Floor Statements

Mr. President, I would like to express my support for the amendment that has been introduced

by our distinguished Democratic leader. This amendment reflects the disaster assistance packages that the Senate passed three times last year, but in each of these cases the House of Representatives failed to go along with these measures. Most convincingly, this amendment last passed the Senate by a vote of 79-16. I cosponsored that amendment as well because it provided much needed assistance to our Nation's farmers who have suffered significant crop losses during the past 2 crop years. Farmers throughout the Nation have suffered great losses, and farmers in my home State of Michigan have been among those who have suffered most.

Two years of statewide crop failure have threatened the viability of many of Michigan's farmers, and this amendment strives to address the losses suffered by growers in the 2001 and 2002 growing years. Over the past 2 years, some farmers faced early warm temperatures followed by freezing conditions. For others, torrential rains came early in the growing season and were followed by long droughts. Still other farmers faced drought conditions at the start of the crop year and heavy rains at harvest time.

Last year, USDA Secretary Ann Veneman recognized the atypical weather conditions that greatly diminished crop production in Michigan by designating all of Michigan's 83 counties as disaster areas. If that was not bad enough, Secretary Veneman designated 82 of Michigan's 83 counties as official disaster areas in 2001.

Michigan is one of the Nation's most diverse States in terms of the sheer breadth and number of crops grown in it, and growers of many crops have been affected by adverse weather conditions. Total losses for Michigan farmers for both 2001 and 2002 are roughly estimated at $314 million. For 2 years, I have met with many farmers who want to know if they will receive assistance. Assistance is what farmers in Michigan and throughout the Nation need.

Last year, cherry farmers in Michigan lost upwards of 95 percent of their crops, a level that threatens to devastate Michigan and the Nation's cherry industry, given that Michigan produces over 70 percent of the tart cherries in the Nation. Last summer, I had the opportunity to visit with cherry growers in Michigan and listen to them as they told me how this year's crop losses were the worst that the industry had ever suffered since crop records have been kept. Additionally, 80 percent of all Michigan apple farmers have lost upwards of 40 percent of their crop this year.

In 2001, farmers in just one area of Michigan, which is one of the leading dry bean producing regions in the Nation, lost 85 percent of their bean crop. Due to severe drought, bean growers who export every other row they grow, lost 85 percent of their crops.

Across the state, in the southwest corner of Michigan, Labrusca grape growers lost 80 percent of their crop and they suffered similar losses this year. While the losses suffered by bean and grape growers are particularly severe, they are not the only crops to have suffered drastic losses.

Approximately 25 percent of apple growers in Michigan and across the Nation are in danger of going out of business in the next 2 years, and in Michigan that means that our cherry, peach, and asparagus crops, which are often grown on the same orchards as apples, will be greatly decreased. Orchard communities around the country have been devastated. Orchard operators still have very high operating expenses even if they do not harvest a crop. Orchards must be tended to all year long. Activities such as pruning and spraying are expensive to conduct, but they must be done even when there is no crop.

As farmers have left the business, small businesses and cooperatives that have been around for generations have also gone out of business, and local governments have lost significant tax revenue. This assistance will allow many growers to reduce debt and get private bank or USDA loans for the next growing season. This assistance for will give farmers the shot in the arm they need to recover from several years of low prices. This aid is the economic stimulus package for rural America.

Our Nation's farmers have not shared in the prosperity which many Americans have experienced over the past decade. No one, least of all America's farmers, likes the fact that annual emergency agriculture supplementals have seemingly become routine.

Yet, we must provide this assistance if we are to address the problems facing farmers throughout the Nation. Several growers have told me that the crop losses they suffered this past year were so severe that without emergency assistance they will most likely lose their farms. This assistance is not the answer to the problems facing our farmers and rural America, but it is an important part of an effort to keep families on their farms. I thank the Senator for South Dakota for his efforts in offering this amendment.

Mr. President, January 31 of this year will be the last day that MG Gordon E. Stump serves as the head of the Michigan National Guard. This will bring to a close the tenure of the longest serving adjutant general in the Nation. For 12 years, GEN Stump has embodied the pride, professionalism and dedication that is the hallmark of the citizen soldiers of the National Guard.

Increasingly, our Nation's military relies on the men and women of the National Guard and Reserve to serve seamlessly alongside of our active duty military. The ability of these citizen soldiers to pick up, leave their families and serve where they are needed is a tribute to them and to the ability of

their leadership to prepare them for service. It is because of the dynamic leadership and vision of men and women like GEN Stump that our National Guard is able to operate with such professionalism.

Since I have had the pleasure of first working with GEN Stump, I have witnessed a man who had a clear vision for the future of the Michigan National Guard. To that end, he has tirelessly worked to improve the tools available to the soldiers under his command. He has worked to improve their hardware, facilities and training opportunities, and he has achieved success in each of these efforts. Today, the Michigan Army Guard possesses the UH-60 Black Hawk instead of the Vietnam era Huey Cobra helicopter. Additionally, airlift capacity has been enhanced with the addition of C-130 aircraft, F-16s have been upgraded with the addition of Litening targeting pods, and the Multiple Launch Rocket System is now available for use by the soldiers of the Michigan National Guard.

In just over a decade, GEN Stump has upgraded Michigan's Guard facilities by securing $179 million in military construction funds that have been used for 32 projects throughout Michigan. Among these facilities is Selfridge Air National Guard Base, ANGB, a unique base because it is the only Air National Guard facility in the United States with all the branches of the service represented on the base. This is also the base where GEN Stump maintained his aeronautical skills and became qualified as an F-16 pilot.

