PCAOB Enforcement Transparency Act of 2011

I rise today to introduce my Buy Back America Bonds bill, S. 1909. This bill will not only help raise awareness of our Nation's debt crisis, but it will also give every American the chance to be a part of the solution to fix our country's fiscal dilemma. My bill will allow Americans to invest in this incredible country and bring foreign- held U.S. debt back to American hands while at the same time reducing Federal Government spending. But before I talk about where my bill is going, I want to explain where I am coming from.

In World War II, war bonds were sold to help pay for our Nation's national defense and reduce the amount of debt incurred. People from all kinds of backgrounds saved toward purchasing war bonds, often with nickels, dimes, and quarters. On the job, people deducted the cost of war bonds from their meager paychecks. Families invested in war bonds and saved for the future. During World War II, President Roosevelt even asked the Boy Scouts of America to sell war bonds, and they did. Boy Scouts and Girl Scouts worked with their packs and troops to sell bonds to their neighbors and communities. In other words, all across the country, folks of all walks and types were working together for one collective goal--to do their part for the country's war effort. Men, women, and children were selling and purchasing these war bonds, all in the name of lending a hand to our fellow countrymen and to pay for the costs of war.

I was born during World War II. When I was born, my parents bought me a war bond. I still have that $20 bond today. Not cashing it was my first gift to my country, and it is also a keepsake to me.

In 1941, when savings bonds were retitled as ``war bonds'' in the terrible and devastating aftermath of Pearl Harbor, the United States rallied as a collective nation in support of the war and war bond effort. At the time, though, the average American only earned about $2,000 a year. Despite these hardships and tough times, 134 million Americans were called on to be part of the war bond effort, and more than half of the U.S. population--85 million people--responded to the patriotic call to participate.

The Scouts raised money and personally donated their own funds 10 cents at a time in the form of stamps that could be pasted into a war bond booklet. When war bond books were complete, they could be taken to the local bank, and sometimes even the local post office, to purchase bonds. One innovative group even created a promotional cardboard with slots for 75 quarters that had to be filled before it could be redeemed for a bond.

Showing his leadership and dedication to the effort, President Franklin Delano Roosevelt purchased the very first war bond issued. In part of President Roosevelt's April 30, 1941, radio address to the American people, he said:

One thought is uppermost in my mind as I make grateful

acknowledgment of this dual honor. It is that in reserving

the first Defense Savings Bond and the first Defense Postal

Savings Stamps in the name of the President, the Secretary of

the Treasury and the Postmaster General have given emphasis

to the national character of this defense savings campaign.

This character of the campaign is national in the best sense

of the word, for it is going to reach down, we hope, to the

individual and the family in every community and on every

farm, in every State and every possession of the United

States.

The President goes on to say:

It is national and it is homey at the same time. For

example, I am buying not one stamp but ten stamps each to go

into a little book for each of my ten grandchildren. And the

first savings bond is being made out in the name of Mrs.

Roosevelt as beneficiary.

It is fitting that the President in his purchases should be

a sort of a symbol of the determination of all the people to

save and sacrifice in defense of democracy. In a larger

sense, this first defense bond and these first defense stamps

sold to the President constitute tangible evidence of a

partnership--a partnership between all of the people and

their Government--entered into to safeguard and perpetuate

all of those precious freedoms which Government guarantees.

In this time of national peril, what we all must realize is

that the United States Government is you and I and all other

families next door all the way across the country and back

again. It is one great partnership.

That ends the quote from President Roosevelt.

The President concluded his address by asking his fellow Americans to demonstrate their faith in America by investing in the new defense bonds and stamps.

I remember as a child bringing dimes to school so that I could purchase a stamp for my savings bond book--one stamp at a time, saving toward the price of a full savings bond. I remember vividly that the bond was a lofty $18.75. When I got my book filled, we could go down to the bank so that I could finally trade for my bond--that piece of paper showing that I had done my small part to help in the effort and make this country better. Kids of my generation learned the value of saving and helping their country through the savings bond program.

Today, I rise to speak about a different sort of fight, and yet, at the same time, this fight is one that is no less serious than the one I remember as a child. Today, our Nation is struggling to fight a growing spending problem and a debt crisis. Debt is our problem now.

