall elections.

"We are fed up with politicians who pay attention to the needs of big shots and the wealthy rather than the needs of working families -- and I'm talking about Democrats as well as Republicans," he said. "We need to change the rules that govern not just the sale and distribution of energy, but the security of pensions and the governance of corporations and the conduct and standards of the accounting industry."

To that end, Sweeney said the AFL-CIO is supporting a bill proposed by Senate Banking Committee Chairman Paul Sarbanes, D-Md., that would significantly limit consulting work auditors can provide to companies they audit, and would create a new board to oversee the accounting industry and discipline auditors, replacing the current system in which the industry largely polices itself.

Critics of current practices say investor confidence and the integrity of financial reports are being threatened by perceived cozy relationships between some accountants and the companies they audit.

The Senate Bill, which was approved by a key Senate committee by a 17-4 vote on Tuesday, also requires the Securities and Exchange Commission to impose new rules on financial analysts to prevent conflicts of interest.

But Sweeney said the Sarbanes bill is fighting for its life in Congress, facing opposition from House Republican leaders and the accounting industry. He said they want far more limited legislation and believe the SEC already has the authority to do most of what reformers seek.

"It's because the accounting industry has flooded Capitol Hill with more than 300 highly-paid lobbyists who are twisting arms and calling in their IOUs," Sweeney said.

"It's because the accounting industry contributes more than $15 million to the campaigns of its defenders every election cycle. And those defenders ... are stalling and delaying, substituting and amending and trying to keep the Sarbanes bill from coming to the floor for a vote," he said.

Sweeney said rising health care costs, which could put access to health insurance coverage out of reach of millions more Americans in addition to the 37 million who are already uninsured, is a key concern.

"In every poll taken these days -- by Republicans as well as Democratic pollsters -- the outrageous cost of prescription drugs is listed as one of the top priorities of American voters," he said.

The CWA said private sector drug prices in the United States are 30 percent to 70 percent more than in Canada and Mexico and attributed some of that increase to "over-reliance by patients on brand name versus generic drugs or other lower-priced alternatives."

The CWA also cited huge amounts spent on marketing and advertising as well as enormous profits earned by the pharmaceutical companies. "Large drug manufacturers have marked net profits of about 20 percent, between four and five times the median profits for the average Fortune 500 company."

"Many older Americans can no longer afford the drugs they need to survive," Sweeney said. "And to my mind that makes the promoters of the drug industry -- the opponents of Medicare prescription drug coverage -- no better than paid assassins -- hired killers."