Under GEN Stump's leadership, Michigan became one of 23 States to participate in the Department of Defense's State Partnership program that paired States with nations that were once part of the former Soviet Union. These partnerships sought to teach the militaries of these nations about the standards required by members of the North Atlantic Treaty Organization, NATO.

GEN Stump worked to develop the Michigan Youth Challenge program, a program that works with at-risk youth enabling them to earn their general equivalency diploma while enabling them to develop the skills needed to succeed in life. Additionally, GEN Stump was able to work with the State of Michigan to initiate a program with 18 colleges and universities in the State that coupled with the Montgomery GI Bill, virtually guarantees a free education for Michigan guard members. These programs have resulted in a manning increase from 84 percent to over 99 percent for the Michigan National Guard.

All of these efforts have paid important dividends for Michigan and the Nation. The Michigan National Guard has participated in over 10 Department of Defense missions including Operations Desert Shield, Desert Storm, Joint Endeavor, Noble Eagle, and Enduring Freedom. Forces have also been provided to the 1996 Summer Olympics, humanitarian missions throughout the world, and disaster relief efforts in Michigan. In the days and months following September 11, residents of Michigan saw the Michigan National Guard come to the aid of their fellow citizens. Guard members protected key sites, assisted at airports and aided Customs officials with their duties along the northern border between the United States and Canada. Their hard work helped our Nation remain secure and maintain the free flow of commerce between both nations.

GEN Stump's leadership has been recognized by his peers. He has been appointed to serve on the Reserve Forces Policy Board, the Adjutant Generals Association, and for the past 2 years as the president of the National Guard Association of the United States. GEN Stump has left an indelible impression upon the Michigan National Guard. I look forward to working with his successor, GEN Thomas Cutler, and I know that the new Adjutant General of Michigan will agree with me that his job has been made easier because of the hard work and dedication of GEN Stump. I commend GEN Gordon E. Stump for his long and distinguished career of service to the United States Air Force, the Michigan National Guard, and his Nation, and I know my Senate colleagues will join me in wishing him well in the years to come.

Mr. President, I ask unanimous consent that the Canadian Waste bill be printed in the Record.

Mr. President, I ask unanimous consent that the Canadian Waste bill be printed in the Record.

Madam President, all across America preparations are being made to commemorate the life and legacy of Dr. Martin Luther King, Jr. On Monday, January 20, we will memorialize a man who sought to protect the dignity of a people and awaken the conscience of a Nation.

Dr. King's death is 35 years behind us now. To some extent, deeply felt passions and the frustration, anguish, and bitterness with which the Nation was consumed during the tragic year of 1968 have cooled. But what remains with us and what is indelibly woven into the fabric and history of our Nation is the vision which Dr. King lived for and the dream for which he died. Dr. King embraced all Americans in his quest to make a living reality of equality of opportunity and economic and social justice for all humankind, those fundamental principles in our Constitution.

This great warrior, whose battlefield was the hearts and minds of those who did not feel that justice and dignity were meant for all people, whose shield and armor was a strong determination and an unassailable character and whose ammunition was moral conviction and self-sacrifice, continues to deserve the fullest honor of this Nation.

Dr. King gave a number of famous speeches during his time, most notably in Montgomery, Birmingham, Selma, Chicago, Detroit, and several other cities. He came to Detroit on June 23, 1963, the day after his first meeting with President Kennedy. Introduced as ``America's beloved freedom fighter,'' he called the ``Freedom Walk'' that day in Detroit ``the largest and greatest demonstration for freedom ever held in the United States.'' Dr. King went on to say, `` . . . I can assure you that what has been done here today will serve as a source of inspiration for freedom-loving people of this nation.''

Dr. King spoke about Birmingham and the vision that had been broadcast to the entire world just two months earlier, when dogs and fire hoses were turned against peaceful marchers. He said, and I quote, ``Birmingham tells us something in glaring terms--it says that the Negro is no longer willing to accept racial segregation in any of its dimensions.'' It is said that the Freedom Walk in Detroit was in many respects a rehearsal for the upcoming March on Washington and Dr. King's I Have a Dream speech, two months

later on August 28, in our Nation's Capital.

Dr. King gave the people of this Nation an ethical and moral way to engage in activities designed to perfect social change without bloodshed and violence; and when violence did erupt it was that which is potential in any protest which aims to uproot deeply entrenched wrongs. Dr. King preached, ``Do not be overcome by evil, but overcome evil with good.''

He believed in a united America. He believed that the walls of separation brought on by legal and de facto segregation and discrimination based on race and color, could be eradicated. His quest was to make a living reality our fundamental principles, that ``all men are created equal,'' and with a right to ``life, liberty, and the pursuit of happiness.''

Few have dedicated their life so tirelessly in the struggle for equality as Dr. King. From the bus boycott in Montgomery to the sanitation workers in Memphis, his unyielding commitment to improve the lot of all Americans was demonstrated--he achieved significant goals by peaceful and nonviolent actions. To Dr. King, those means were beneficial to those in the struggle as the ends they were seeking.

With reference to the 11-month long successful Montgomery bus boycott, he said:

Nonviolence had tremendous psychological importance to the

Negro . . . This method was grasped by the Negro masses

because it embodied the dignity of struggle, of moral

conviction and self-sacrifice. The Negro was able to face his

adversary, to concede to him a physical advantage and to

defeat him because the superior force of the oppressor had

become powerless . . . I am convinced that the courage and

discipline with which Negro thousands had accepted non-

violence healed the internal wounds of Negro millions who did

not themselves march in the street or sit in the jails of the

South. One need not participate directly in order to be

involved . . . to have pride in those who were the principals

. . . to restore to them some of the pride and honor which

had been stripped from them over the centuries. We have come

a long way toward achieving justice and equality for all.

