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Archive for Sunday, June 30, 2002

Bush assails industry scandals

June 30, 2002

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— President Bush, bearing down on corporate America's "deeply troubling" accounting scandals, vowed Saturday that no violation of the public's trust would be tolerated.

Bush moved in his weekly radio address to shield his administration from public anger over allegations of corporate fraud and phony profits. He said his administration would not allow the acts of what he called an unethical minority in corporate boardrooms to "tarnish our entire free-enterprise system."

"The federal government will be vigilant in prosecuting wrongdoers to ensure that investors and workers maintain the highest confidence in America's business," Bush said.

Internal Republican polling has found Bush and the GOP vulnerable on the issue. Democrats sense it may open a chance for gains in elections this November that will decide who controls the House and Senate during the second half of the president's term.

Senate Majority Leader Tom Daschle, D-S.D., opened Friday's business on the Senate floor with a denunciation of "a deregulatory, permissive atmosphere that has relied too much on corporate America to police itself." He listed companies that have been in trouble, including Halliburton, where Vice President Dick Cheney was chief executive before accepting Bush's offer to be his vice president.

Sen. Paul Sarbanes, chairman of the Senate Banking Committee, used the Democrats' weekly radio address to censure corporate misconduct.

"We are facing a crisis of confidence that is eroding the public's trust in our markets and poses a real threat to our economic health," Sarbanes said. "We ignore it at our peril."

Sarbanes, D-Md., urged passage of his bill to tighten oversight of the accounting industry with a new private-sector body. White House spokesman Ari Fleischer said the president might support the legislation when it reaches the Senate floor next month if it is changed to give the Securities and Exchange Commission greater administrative authority.

The president plans to deal with the issue more fully in a speech on July 9. A senior administration official said Bush's advisers were prepared to recommend that he propose new criminal penalties for corporate executives who certify misleading financial statements.

Under current practice, the SEC must get court approval to bar executives from serving as officers or directors of publicly held corporations if they have engaged in serious misconduct. Bush already has proposed allowing the commission to act on its own; senior advisers plan now to recommend that business leaders who lie on financial statements be prosecuted by the Justice Department.

In the radio address, recorded Friday and broadcast on the day Bush underwent a colon screening by military doctors at Camp David, Md., the president said the U.S. economy remained fundamentally sound and strong despite what he called recent abuses.

Bush referred, though not by name, to WorldCom's disclosure Tuesday that it misrepresented $3.8 billion in expenses. By Friday, Xerox had announced it, too, had overstated revenues by billions of dollars.

"America is ushering in a new era of responsibility, and that ethic of responsibility must extend to America's boardrooms," Bush said.

He listed administration efforts against corporate fraud: quick investigations into and actions against companies by the SEC, and a 10-point plan that includes taking away "phony profits" from company executives and denying them the chance to serve on other corporations' boards of directors.

Rep. Michael Oxley, R-Ohio, chairman of the House Financial Services Committee, said on CNN's "Novak Hunt & Shields," broadcast Saturday, that current cases of speculation and corner-cutting are part of the recent cycle of vibrant economic growth.

He added: "Our markets are based on confidence, and right now I think a lot of folks are very concerned, and obviously, we have to address that."

The economy perennially tops voters' lists of concerns, and a poll released this week suggests both parties are right to pay attention to the accounting scandals.

The nonpartisan Pew Research Center found that, while Bush's overall job approval remained strong at 70 percent, only one-third of Americans believe he is "doing all he can" on the economy.

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