Will Congress protect investors or swindlers?

If Congress had any doubt that the Private Securities Litigation Reform Act of 1995 requires amending, Enron has now provided the proof.
The PSLRA was passed in 1995 over the veto of President Clinton and against the editorial advice of dozens of newspapers, including this one. Ostensibly, it was billed by its Contract With America backers as a law that would remove the shackles from high-tech entrepreneurs who would be able to do great things if only they didn't have to worry about being sued by investors who felt cheated if a venture failed.
Lobbying hard for the legislation was the Coalition to Eliminate Abusive Securities Suits, which included Arthur Anderson, then one of the "big six" accounting firms. The accountants were still bristling from having to pay $1.4 billion in fines, verdicts and settlements arising from savings and loan failures in the 1980s.
Congress put the wants of the accountants ahead of the needs of America's investors and gave them the cover they needed. In return, the nation got, among other things, Enron.
Now 80 defendants, including Ken Lay and many of Enron's other heaviest hitters, are being sued by the Board of Regents of the University of California, which says it lost $100 million in Enron's shell game.
Hiding behind the law
The response of the defendants: You can't sue us. They say they're protected by the PSLRA and two Supreme Court decisions of the early 1990s that shielded aiders and abettors of fraud from civil suits and that set a three-year statute of limitations on security fraud suits.
And, at least for some of them, that argument might work.
The House has passed a watered down revision of the PSLRA, but the best chance for getting an effective bill now appears to be in the Senate. It's important that the Senate, which could begin debate as early as next week, pass as strong a bill as possible.
At a time when investor confidence is shaken and at a time when the Justice Department is going to be devoting more of its resources to anti-terrorism activities and less to securities fraud investigations, Congress must find a way of sending a clear message to Wall Street and the accounting fraternity that those who bilk investors will face the consequences.