When the Supreme Court order to end segregation on buses was delivered to Montgomery, Dr. King proudly told an overflow crowd at a local church:

We came to see that, in the long run, it is more honorable

to walk in dignity than ride in humiliation. So in a quiet

dignified manner, we decided to substitute tired feet for

tired souls, and walk the streets of Montgomery until the

sagging walls of injustice have been crushed.

We have come a good distance in fulfilling Dr. King's dream, but there is still a ways to go. Let us rededicate ourselves today, in his name, to continuing the struggle for human rights for all, for which he lived and died.

Mr. President, I want to add my praise for the job done by Senators Bond and Mikulski and associate myself with the comments just made by Senator Gregg. I am also familiar with the mobility device which Senator Gregg mentioned. I also believe that some of the veterans with service connected spinal cord injuries could benefit from, and should be assisted by, making these devices available to them. Therefore, it is also my expectation that the Department will aggressively pursue, within available funds and current policy, making this mobility device and other state of the art assistive technologies available to disabled veterans as medically appropriate.

Mr. President, this week the Brady Campaign to Prevent Gun Violence, in partnership with the Million Mom March and State gun safety groups, released its 6th Annual Report Card on State Gun Laws Protecting Children. According to the report, the Centers for Disease Control and Prevention data showed a welcome decrease in the number of children killed by guns. However, children continue to be at great risk from gun violence.

The Brady Campaign State Report Cards evaluate each State on several criteria: Does the State have juvenile possession laws or juvenile sale and transfer laws? Does the State have child access prevention laws? Does the State have gun safety lock and safer design standards? Does the State allow cities to regulate guns? Does the State provide secondary private sales background checks? Does the State have carrying concealed weapons laws? In addition to these criteria, States can also receive extra credit and/or demerits for a variety of gun safety measures such as permits for handguns.

This year, according to the Brady Campaign, 11 States were awarded Sensible Safety Stars. These States resisted efforts to weaken gun safety laws and/or enacted gun safety laws that protect children from guns. I am disappointed to report that my home State of Michigan was not among them.

According to the Bureau of Alcohol, Tobacco, and Firearms and the Brady Campaign, seven states, all of whom received poor grades, were major sources of crime guns. Further, the ATF found that gun traffickers seek out States that allow criminals to purchase firearms without background checks at gun shows.

The Congress has the ability to pass legislation that will further reduce

child firearm deaths and automatically improve the grade of many States. I urge my colleagues to take up and pass commonsense gun safety legislation that will close the gun show loophole and improve child gun access prevention laws so that we might prevent kids from gaining access to guns, and improve the quality and safety of our communities.

Mr. President, I want to bring to the attention of my colleagues the recent accomplishments achieved by Grand Valley State University's, GVSU, football team who on December 14, 2002, became the 2002 National Collegiate Athletic Association, NCAA, Division II Football Champions. This championship was the first in Grand Valley's history, and completes a perfect season in which the GVSU Lakers went 14-0 maintaining their position atop the Division II football rankings for the entire season. Even more impressive is the fact that the Lakers are 33-1 in their last 34 games with their only loss coming in the 2001 title game.

Preceding their National Championship, the GVSU Lakers won the Great Lakes Intercollegiate Athletic Conference, GLIAC, Football Championship with a perfect record in league play. The Laker's depth was evidenced by their placing 18 players on the All-GLIAC team. Quarterback Curt Anes was named the GLIAC Player of the Year for the second straight season, and received the Harlon Hill Trophy as NCAA Division II's most outstanding player. In addition, head coach Brian Kelly was recently named the American Football Coaches Association Division II Coach of the Year. Coach Kelly has led the GVSU Lakers to a 104-34-2 record during his 12 years as head coach, and includes five GLIAC titles and five NCAA Division II playoff appearances.

The championship game, which I was lucky enough to see on television, was a true nail-biter. The game matched the top ranked Grand Valley State Lakers against the second ranked Valdosta State University Blazers. After marching through the playoffs with relative ease, the Lakers found a formidable opponent in Valdosta State, and the game was appropriately close to the very end. GVSU sealed the game when All- American quarterback Curt Anes tossed a 10-yard pass to fellow All- American wide receiver and his primary target David Kircus with 1 minute and 4 seconds remaining securing a 31-24 victory.

Over the last 2 years, the GVSU Lakers have demonstrated great strength, skill, unity, and perseverance. Their ability to regroup after last season's loss and maintain their top ranking all season bears witness to the focus and common purpose shared by the entire team. I commend them for their hard work and dedication. I know that my colleagues will join me in congratulating the GVSU Lakers on winning the 2002 NCAA Division II Football Championship.

I ask unanimous consent that a list of the players and coaches be printed in the Record.

There being no objection the material was ordered to be printed in

Mr. President, I am introducing today on behalf of myself and Sen. McCain two separate bills relating to stock options. Stock options are unfinished business from the last Congress. They are the 800-pound gorilla that has yet to be caged by corporate reform.

Stock options allow a company's employees, usually its top executives, to purchase company stock at a set price for a specified period of time, perhaps 10 years. If the stock price rises after the option is issued, the executive can exercise the option, buy the stock at the set price, and then sell it on the open market at a profit. Today, most CEOs of U.S. publicly traded companies receive a large percentage of their pay from stock options.

Despite their widespread use, stock options remain a stealth form of compensation because, under current accounting rules, they never have to appear on the company books as a compensation expense. In fact, they are the only form of compensation that companies do not have to book as an expense at any time. In addition, stock options are the only form of compensation that a company can claim as a deductible business expense on its tax return, even when no expense is ever recorded on the company books.

