NJ reps gut US law to 'help business' - or 'weaken reform'

After winning a 37-32 vote in the US House Financial Services Committee to prevent a Sarbanes-Oxley Act rule, forcing firms to disclose their internal financial controls, from applying to public companies worth less than $75 million, the bipartisan suburban duo of US Rep. John Adler, D-NJ, and Scott Garrett, R-NJ, are collecting both fame and scorn.

The vote was cheered by Mark Heesen, head of the National Venture Capital Association, on his visit to the Inquirer today. In a public statement, Adler bragged the bill frees small business from the threat of "prohibitive regulations" and will "help create jobs and spur economic growth".

By contrast, the Consumer Federation of America and investors' and accountants' groups cried "Sellout!" 

Adler and Garrett would "weaken protections against accounting fraud at roughly half of public companies," the CFA complained. Congres is "rolling back existing transparency and accountability... Amazingly, after the worst financial crisis since the Great Depression,"  thy're "roll(ing) back what few effective protections investors already have by weakening refomrs put in place after the Enron collapse."

John McLaughlin, senior managing director at business adviser and accounting firm Smart & Co., Devon, notes a recent Public Company Accounting Oversight Board review of small-company financial reports reviewed by big accounting firms, seven years after Sarbanes-Oxley was passed, "continue(d) to find deficiencies in important audit areas including revenue recognition, management's estimates, income taxes and fair value of financial instruments including derivative instruments, loans and securities." McLaughlin says this shows weak "quality" at some companies "regarding public reporting and disclosure."