WASHINGTON (AP) -- All five members of the Securities and Exchange Commission are being asked by Congress to defend the watchdog agency against accusations that it may be tilting toward business interests and away from investors.

A hearing Tuesday by the House Financial Services Committee, under Democratic Chairman Barney Frank of Massachusetts, marks the first time in more than a decade that all SEC commissioners have been called to testify together.

Business interests have been pressing for an easing of corporate governance rules and restraints on class-action lawsuits against corporations and auditors. Their campaign was embraced by a group of 16 House Republicans, who in a letter to Chairman Christopher Cox Friday urged the SEC "to examine the costs and benefits to the average individual investor of private class-action litigation under the federal securities laws."

On the other side, some critics and investor advocates see recent moves by the SEC under Cox, a longtime free-market Republican congressman, as favoring business and Wall Street.

As the gap widens between corporate executives' compensation and employees' pay, and workers lose jobs at companies bought out by big private-equity firms, Tuesday's hearing also affords Democratic lawmakers a chance to highlight themes likely to be sounded in next year's election.

Frank is not criticizing the agency but says he wants to provide a forum for concerns to be expressed. "I think they've been doing some good stuff," Frank said in an interview Monday, citing the SEC having approved revisions to financial-control rules that are designed to ease the compliance burden on companies.

But in another area -- increasing shareholders' access to company ballots so they can more easily put proposals to a vote by all investors -- Frank said he wants the SEC to move faster.

An issue expected to come up is the SEC commissioners' recent 3-2 vote to side with investors in a significant securities lawsuit pending in the Supreme Court that harks back to the Enron scandal. The Bush administration overrode the SEC by declining to side with investors in lawsuits against third parties such as investment banks, attorneys or vendors that collude with companies engaging in fraudulent conduct.

Last week, the court ruled against investors in another securities-fraud case involving high-tech company Tellabs Inc., which was sued in the case.

Two e-mails were provided to The Associated Press concerning that case, involving a senior counsel at the SEC and the prominent Washington attorney who represented Tellabs, Carter Phillips. The two men previously worked together at the law firm representing Tellabs where Phillips is a partner, Sidley Austin.

The e-mails were obtained by the American Association for Justice, a national trial lawyers' group, through a Freedom of Information Act request and provided to the AP.

The SEC attorney, Michael L. Post, congratulated Phillips on Jan. 5 because the Supreme Court had agreed to take the case. Phillips replied, "I hope the federal government will weigh in on our side."

The government did so one month later, and Post was among the five lawyers at the SEC listed as having contributed to the Bush administration's legal argument against investors in the case.

SEC spokesman John Nester noted Tuesday that Post, who went to work at the agency in early 2003, did not violate government ethics rules. They prohibit government employees for one year from working on matters involving clients of their former firms.

"The highest standards of government ethical conduct have been met or exceeded in every way," Nester said. "The federal government has determined that one year's passage of time is more than enough to avoid even the appearance of a potential conflict of interest."

Post declined to comment Tuesday. Phillips had no immediate comment.

"Regardless of the timing of the e-mail, it raises enormous suspicions into the relationship between a senior attorney representing Tellabs and a senior attorney at the SEC," Bill Schulz, a spokesman for the trial lawyers' organization, said Tuesday. "What does 'congratulations' mean? ... It raises all sorts of questions as to the cozy relationship between the attorneys who should be representing the interests of investors and those representing Tellabs."

Cox disputes the notion that the agency has leaned toward corporate interests or Wall Street, saying that his commitment to investor protection has not wavered.

"We have a great investor protection story to tell and we're happy to tell it," Nester said Monday.

Frank noted concern in some quarters over a new SEC policy, being used on a trial basis, that requires agency enforcement attorneys to get approval from the commissioners to enter into negotiations with companies over fines and other penalties. Under this system, the staff attorneys are given a possible range of penalties by the commissioners.

---------------------------------------------------------------------------------------------

Copyright © 2007 The Associated Press. All rights reserved.