These stock option accounting and tax rules are inconsistent and illogical. The two bills we are introducing today, the Stock Option Accounting Review Act, and the Ending the Double Standard for Stock Options Act, were introduced in the last Congress to address this problem. Each bill tackles a different aspect of the stock option issue. One addresses stock option accounting; the other addresses the stock option tax deduction.

Last year, Senator McCain and I proposed the accounting provision as an amendment to the Sarbanes-Oxley corporate reform bill that was before the Senate in July. There appeared to be sufficient support to pass it at the time, but we were unable to obtain a vote on it or on any other stock option legislation. That is why we are back this Congress.

Congress failed to resolve the issue last year, even though stock option abuses were repeatedly linked to serious corporate abuses and dishonest accounting. In fact, virtually every corporate disaster that has struck in recent years has had a stock option component.

Enron, of course, was the poster child. Congressional investigations, including by the Permanent Subcommittee on Investigations on which I sit, showed that, at the same time Enron investors and employees were losing their shirts, Enron executives were cashing in their stock options for tens or hundreds of millions of dollars. Ken Lay, the Chairman of the Board, took home $123 million from stock options in 2000 alone. Jeff Skilling, the CEO, took home over $60 million. Another executive, Lou Pai, topped them all by cashing in Enron stock options, in 2000, for $265 million.

Stock options also contributed to Enron's inflated earnings, since despite providing the lion's share of executive pay, this compensation never appeared on the company books as an expense nor was it ever deducted from earnings. And many have blamed stock options for encouraging Enron management to rig the company's financial statements through other accounting deceptions to help boost apparent income and, in turn, the company stock price, so they could sell their Enron stock at enormous profit.

Still others have noted that Enron used about $600 million in stock option tax deductions to avoid paying any corporate income taxes in four out of the last five years before its bankruptcy while, at the same time, touting record amounts of corporate income. What is now only beginning to be understood is that Enron's stock option tax deductions played a central role in much of its wrongdoing, after all, Enron was able to inflate its corporate income with impunity, in part, because its stock option tax deductions allowed it to avoid paying taxes on any of its phony inflated income.

Enron was the poster child for stock option abuses, but it was far from the only company in that category last year. Worldcom, Tyco, Qwest Communications, and many others have stock option stories that are equally disturbing.

And the problems did not stop with companies engaged in accounting deceptions or other corporate misconduct. Even companies that never appeared on the 2002 rollcall of corporate deception have been excoriated in media reports for giving huge stock option pay to executives while socking employees and investors with lower stock prices, mounting losses, and lousy corporate performance.

High tech companies that have been the biggest promoters of stock options have been some of the biggest culprits. Company after company in Silicon Valley paid their executives big bucks via stock options while laying off employees, losing money or market share, and stiffing investors. One example frequently cited in the media is Lawrence Ellison, CEO of Oracle Corp., who exercised options in 2001 to obtain profits of $706 million, while his company's stock price dropped by more than 50 percent.

Aggregate stock option statistics are also sobering. Business Week, for example, has estimated that stock options now account for ``a staggering 15 percent of all shares outstanding.'' Federal Reserve Chairman Alan Greenspan estimated that stock options have been used to overstate reported company earnings by an average of 6 to 9 percent. Perhaps that is why Chairman Greenspan has picked honest stock option accounting as his number one post-Enron reform.

Stock option abuses have been linked to inflated company earnings, dishonest accounting, and executive misconduct. These abuses have been facilitated by existing accounting and tax rules which allow stock option compensation to never appear on a company's books as an expense, even when a company claims this compensation as a business expense on its tax return. This double standard is fueling Enron-style abuses, and it is time for it to end.

Many in the U.S. business community apparently agree and, unlike the Congress, have taken direct action on the stock option issue. In fact, over the last year, there has been significant movement in the business world to end dishonest stock option accounting.

Over 120 companies, including such American giants as Coca-Cola, General Motors, General Electric, Dow Chemical, Wal-Mart, and Home Depot have announced that they will begin expensing options in 2003, joining longtime expensers like Boeing and Winn-Dixie. Standard and Poors has created additional pressure for honest stock option accounting by announcing a new ``core earnings'' calculation for companies which requires stock option compensation to be subtracted from a company's earnings.

Accounting experts are also moving. The International Accounting Standards Board in London has announced that, by the end of 2003, it will issue accounting standards requiring companies to expense stock options. The U.S. equivalent, the Financial Accounting Standards Board, or FASB, has announced that it will decide by the end of the first quarter of this year whether it will issue stock option accounting standards similar to those of the International Board.

While there has been a major shift in the U.S. business world toward honest stock option accounting, not all companies are on board. Some companies, especially those in the high tech sector, have announced that they will not expense stock options until forced to do so. That means, until FASB acts, there will be a discrepancy between those companies that are voluntarily expensing options and those that are not, when there ought to be a level playing field where everyone plays by the same accounting rules. It is this discrepancy that continues to make our stock option legislation relevant and necessary for Congressional action this year.

Let me describe both bills.

First is the Stock Option Accounting Review Act. This bill is very simple. It would direct FASB to conduct a fresh review of the current accounting treatment for stock options and, within one year, establish what it deems to be the appropriate stock option accounting standards.

The bill does not specify the stock option accounting standards that FASB should issue; that matter is left to the experts where it belongs. But

the bill does put the Senate on record as urging FASB to review the existing rules and take appropriate action within one year. This legislative directive is important, because the only other time the Senate has spoken on this issue, in 1994, the Senate majority urged FASB to keep allowing companies to exclude stock option expenses from their financial statements. The Senate's position contradicted FASB's position at the time which was to require stock option expensing. It is long past time for the Senate to rescind its mistaken advice.

