By BILL TAUZIN

The free market system is the cornerstone of our nation’s economy. For this system to succeed, honesty by corporate leaders is essential. Trust in those leaders by investors is equally as critical. Yet recent accounting scandals by major public corporations such as Enron, Global Crossing and WorldCom have shaken the very foundation upon which America’s free market system relies. This violation of the public trust by corporate criminals has spurred action by Congress to protect investors and employees, and encourage ethical business practices.

Our business community, and the investor culture that thrives therein, is based upon concepts that we hear more and more about as these corporate scandals continue to unfold. Phrases such as “transparent accounting,’ ‘auditor independence’ and ‘investor confidence’ have made their way outside the boardroom and into the American lexicon. Because of the technology boom of the late 90’s and the democratization of the financial markets, these concepts now are discussed around American dinner tables. Investors simply must have confidence in financial reporting, and the strength of our market system. The first and foremost important step in this process is to restore the fundamental trust of the general public in the integrity of business leaders and the financial reports they issue.

Swearing an oath has long been a very public way for those in a position of leadership – in government and in the private sector – to take explicit responsibility for their actions with regard to that position. For example, Members of Congress take an oath to uphold the Constitution. Public avowal serves as an assurance to the people – investor or constituent – that the leader raising his or her right hand will act in the interest of those he or she serves. But in addition to that, it shores up confidence in the system as a whole. It shows that the system is comprised of men and women who are accountable not only to those they serve directly, but also to the entire community.

Investors who have lost huge amounts of money are irate – and rightfully so – with the shady dealings of their corporate representatives. So, too, are those of us who believe in the virtues of the free market. In fact, it is the most stalwart of defenders of free markets who are most offended by abusers of the system. The business community is just that, a community, and when people cook the books in an attempt to line their own pockets, they do an incredible disservice to all of those who try to inform themselves completely and invest responsibly.

The House Energy and Commerce Committee has been at the forefront on Capitol Hill in investigating corporate wrongdoing. For nearly two years, our investigators have been uncovering evidence, such as the shredding of documents by Arthur Anderson and fraudulent accounting practices at Enron, that have spotlighted the need for real reform.

To that end, Congress has come down hard on corporate wrongdoing by overwhelmingly passing H.R. 3763, the Corporate Accountability Act of 2002, which protects investors by providing auditor independence and oversight of the accounting profession, increases corporate responsibility and prevents analyst conflicts of interest. This bill imposes tougher criminal penalties on those who have violated the law, requires CEO and CFO certification of periodic reports and, finally, makes them subject to tough, new civil and criminal penalties. The bill makes it a crime to interfere with an audit. It requires forfeiture of certain bonuses and profits if an auditor is required to prepare an accounting restatement and establishes a lifetime ban for “unfit” officers and directors. In addition, it prohibits insider trading during pension fund “blackout” periods. President Bush signed this important legislation into law on July 30.

These important new safeguards will help to ensure that the thousands of hard-working Americans, pension holders and small investors devastated by corruption in corporate boardrooms see rogue company executives punished for their greedy practices, not rewarded with multi-million dollar stock options and massive compensation packages. The Corporate Accountability Act will go a long way toward shielding shareholders and employees from corporate fraud while helping to restore investor confidence in America’s free market economy.

BILLY TAUZIN represents Louisiana’s Third Congressional District in the United States Congress.