It is time to get all of America involved, not with a promise of wealth but with a sense of investing in our country, of buying America back, pulling us back from the brink of bankruptcy to other countries. The national debt stands at $15 trillion, which breaks down to nearly $48,000 for every person in our entire country. These figures are a frightening reminder that we cannot continue to put off the tough choices and that we must restore the fiscal discipline to the Federal Government.

This is a tough fight that has to be tackled on all fronts. Today I am proposing a step in the right direction and calling upon Americans for support of this effort. I am proposing that we bring American debt back to American hands. I am introducing the Buy Back America Bonds, S. 1909. My bill would buy back American bonds to American citizens in affordable $25 increments so every American can afford to invest and do their part. The Treasury would then use the funds from these bonds to begin paying down the $4.4 trillion in foreign-held U.S. debt. Investing in Buy Back America Bonds would allow Americans to show their patriotism and faith in this great Nation.

Unlike the war bonds of my childhood, Buy Back America Bonds would create a new series of savings bonds which are indexed for inflation as well as earning a fixed interest rate. By tying Buy Back America Bonds to inflation, we ensure the buying power of consumers' investments remains the same while also earning them additional interest. These could be called Gold Standard Bonds.

Those are two ways the Buy Back America Bonds would earn and keep their value for investors in addition to their patriotic and symbolic investment. These are not going to be barn-burner investments, but they will help our Nation not only pay down our debt but pay down the amount of debt owed to foreign nations.

What makes this bill particularly special is that for every bond purchased, citizens are also helping the Federal Government to reduce spending. Every year after the first year the amount of Buy Back America Bonds sold would be tallied and that exact amount would then be cut from Federal spending the following year.

I stand before you to explain not only where I am coming from with my Buy Back America Bonds but also why our Nation needs a collective effort to rally around to make steps toward a more responsible Federal budget and getting our national debt under control. Investing in America and bringing foreign-held debt back to American hands is where I propose to start. I ask my colleagues and the American people to help me be an integral part of the debt crisis solution.

Not only am I a father, I am a grandfather, and I want to be the first to purchase Buy Back America Bonds for my four grandchildren. I want my grandchildren and yours to have every opportunity for a great quality of life, to know the meaning of faith and investment in a prosperous United States. I am doing everything I can to ensure that happens. That means proposing solutions to problems and working to get my colleagues on board.

So I rise and ask for the support of my colleagues for this great effort and support for S. 1909, my Buy Back America Bonds bill. What President Roosevelt said then is equally true now:

In this time of national peril we must realize the U.S.

Government is you and I, and all other families next door all

the way across the country and back again. It is one great

partnership.

Working together we can solve all of this. We need to solve all of this. We need to start solving it right now and this is one way to do it.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, today I am introducing the PCAOB Enforcement Transparency Act of 2011 along with Senator Grassley.

One of the largest securities frauds in history began unraveling in August 2001 when an Enron vice president expressed her concern that the company might ``implode under a series of accounting scandals.'' Enron disclosed a few months later that its historical financial statements were not accurate. A subsequent restatement revealed over that $500 million in losses had gone unreported. Several other large corporate frauds followed shortly thereafter. For instance, in June 2002, WorldCom admitted that it had misrepresented its profitability to investors.

The Senate Committee on Banking, Housing, and Urban Affairs conducted a series of hearings on the issues that were raised by the revelations of Enron and other public companies. The hearings produced a remarkable consensus on a number of underlying causes, including weak corporate governance, a lack of accountability, and inadequate oversight of accountants charged with auditing a public company's financial statements.

In order to address the gaps and structural weaknesses revealed by the investigation and hearings, Congress passed the Sarbanes-Oxley Act of 2002. The Senate passed this legislation on a 99 to 0 vote.

The Sarbanes-Oxley Act ensured that corporate officers were directly accountable for their financial reporting and for the quality of their financial statements. The new law also created a strong, independent board to oversee the conduct of the auditors of public companies, the Public Company Accounting Oversight Board, PCAOB or Board.

