Senate measure would compel corporate officers to report any illegal activities they hear about
Contra Costa Times
SACRAMENTO – Consumer advocates hailed the passage of legislation Thursday that would force corporate officers to report any illegal activities they learn of or face a fine of up to $100,000.
The measure, prompted by recent revelations about wrongdoing at corporations such as Enron, Tyco and Global Crossing, cleared the Senate on a 21-15 vote and now heads to the Assembly, where a battle is expected between business interests and reform-minded Democrats.
“This is landmark legislation,” said Doug Heller, a lobbyist for the Santa Monica-based Foundation for Taxpayers and Consumer Rights, which has pushed the measure. “This is really the biggest Enron-reform bill that is still alive in any legislature in the country.”
But opponents, who include Republicans and the California Chamber of Commerce, said the bill is overly punitive, too broad and anti-business.
“It’s just not going to be good for California,” said Cher Gonzalez, a lobbyist for the California Chamber of Commerce. She predicted SB1452 by Sen. Martha Escutia, D-Norwalk, would send businesses fleeing to Arizona and other states if it becomes law.
Even Sen. Steve Peace, D-La Mesa, who joined Republicans in voting against the measure, said he finds the bill “scary.” Peace authored the 1996 legislation that deregulated California’s electricity market and spent much of last year assailing Enron as greedy and blaming the company for exploiting the market.
“Look, you can’t fix everything in life, and you certainly can’t fix everything by turning us into a police state,” Peace said.
Along with requiring executives and managers to inform the attorney general about illegal conduct, the bill would also set up a “whistle-blower hotline” for people to leave anonymous tips about corporate misbehavior. In addition, the legislation would expand protections for whistle-blowers.
“This serves as an early warning system for abuses,” Heller said. “The Legislature has to face the grim reality that this may be the only chance that lawmakers have to protect against the next Enron. There’s nothing else out there.”
Critics, though, believe the bill’s wording is unclear. For instance, Gonzalez questioned what is meant by “actual knowledge” of illegal activity. She wondered if overhearing a conversation in the restroom would qualify.
“It’s difficult for the average person to figure out when this thing triggers,” Gonzalez said.
Also, corporations or limited liability companies could get hit with up to $1 million in liability. The fines, both for individuals and small companies, could prove ruinous and would discourage people from joining corporate boards and encourage companies to go elsewhere, Gonzalez said.
For proponents, the issue is protecting public money that is invested in stocks or pension funds. Sen. Sheila Kuehl, D-Santa Monica, said the bill attempts to prevent coverups of corporate activity that can squander the retirement and life savings of everyday Americans.
“All we want as Americans is honesty,” said Escutia, the bill’s author. “All we want in the marketplace is honesty.”
Congress has deadlocked on what reforms to pursue after the Enron debacle, but government must take a more active role, Heller said. “It’s not enough,” he said, “to prosecute people after they have stolen our money.”
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To learn more about the legislation, go to http://www.leginfo.ca.gov and search on SB1452.
Andrew LaMar covers state government. Reach him at: 916-441-2101 or [email protected]
