Disgraced CEO Behind Report Calling For Weakening Post-Enron Corporate Governance Reforms

Corporate titans are salivating over the propect of weaking the post-Enron corporate governance reforms known as the Sarbanes-Oxley law. House Speaker Nancy Pelosi has told the media she is open to some changes and a new report out today is supposed to provide the substantive reasons for softening the rules.

It turns out, though, that former AIG insurance executive Maurice Greenberg, who was ousted because of accounting manipulations and misrepresentations, runs the foundation that funded the report calling for weakening the corporate governance and accounting standards that helped uncover AIG's misconduct.

Earlier this year, AIG acknowledged intentionally misleading regulators, investors and policyholders and agreed to pay $1.6 billion in reparations to settle a suit brought by New York Attorney General Eliot Spitzer. The company also restated its earnings by more than $3 billion. A civil suit accusing Greenberg of fraud and other sham accounting maneuvers is still pending. The charges include false transfers of reserves and the creation of offshore entities to prop up AIG's performance.

"The power given to prosecutors and the personal responsibility of CEOs created under Sarbanes-Oxley were key contributors to Greenberg's ouster from AIG," says my colleague Carmen Balber at the Foundation for Taxpayer and Consumer Rights. "This proposal is an attack by a discredited CEO against the corporate governance laws that ended his 37 year reign at the helm of AIG."

The committee's proposals would undermine existing investor and consumer protections. They include:

-- Substantially diminished shareholder rights, such as a proposal to eliminate shareholder class-action lawsuits before a jury, replacing them with arbitration or non-jury trials.

-- Give federal regulators precedence in enforcement matters, effectively curtailing activities by states attorneys general, like Eliot Spitzer in New York.

-- Not hold directors responsible for corporate malfeasance.

-- Limit an accounting firm's liability if they certify false financial information enabling corporate executives to cheat their shareholders and the public.

-- Weaken accounting requirements concerning what information must be reported as having an impact on financial statements and loosen the standard by defining it related to annual statements rather than interim ones.

Speaker Pelosi might want to re-consider her reported support for weakening Sarbanes-Oxley's standards now that it's clear it is the fox who wants to lessen the standards for trespassing in the chicken coop.

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