The board is responsible for overseeing auditors of public companies in order to protect investors and further the preparation of informative, accurate, and independent audit reports on the financial statements of public companies. The board operates under the oversight of the U.S. Securities and Exchange Commission, SEC.

The PCAOB is responsible for setting auditing standards for auditors of public companies, for examining the quality of audits performed by public company auditors, and where necessary, for imposing disciplinary sanctions on registered auditors and auditing firms. The PCAOB oversees more than 2,400 registered auditing firms, as well as the thousands of audit partners and staff who contribute to a firm's work on each audit.

The board's ability to commence proceedings to determine whether there have been violations of its auditing standards or rules of professional practice is an important component of its oversight. In order to determine whether to institute a proceeding, the board's enforcement staff conducts a nonpublic investigation and makes a recommendation to the five-member board.

However, unlike other oversight bodies, such as the SEC, the U.S. Department of Labor, the Federal Deposit Insurance Corporation, FDIC, the U.S. Commodity Futures Trading Commission, CFTC, the Financial Industry Regulatory Authority, FINRA, and others, the Board's disciplinary proceedings are not allowed to be public.

Unfortunately, over the last several years, bad actors have been taking advantage of this lack of transparency. In April 2011, the Subcommittee on Securities, Insurance, and Investment, which I chair, considered the issue of enhancing the PCAOB's effectiveness by permitting the Board to disclose information about its enforcement proceedings. PCAOB Chairman James Doty noted that the ``secrecy has a variety of unfortunate consequences'' and

this ``state of affairs is not good for investors, for the auditing profession, or for the public at large.''

In one example, an accounting firm that was subject to a disciplinary proceeding continued to issue no fewer than 29 additional audit reports on public companies without any of those companies knowing about the PCAOB proceedings. Those public companies and their investors were completely in the dark about the board's decision to both institute disciplinary proceedings and about the progress of those proceedings. The auditor knew about the proceedings, but the investors and public companies were denied information that was arguably very relevant to the audit relationship.

There are additional reasons that the proceedings should be open and transparent. First, the closed proceedings run counter to the public proceedings of other oversight bodies, as I have already noted. Indeed, nearly all administrative proceedings brought by the SEC against public companies, brokers, dealers, investment advisers, and others are open, public proceedings.

The PCAOB's secret proceedings are not only shielded from the public, but from Congress as well. The public and Congress have a role in ensuring that not just auditors are held to account, but also that the PCAOB is held to account as well for its oversight of the auditors and audit firms.

Second, the incentive to litigate cases in order to continue to shield conduct from the public as long as possible frustrates the process and requires the expenditure of needless resources by both litigants and the PCAOB. In April, Chairman Doty, who testified before the Subcommittee on Securities, Insurance, and Investment, noted that ``the fact that PCAOB disciplinary proceedings are required to be secret creates a considerable incentive to litigate.''

Third, a recent academic study noted that the public nature of SEC's proceedings against companies result in good results. ``Observing a public SEC enforcement action in its industry against a target firm is likely to increase a peer firm's knowledge about SEC activity and cause it to revise upward its subjective probability of attracting such an action against itself.'' In effect, the study noted that this may serve as a deterrent to misconduct because of a perceived increase in ``getting caught.'' Accordingly, the audit industry would also benefit from timely, public, and non-secret enforcement proceedings.

Our bill will make hearings by the PCAOB, and all related notices, orders, and motions, open and available to the public unless otherwise ordered by the board. The board procedure would then be similar to the SEC's Rules of Practice for similar matters, where hearings and related notices, orders, and motions are open and available to the public.

We need to ensure public proceedings to better protect and serve companies and investors. I hope our colleagues will join Senator Grassley and me in taking the legislative steps necessary to enhance transparency in the PCAOB's enforcement process.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, today I am introducing the PCAOB Enforcement Transparency Act of 2011 along with Senator Grassley.

One of the largest securities frauds in history began unraveling in August 2001 when an Enron vice president expressed her concern that the company might ``implode under a series of accounting scandals.'' Enron disclosed a few months later that its historical financial statements were not accurate. A subsequent restatement revealed over that $500 million in losses had gone unreported. Several other large corporate frauds followed shortly thereafter. For instance, in June 2002, WorldCom admitted that it had misrepresented its profitability to investors.