The second bill we are introducing today is the Ending the Double Standard for Stock Options Act. This bill would not address the accounting treatment of stock options. Instead, it would address the tax treatment of stock option compensation, ending the costly double standard in federal law which allows a company to take a tax deduction for stock option compensation, even if the company does not show that compensation as a business expense on its financial statements.

Essentially, our bill would prevent a company from claiming a stock option expense on its tax return unless the company also includes that expense on its books. It would require companies to be consistent in how they treat stock options, and take a corporate tax deduction that mirrors the expense shown on the company books. If a company took the position that it incurred no expense from stock option compensation on its books, the bill would allow the company to take that position, but would also require it to take the same approach on its tax return and forego any deduction. The bill would stop companies from telling stockholders one thing, that it has no stock option expenses, while telling the opposite to Uncle Sam.

And to add insult to injury, in 2001, the IRS issued Revenue Ruling 2001-1 which determined that companies whose tax liability was erased through stock option expenses were not subject to the corporate alternative minimum tax. That revenue ruling meant that our most successful publicly traded companies, if they doled out enough stock options to insiders, could arrange their affairs to escape paying any taxes. That absurd result leaves the average taxpayer feeling like a chump for paying his fair share when a company like Enron can use its success in the stock market to apparently end up tax free.

One last point. Some opponents of stock option reform argue that reining in stock options would hurt the average worker, but this contention is nothing more than a red herring. While many average workers are eligible for stock options, few actually receive them. Stock options are overwhelmingly reserved for top corporate executives.

A recent Bureau of Labor Statistics survey did the research. This nationwide government survey found that in 2000, a banner year for stock options, only 1.7 percent of non-executive workers actually got any stock options. The BLS survey also looked at corporate executives and found that only about 5 percent of these corporate executives received any stock options. These results are consistent with the findings of a private sector group not associated with the government called the National Center for Employee Ownership, which favors stock options. Looking at a small sample of companies, the Center reported that 70 percent of all stock options were given to managers rather than other employees, and about 50 percent were given to the most senior executives. The reality is that stock options are a perk mainly reserved for a very small group, and neither average workers nor most executives would be affected by honest accounting or consistent tax and accounting treatment for stock options.

It is also important to understand that neither of our bills would bar any company from issuing stock options. Companies would still be able to issue stock options to their executives and other employees. The goal of this legislation is not to stop the use of stock options, but to promote honest accounting and consistent treatment of stock options on federal corporate tax returns.

Stock option abuses have damaged investor confidence in American business. I hope our colleagues will support enactment of these bills to help restore investor confidence and end stock option abuses. I ask unanimous consent to have reprinted in the Record after my remarks the text of both bills.

Mr. President, I am introducing today legislation to provide the Securities and Exchange Commission with stronger administrative authority to detect, investigate, and punish corporate and individual misconduct. This legislation, the SEC Civil Enforcement Act, among other measures, would provide the SEC with new authority to impose administrative civil fines on those who violate federal securities laws. The bill is cosponsored by Senators Bill Nelson, Corzine, and Biden.

The SEC has repeatedly requested the new enforcement tools that this bill would provide, and I ask unanimous consent to print in the Record after my remarks a copy of a letter from SEC Chairman Harvey Pitt supporting enactment of this legislation.

Mr. President, I am introducing today on behalf of myself and Sen. McCain two separate bills relating to stock options. Stock options are unfinished business from the last Congress. They are the 800-pound gorilla that has yet to be caged by corporate reform.

Stock options allow a company's employees, usually its top executives, to purchase company stock at a set price for a specified period of time, perhaps 10 years. If the stock price rises after the option is issued, the executive can exercise the option, buy the stock at the set price, and then sell it on the open market at a profit. Today, most CEOs of U.S. publicly traded companies receive a large percentage of their pay from stock options.

Despite their widespread use, stock options remain a stealth form of compensation because, under current accounting rules, they never have to appear on the company books as a compensation expense. In fact, they are the only form of compensation that companies do not have to book as an expense at any time. In addition, stock options are the only form of compensation that a company can claim as a deductible business expense on its tax return, even when no expense is ever recorded on the company books.

These stock option accounting and tax rules are inconsistent and illogical. The two bills we are introducing today, the Stock Option Accounting Review Act, and the Ending the Double Standard for Stock Options Act, were introduced in the last Congress to address this problem. Each bill tackles a different aspect of the stock option issue. One addresses stock option accounting; the other addresses the stock option tax deduction.

Last year, Senator McCain and I proposed the accounting provision as an amendment to the Sarbanes-Oxley corporate reform bill that was before the Senate in July. There appeared to be sufficient support to pass it at the time, but we were unable to obtain a vote on it or on any other stock option legislation. That is why we are back this Congress.

Congress failed to resolve the issue last year, even though stock option abuses were repeatedly linked to serious corporate abuses and dishonest accounting. In fact, virtually every corporate disaster that has struck in recent years has had a stock option component.

Enron, of course, was the poster child. Congressional investigations, including by the Permanent Subcommittee on Investigations on which I sit, showed that, at the same time Enron investors and employees were losing their shirts, Enron executives were cashing in their stock options for tens or hundreds of millions of dollars. Ken Lay, the Chairman of the Board, took home $123 million from stock options in 2000 alone. Jeff Skilling, the CEO, took home over $60 million. Another executive, Lou Pai, topped them all by cashing in Enron stock options, in 2000, for $265 million.

Stock options also contributed to Enron's inflated earnings, since despite providing the lion's share of executive pay, this compensation never appeared on the company books as an expense nor was it ever deducted from earnings. And many have blamed stock options for encouraging Enron management to rig the company's financial statements through other accounting deceptions to help boost apparent income and, in turn, the company stock price, so they could sell their Enron stock at enormous profit.

