FOR IMMEDIATE RELEASE:

CONTACT: Jesse Jacobs
Tuesday, January 15, 2002

202-224-4524


SARBANES REQUESTING GENERAL ACCOUNTING
OFFICE TO INVESTIGATE INVESTMENT OF EMPLOYEE
RETIREMENT FUNDS IN COMPANY STOCK AND ADEQUACY
OF FINANCIAL REPORTING IN THE UNITED STATES



Senator Paul S. Sarbanes, the Chairman of the Banking, Housing and Urban Affairs Committee, has written two letters to the General Accounting Office (GAO), in the wake of the collapse of Enron Corp., requesting the GAO investigate the investment of employee retirement funds in company stock and also to report on the adequacy of financial reporting in the United States.

In the first letter, Sarbanes has asked the GAO to look at three specific areas: (1) those situations in the last ten years, including Enron's, in which employees suffered substantial retirement fund losses because of declines in value of company stock; (2) the number of U.S. retirement plans invested in company stock; and (3) the provisions of the Employee Retirement Income Security Act of 1974, the Securities Acts, and the Internal Revenue Code governing company stock purchases by retirement plans. On the third point, Sarbanes is particularly interested in whether employers provide sufficient information and financial education to permit their employees to understand the risks of company stock retirement investments; and whether the Securities and Exchange Commission should reconsider its administrative determination not to explore application of the Securities Act and the Securities Exchange Act to define contribution plans.

"Investment of retirement funds in company stock can enable employees to share in the fruits of their labor – as reflected in a company's stock price," Sarbanes wrote. "However, the reported results of Enron's bankruptcy raise significant issues about the adequacy of our laws and their enforcement. It is in everyone's interest that corporate mismanagement and conflicts of interest do not increase the already significant inherent risks of company stock investment."

In a second letter, Sarbanes noted that, "Accurate and honestly presented financial information is essential to the efficiency of our capital and security markets, yet in recent years costly accounting irregularities have proliferated." Accordingly, he requested the GAO to evaluate the governance system of the accounting profession in the United States and consider the extent to which defects in that system may have contributed to or increased the risks of such irregularities.

In addition, Sarbanes has announced that the Senate Banking Committee will hold an oversight hearing on Tuesday, February 12, 2002 to examine accounting and investor protection issues in the wake of the Enron Corp. failure and problems with other public companies. Five former Chairmen of the Securities and Exchange Commission will testify before the full Committee on these issues.

NOTE: Copies of the full text of Sarbanes' letters to the General Accounting Office are available upon request.



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