The Senate Committee on Banking, Housing, and Urban Affairs conducted a series of hearings on the issues that were raised by the revelations of Enron and other public companies. The hearings produced a remarkable consensus on a number of underlying causes, including weak corporate governance, a lack of accountability, and inadequate oversight of accountants charged with auditing a public company's financial statements.

In order to address the gaps and structural weaknesses revealed by the investigation and hearings, Congress passed the Sarbanes-Oxley Act of 2002. The Senate passed this legislation on a 99 to 0 vote.

The Sarbanes-Oxley Act ensured that corporate officers were directly accountable for their financial reporting and for the quality of their financial statements. The new law also created a strong, independent board to oversee the conduct of the auditors of public companies, the Public Company Accounting Oversight Board, PCAOB or Board.

The board is responsible for overseeing auditors of public companies in order to protect investors and further the preparation of informative, accurate, and independent audit reports on the financial statements of public companies. The board operates under the oversight of the U.S. Securities and Exchange Commission, SEC.

The PCAOB is responsible for setting auditing standards for auditors of public companies, for examining the quality of audits performed by public company auditors, and where necessary, for imposing disciplinary sanctions on registered auditors and auditing firms. The PCAOB oversees more than 2,400 registered auditing firms, as well as the thousands of audit partners and staff who contribute to a firm's work on each audit.

The board's ability to commence proceedings to determine whether there have been violations of its auditing standards or rules of professional practice is an important component of its oversight. In order to determine whether to institute a proceeding, the board's enforcement staff conducts a nonpublic investigation and makes a recommendation to the five-member board.

However, unlike other oversight bodies, such as the SEC, the U.S. Department of Labor, the Federal Deposit Insurance Corporation, FDIC, the U.S. Commodity Futures Trading Commission, CFTC, the Financial Industry Regulatory Authority, FINRA, and others, the Board's disciplinary proceedings are not allowed to be public.

Unfortunately, over the last several years, bad actors have been taking advantage of this lack of transparency. In April 2011, the Subcommittee on Securities, Insurance, and Investment, which I chair, considered the issue of enhancing the PCAOB's effectiveness by permitting the Board to disclose information about its enforcement proceedings. PCAOB Chairman James Doty noted that the ``secrecy has a variety of unfortunate consequences'' and

this ``state of affairs is not good for investors, for the auditing profession, or for the public at large.''

In one example, an accounting firm that was subject to a disciplinary proceeding continued to issue no fewer than 29 additional audit reports on public companies without any of those companies knowing about the PCAOB proceedings. Those public companies and their investors were completely in the dark about the board's decision to both institute disciplinary proceedings and about the progress of those proceedings. The auditor knew about the proceedings, but the investors and public companies were denied information that was arguably very relevant to the audit relationship.

There are additional reasons that the proceedings should be open and transparent. First, the closed proceedings run counter to the public proceedings of other oversight bodies, as I have already noted. Indeed, nearly all administrative proceedings brought by the SEC against public companies, brokers, dealers, investment advisers, and others are open, public proceedings.

The PCAOB's secret proceedings are not only shielded from the public, but from Congress as well. The public and Congress have a role in ensuring that not just auditors are held to account, but also that the PCAOB is held to account as well for its oversight of the auditors and audit firms.

Second, the incentive to litigate cases in order to continue to shield conduct from the public as long as possible frustrates the process and requires the expenditure of needless resources by both litigants and the PCAOB. In April, Chairman Doty, who testified before the Subcommittee on Securities, Insurance, and Investment, noted that ``the fact that PCAOB disciplinary proceedings are required to be secret creates a considerable incentive to litigate.''

Third, a recent academic study noted that the public nature of SEC's proceedings against companies result in good results. ``Observing a public SEC enforcement action in its industry against a target firm is likely to increase a peer firm's knowledge about SEC activity and cause it to revise upward its subjective probability of attracting such an action against itself.'' In effect, the study noted that this may serve as a deterrent to misconduct because of a perceived increase in ``getting caught.'' Accordingly, the audit industry would also benefit from timely, public, and non-secret enforcement proceedings.