Still others have noted that Enron used about $600 million in stock option tax deductions to avoid paying any corporate income taxes in four out of the last five years before its bankruptcy while, at the same time, touting record amounts of corporate income. What is now only beginning to be understood is that Enron's stock option tax deductions played a central role in much of its wrongdoing, after all, Enron was able to inflate its corporate income with impunity, in part, because its stock option tax deductions allowed it to avoid paying taxes on any of its phony inflated income.

Enron was the poster child for stock option abuses, but it was far from the only company in that category last year. Worldcom, Tyco, Qwest Communications, and many others have stock option stories that are equally disturbing.

And the problems did not stop with companies engaged in accounting deceptions or other corporate misconduct. Even companies that never appeared on the 2002 rollcall of corporate deception have been excoriated in media reports for giving huge stock option pay to executives while socking employees and investors with lower stock prices, mounting losses, and lousy corporate performance.

High tech companies that have been the biggest promoters of stock options have been some of the biggest culprits. Company after company in Silicon Valley paid their executives big bucks via stock options while laying off employees, losing money or market share, and stiffing investors. One example frequently cited in the media is Lawrence Ellison, CEO of Oracle Corp., who exercised options in 2001 to obtain profits of $706 million, while his company's stock price dropped by more than 50 percent.

Aggregate stock option statistics are also sobering. Business Week, for example, has estimated that stock options now account for ``a staggering 15 percent of all shares outstanding.'' Federal Reserve Chairman Alan Greenspan estimated that stock options have been used to overstate reported company earnings by an average of 6 to 9 percent. Perhaps that is why Chairman Greenspan has picked honest stock option accounting as his number one post-Enron reform.

Stock option abuses have been linked to inflated company earnings, dishonest accounting, and executive misconduct. These abuses have been facilitated by existing accounting and tax rules which allow stock option compensation to never appear on a company's books as an expense, even when a company claims this compensation as a business expense on its tax return. This double standard is fueling Enron-style abuses, and it is time for it to end.

Many in the U.S. business community apparently agree and, unlike the Congress, have taken direct action on the stock option issue. In fact, over the last year, there has been significant movement in the business world to end dishonest stock option accounting.

Over 120 companies, including such American giants as Coca-Cola, General Motors, General Electric, Dow Chemical, Wal-Mart, and Home Depot have announced that they will begin expensing options in 2003, joining longtime expensers like Boeing and Winn-Dixie. Standard and Poors has created additional pressure for honest stock option accounting by announcing a new ``core earnings'' calculation for companies which requires stock option compensation to be subtracted from a company's earnings.

Accounting experts are also moving. The International Accounting Standards Board in London has announced that, by the end of 2003, it will issue accounting standards requiring companies to expense stock options. The U.S. equivalent, the Financial Accounting Standards Board, or FASB, has announced that it will decide by the end of the first quarter of this year whether it will issue stock option accounting standards similar to those of the International Board.

While there has been a major shift in the U.S. business world toward honest stock option accounting, not all companies are on board. Some companies, especially those in the high tech sector, have announced that they will not expense stock options until forced to do so. That means, until FASB acts, there will be a discrepancy between those companies that are voluntarily expensing options and those that are not, when there ought to be a level playing field where everyone plays by the same accounting rules. It is this discrepancy that continues to make our stock option legislation relevant and necessary for Congressional action this year.

Let me describe both bills.

First is the Stock Option Accounting Review Act. This bill is very simple. It would direct FASB to conduct a fresh review of the current accounting treatment for stock options and, within one year, establish what it deems to be the appropriate stock option accounting standards.

The bill does not specify the stock option accounting standards that FASB should issue; that matter is left to the experts where it belongs. But

the bill does put the Senate on record as urging FASB to review the existing rules and take appropriate action within one year. This legislative directive is important, because the only other time the Senate has spoken on this issue, in 1994, the Senate majority urged FASB to keep allowing companies to exclude stock option expenses from their financial statements. The Senate's position contradicted FASB's position at the time which was to require stock option expensing. It is long past time for the Senate to rescind its mistaken advice.

The second bill we are introducing today is the Ending the Double Standard for Stock Options Act. This bill would not address the accounting treatment of stock options. Instead, it would address the tax treatment of stock option compensation, ending the costly double standard in federal law which allows a company to take a tax deduction for stock option compensation, even if the company does not show that compensation as a business expense on its financial statements.

Essentially, our bill would prevent a company from claiming a stock option expense on its tax return unless the company also includes that expense on its books. It would require companies to be consistent in how they treat stock options, and take a corporate tax deduction that mirrors the expense shown on the company books. If a company took the position that it incurred no expense from stock option compensation on its books, the bill would allow the company to take that position, but would also require it to take the same approach on its tax return and forego any deduction. The bill would stop companies from telling stockholders one thing, that it has no stock option expenses, while telling the opposite to Uncle Sam.

And to add insult to injury, in 2001, the IRS issued Revenue Ruling 2001-1 which determined that companies whose tax liability was erased through stock option expenses were not subject to the corporate alternative minimum tax. That revenue ruling meant that our most successful publicly traded companies, if they doled out enough stock options to insiders, could arrange their affairs to escape paying any taxes. That absurd result leaves the average taxpayer feeling like a chump for paying his fair share when a company like Enron can use its success in the stock market to apparently end up tax free.

One last point. Some opponents of stock option reform argue that reining in stock options would hurt the average worker, but this contention is nothing more than a red herring. While many average workers are eligible for stock options, few actually receive them. Stock options are overwhelmingly reserved for top corporate executives.

