A group of Pittsburgh business executives took no issue yesterday with the intent of the Sarbanes-Oxley law -- 2002 federal legislation aimed at ending corporate accounting scandals -- but a number of them complained that the costs of complying with it were too high and some of its provisions amounted to regulatory overkill.

Sen. Rick Santorum

Sen. Rick Santorum, R-Pa., agreed with some of the criticism but told the group it was unlikely that Congress would change the provisions of the law, known as "SOX," that they cited as most burdensome. The executives gathered at the Rivers Club, Downtown, for a panel discussion on SOX organized by Pittsburgh's chapter of the National Investor Relations Institute.

Panelist William Lyons, chief financial officer of Consol Energy, said his company's costs to comply with Section 404 of SOX, which requires auditors to attest to the adequacy of a company's internal financial controls, were $3.5 million last year. Internal controls are measures involving record keeping and other practices by management to prevent fraud or even errors that could affect the reliability of financial statements.

Consol said its audit costs last year nearly doubled to $1.4 million from $755,000 in 2003 because of other SOX provisions.

Many companies that were required for the first time last year to implement Section 404 hired consultants to help them comply with the law. While consulting costs could diminish next year, the costs for auditors examining their clients' internal controls probably wouldn't, Lyons said.

In 2003, in the wake of accounting scandals at companies such as Enron and Worldcom Inc., the business community got its first taste of SOX, as corporate chief executive officers were required to sign off on their companies' financial statements.

Matthews International CEO David Kelly, who was not on the panel, said in an interview that he had no problem with that. But, Kelly, who also anticipates a doubling of his firm's audit costs, called the new law "good intention gone awry."

Over time, SOX could improve accounting at companies that did not necessarily think they had any problems, at least one panelist said.

Michael Fox, iGate Corp.'s vice president of finance, said the law probably had spurred small companies such as his information technology and outsourcing firm to "formalize our business processes."

Still, because small companies often "don't have the infrastructure" of big ones, he said the costs of compliance with SOX had a "disproportionate impact" on them, he said.

"I think over time we're going to see a benefit," Fox said, though he added that the money spent probably would not produce a return on investment for some years.

Fox made a point of adding that SOX was not responsible for iGate delays in filing financial statements.

Some panelists questioned whether the law would prevent fraud. Joanne O'Rourke Hindeman, a panelist who advises a member of the Public Company Accounting Oversight Board, which was set up to police compliance, said "behavior has changed on many fronts" both among companies and their auditors.

But Santorum was skeptical. He portrayed SOX as a law passed too quickly by Congress in an attempt to defuse a sense of crisis in the wake of the accounting scandals.

He said he believed that new regulations and tougher enforcement would have been the proper response to corporate accounting scandals. But he said it was unlikely Congress would amend the law.

Santorum also responded to questions raised on a possible SOX II, aimed at reining in corporate salaries.

Several executives attending yesterday's meeting asked whether any such law was in the works.

"We have played with executive compensation [discussions] many times on the Senate floor," Santorum said.

"It's hard to defend many of the packages that are out there now for CEOs" particularly for corporate chiefs who have "driven companies into the ground," Santorum said.

Still, Santorum said he did not think a Republican-controlled Congress and White House would attempt to curb CEO compensation.