Our bill will make hearings by the PCAOB, and all related notices, orders, and motions, open and available to the public unless otherwise ordered by the board. The board procedure would then be similar to the SEC's Rules of Practice for similar matters, where hearings and related notices, orders, and motions are open and available to the public.

We need to ensure public proceedings to better protect and serve companies and investors. I hope our colleagues will join Senator Grassley and me in taking the legislative steps necessary to enhance transparency in the PCAOB's enforcement process.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I rise to speak about bipartisan legislation I am introducing today, the Cut Energy Bills at Home Act, which would provide a 30 percent tax credit for Americans to cut their energy bills, and catalyze our construction industry, reduce pollution, and seize the opportunity in residential energy efficiency to secure America's energy future. With heating oil prices at $3.94 nationally for home heating oil, a record for this time of year, this legislation is a timely method to address what may be the most expensive heating season in history.

I am pleased to have developed this bill with Senators Bingaman and Feinstein, two longtime leaders on energy efficiency, and look forward to discussing this bill with my colleagues on the Senate Finance Committee. The Cut Energy Bills at Home Act recognizes the sea-change that has occurred in the energy efficiency industry and tries to ensure that middle-class Americans can harness these technological strides in their own lives.

Specifically, not only have windows, insulation, and boilers become more advanced to reduce energy consumption, but our contractors who perform this work have developed sophisticated practices to holistically improve a home's energy consumption.

In the past, homeowners would simply place insulation in the attic to contain heat, now companies are using infared thermography to identify temperature differences in a house, a blower door test to measure airflow leaks, to replace windows, doors, and insulation that will maximize the cost-effectiveness of home energy efficiency improvements.

Today, we are on the cusp of a milestone turn in the energy efficiency industry--one with benefits for homeowners unimaginable even just five years ago. To spur early adoption of these advances and to ensure that cost is not prohibitive, our bill provides a 30 percent tax credit up to $5,000 to assist homeowners who make an investment that will reduce energy costs for not only this winter, but for future years to come.

For example, under this bill if a homeowner invests in energy efficiency that will reduce heating oil consumption from 1,000 gallons of home heating oil to 800 gallons, a 20 percent improvement, the individual may claim 30 percent of the cost of the improvements as a tax credit up to $2,000.

In 2009, New England consumed 3.4 billion gallons of home heating oil, which is approximately $13 billion that households spent simply to keep warm. A 20 percent reduction in this figure would yield a savings of $2.6 billion for households in New England. Energy efficiency can provide a critical tool to reduce this amount and allow households to invest in food, medicine, and the American economy. I urge my colleagues to support me in passing this legislation into law.

Mr. President, I rise today to introduce the Volunteer Emergency Services Recruitment and Retention Act of 2011. This bill fixes a long-standing problem with the tax code that harms the ability of volunteer fire departments to recruit and retain both firefighter and emergency service personnel.

For years, local and state governments have provided their volunteer firefighters and EMS personnel with different forms of benefits including Length of Service Award Plans, commonly known as LOSAPs. These are pension-like benefits for volunteer emergency responders.

Unfortunately, the way the tax code handles LOSAPs hinders departments' abilities to administer the plans and makes it more difficult for volunteer emergency personnel to receive the benefits.

My bill would simplify the taxation of LOSAPs in two steps. First, it would allow LOSAPs to be elected as deferred compensation plans, and second, it would exempt them from the Employee Retirement Income Security Act of 1974. This bill makes these necessary changes, which will improve access to LOSAP benefits for volunteer emergency responders, without increasing federal spending.

Today, an estimated 180,000 volunteer firefighters across 27 states participate in some form of LOSAP. Many states that do not offer these benefits would be more likely to do so if the federal tax code were simplified. This, in turn, would help volunteer fire departments to more easily recruit and retain personnel. These men and women our local first responders--are the foundation of our emergency response capabilities.

These volunteers put their lives on the line to help protect our communities, and their spirit of selflessness and service should be rewarded. I am proud to introduce this legislation with Senators Schumer and Blumenthal, and I look forward to working with my colleagues to pass this bill through the Senate and into law.

Mr. President, I would ask for unanimous consent that a letter of support be printed in the Record.