A recent Bureau of Labor Statistics survey did the research. This nationwide government survey found that in 2000, a banner year for stock options, only 1.7 percent of non-executive workers actually got any stock options. The BLS survey also looked at corporate executives and found that only about 5 percent of these corporate executives received any stock options. These results are consistent with the findings of a private sector group not associated with the government called the National Center for Employee Ownership, which favors stock options. Looking at a small sample of companies, the Center reported that 70 percent of all stock options were given to managers rather than other employees, and about 50 percent were given to the most senior executives. The reality is that stock options are a perk mainly reserved for a very small group, and neither average workers nor most executives would be affected by honest accounting or consistent tax and accounting treatment for stock options.

It is also important to understand that neither of our bills would bar any company from issuing stock options. Companies would still be able to issue stock options to their executives and other employees. The goal of this legislation is not to stop the use of stock options, but to promote honest accounting and consistent treatment of stock options on federal corporate tax returns.

Stock option abuses have damaged investor confidence in American business. I hope our colleagues will support enactment of these bills to help restore investor confidence and end stock option abuses. I ask unanimous consent to have reprinted in the Record after my remarks the text of both bills.

Mr. President, I am introducing today legislation to provide the Securities and Exchange Commission with stronger administrative authority to detect, investigate, and punish corporate and individual misconduct. This legislation, the SEC Civil Enforcement Act, among other measures, would provide the SEC with new authority to impose administrative civil fines on those who violate federal securities laws. The bill is cosponsored by Senators Bill Nelson, Corzine, and Biden.

The SEC has repeatedly requested the new enforcement tools that this bill would provide, and I ask unanimous consent to print in the Record after my remarks a copy of a letter from SEC Chairman Harvey Pitt supporting enactment of this legislation.

Mr. President, will the Senator yield for a unanimous- consent request?

Mr. President, I ask unanimous consent that after the Senator from Rhode Island speaks for up to 10 minutes, the Senator from New York then be recognized for 10 minutes, and then I be recognized for up to 10 minutes.

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, as we begin the 108th Congress, I want to talk about the situation in Iraq and our response to it, because I believe there may be a fundamental misunderstanding as to the process that is underway to bring about Iraq's disarmament. Pursuant to U.N. resolution 1441, the U.N. Inspection Commission and the International Atomic Energy Agency are to provide updates to the U.N. on the results of their inspections to date. These updates are intended to be interim reports, not final conclusions. I think we all, particularly the administration and the press, need to be very aware of that fact.

The January 27 report will only be one of a number of such reports that will be presented to the Security Council over the weeks and months to come. It is not a determining date on the issue of whether or not Iraq has materially breached U.N. resolution 1441, or whether we will use force against Iraq. We are not in the fourth quarter of some football game. In fact, we have just begun to share a small quantity of the large amount of information that we have relative to Iraqi suspect sites.

Let us look at the events that led up to the unanimous decision by the United Nations Security Council on November 8 of last year to set up an enhanced inspection regime to afford Iraq an opportunity to comply with its disarmament obligations. Iraq, as we all remember, invaded Kuwait on August 1, 1990. After numerous demands and diplomatic, economic, and political action by the international community, on November 29, 1990, almost 4 months after the attack, the U.N. authorized member states ``to use all necessary means'' to liberate Kuwait.

Iraq's defeat at the hands of a United States-led coalition in 1991 was followed by a U.N. Security Council resolution in April 1991 that established a number of conditions for a cease fire, notably including a demand for the destruction of Iraq's weapons of mass destruction programs, and Iraq accepted that resolution.

In the intervening years, Iraq repeatedly obstructed and failed to cooperate with the weapons inspectors of the United Nations and of the atomic energy agency that were charged with the responsibility of disarming Iraq.

With this historical background, the Security Council adopted resolution 1441 on November 8 of last year to set up an enhanced inspection regime. Under resolution 1441, Iraq is required to provide the United Nations inspectors and the IAEA ``immediate, unimpeded, unconditional, and unrestricted access to any and all areas, including underground areas, facilities, buildings, equipment, records and means of transport which they wish to inspect, as well immediate, unimpeded, unrestricted, and private access to all officials and other persons whom the inspectors of the IAEA wish to interview,'' and that includes outside of Iraq. Resolution 1441 also requires Iraq to provide a complete, accurate, and full declaration of all aspects of its weapons of mass destruction and delivery systems programs.

In order to assist the U.N. Security Council in its oversight of implementation of Iraq's disarmament, resolution 1441 set out a time line of events. Using November 8, 2000, the date the U.N. Security Council adopted resolution 1441, Iraq was required to accept the resolution within 7 days. It did so. Iraq was required to provide a full declaration of weapons of mass destruction within 30 days of November 8. It said that its declaration was a full one and it did it on the 29th day.

The inspectors were to start within 45 days of November 8; the inspections began on November 25th.

The inspectors were to provide an update on their inspections to the Security Council within 60 days of the date that the inspections commenced. They have announced their intention to provide these first interim progress reports on January 27, within that time limit.

The inspection process was begun with reasonable speed. The inspectors have already inspected a Presidential palace that had heretofore been subject to special rules, and they are inspecting on weekends and holidays. Their principal job right now is to establish a baseline for future inspections and testing Iraq's willingness to cooperate. This is the key, the inspection process is at its beginning. As of the end of December, virtually all of the arms inspections had taken place in the Baghdad area as the U.N. inspectors only had one of its eight helicopters in Iraq and had just opened a headquarters in Mosul in northern Iraq.

Again and most significantly, the United States and other nations with sophisticated intelligence capabilities have only just begun to share intelligence with the arms inspectors and are proceeding cautiously in light of the reported Iraqi infiltration of the inspectors during the 1990s. In fact, today's Washington Post reports that Secretary of State Powell stated in an interview yesterday that the administration was holding back much of the information in its possession, waiting to see if the inspectors ``are able to handle and exploit'' the information that we did give them.

The inspection process is estimated to take months, not weeks, and this timetable was understood by the Security Council from its inception. That is why the U.N. resolution refers to the January 27th reports from the inspectors as ``updates,'' and that is why January 27 is not a deadline for deciding whether to use force.

British Foreign Secretary Straw noted on December 19, with respect to the declaration filed by Iraq on its weapons of mass destruction and delivery systems: that [``What we've got today is a further step in a very calm and deliberate process to try by every means possible to get Iraq to comply with its international obligations peacefully and therefore and thereby to resolve this crisis in a peaceful manner.'']

In an interview at Crawford, TX, on December 31, President Bush seemed to agree with the British Secretary when he stated that he hoped the Iraqi situation will be resolved peacefully. And in answer to a reporter's question, President Bush said: ``You said we're headed to war in Iraq--I don't know why you say that. I hope we're not headed to war in Iraq.'' On that same day, U.N. Secretary General Kofi Annan said ``Obviously they [the inspectors] are carrying out their work and in the meantime Iraq is cooperating and they are able to do their work in an unimpeded manner, therefore I don't see an argument for a military action now.'' And, in a press conference at the Pentagon just yesterday, Secretary of Defense Rumsfeld said ``I don't know why anyone would use the word 'inevitable.' It clearly is not inevitable.''

The arms inspections in Iraq are at an early stage. The United States has just begun to provide information to the inspectors about suspect sites. Barring a dramatic development, the interim progress reports that the inspectors will make to the U.N. Security Council on January 27 will only be one of a number of such reports that will be presented to the council over the months to come.

Earlier today, Mohamed ElBaradei, Director General of the IAEA, at a press conference at the United Nations stated ``We will provide an update report on the 27th of this month. However, that report, we should emphasize, is an update report, it is not a final report. It's a work in progress. And this simply would register where we are on the 27th of January, but we obviously continue to we'll our work afterward, and we still have a lot of work to do.''

In the absence of the U.N. inspectors finding that Iraq currently possesses or is developing weapons of mass destruction or that Iraq is not cooperating with the inspections, we need to give

the inspectors the needed time to complete their work. In the meantime, we need to provide targeted intelligence to inspectors to facilitate their effort, without disclosing sources and methods, of course. That is our best chance of bringing about Iraq's voluntary disarmament or, failing that, obtaining broad international backing, including U.N. authorization for a multilateral effort to forcibly disarm Iraq.

If we prejudge the outcome of the inspections or if we don't furnish the arms inspectors with targeted intelligence, we will not be able to obtain the international support, as represented by U.N. authorization for the use of force, that is so highly desirable and advantageous to us. Forcibly disarming Iraq without international support would be perceived as a unilateral attack by the United States and a few allies. International support is critical to reducing the short-term risks, such as a loss of regional cooperation with resulting increased probability of U.S. casualties and reduced likelihood of international contributions in a postconflict environment.

International support is also important to reducing long-term risks, such as a loss of international cooperation in connection with the war against al-Qaida, and increased probability of terrorist attacks against us.

In summary, January 27 is the first interim report. It is not D-Day, decision day, as to whether to attack Iraq. We must not prejudge the outcome of the very inspection process that we worked so hard to put in place as being highly relevant to the question of whether we launch attack on Iraq. We must share all the information we can on suspect sites. And finally, if we don't share our information with the U.N. inspectors, or if we prejudge the outcome of these inspections, we will increase the likelihood that we will go to war and increase the risks, short term and long term, to our troops and our Nation in doing so.

Mr. President, I yield the floor.

Mr. President, late last year, the Federal Bureau of Investigation released its annual report on Law Enforcement Officers Killed and Assaulted in 2001. According to the report, there were 136 law enforcement officers killed in 30 States. The tragic events of September 11, 2001, claimed the lives of 72 officers. Excluding these 72 lives, the number of officers killed in 2001 increased over 37 percent, from 51 officer fatalities in 2000 to 70 in 2001. A closer examination of data shows that firearms were used in 61 of the officer murders, and of those, handguns were responsible for 46. The handgun of choice was the 9 millimeter. In my home State of Michigan, Clinton Township, the city of Detroit, and the Federal Protective Service in Detroit each lost an officer in 2001. One of these officers worked in the building in which my Detroit office is located.

In 1994, the Brady law established the National Instant Criminal Background Check System, NICS. The creation of this check system allows federally licensed gun sellers to quickly determine whether an individual is eligible to purchase a firearm. Since its inception, NICS checks have prevented more than 156,000 felons, fugitives, and others not eligible from purchasing a firearm without infringing upon any law- abiding individual's ability to buy a firearm. However, a loophole in the law allows unlicensed private gun sellers to sell guns without conducting a NICS background check.

During the last Congress, Senator Reed introduced the Gun Show Background Check Act. I cosponsored that bill because I believe it is a critical tool in preventing guns from getting into the hands of criminals and other ineligible buyers. This bill would simply apply existing law governing background checks to individuals buying firearms at gun shows. As reflected in the FBI report, preventing easy and unchecked access to guns is critical in preventing police deaths and gun violence. That is why it is supported by major law enforcement organizations including the International Association of Chiefs of Police, the National Troopers Coalition, the International Brotherhood of Police Officers, the Police Executive Research Forum, the Major Cities Chiefs, the National Association of School Resource Officers, the National Black Police Association, the National Organization of Black Law Enforcement Executives, and the Hispanic American Police Command Officers Association.

We must stand by our Nation's law enforcement community and take this commonsense step to reduce gun violence. I urge all of my colleagues to join me in supporting this legislation when it is reintroduced during this Congress.