WASHINGTON — The nation's chief stock market regulator Sunday warned that "people will pay heavily" if there is any untruth in a report due today from WorldCom, explaining how it inflated profits by almost $4 billion.
As the political stakes in the WorldCom scandal rise, Securities and Exchange Commission Chairman Harvey L. Pitt seemed to build on comments by President Bush--who in his Saturday radio address vowed that "the federal government will be vigilant in prosecuting wrongdoers" to ensure public confidence in American business.
"We're demanding that they make a statement under oath, telling the American public exactly what went on there and what their true financial condition is," said Pitt, a Bush appointee, speaking on ABC's "This Week." "If there's even an iota of false statement in there, people will pay heavily."
The blunt warning came as last week's news about WorldCom--the latest in a series of corporate scandals--sparked Democratic accusations that Republicans oppose effective oversight of business and that Pitt himself is part of the problem. The White House, meanwhile, repeatedly in the last few days has urged corporations to report their finances honestly and openly.
Uncertainties about the economy are adding to the political anxiety, with a recent national survey pointing to slipping public confidence in the president's handling of the economy.
The June poll by the Pew Research Center for the People and the Press found that approval for Bush's handling of the economy fell to 53% in June from 60% in January. Just one third of voters said the president was doing all he can to jump-start the economy--down from 48% in January.
"The upcoming congressional election may be as much a referendum on domestic concerns as on the war on terrorism, as the public's economic anxiety increases and its frustration with Washington mounts," the pollsters concluded.
Meanwhile, the two political parties are scrambling to put together new legislation to safeguard investors and ensure the integrity of financial reports.
The Republican-controlled House already has passed bills that are supposed to enhance the security of pensions, as well as to strengthen accounting standards and disclosure requirements so that firms are not able to misrepresent their financial standing.
In the Senate, a Democratic bill to strengthen oversight of accountants is expected to reach the floor sometime after the July 4 recess. But disputes remain over important details of such legislation.
The partisanship stepped up a notch Saturday when former Vice President Al Gore ripped into Bush's economic policies and denounced the administration's choice of Pitt to serve as watchdog of the nation's financial markets. Pitt is an attorney who formerly represented investment banks and is seen as friendly to the Wall Street establishment.
"They picked a fox to head that chicken coop," Gore said in a campaign-style speech. "They picked the principal lawyer and lobbyist for the Big Five accounting firms who, before coming to the government, went and pleaded with the SEC to open up the loopholes for the accounting companies."
But as they seek to lump the Republicans together with business scandal, the Democrats might have their own problems on the issue of corporate governance.
A new report by the Center for Responsive Politics, which tracks campaign contributions, found that WorldCom has doled out its donations with an even hand, particularly over the last year. Democratic hopes of tethering the GOP to WorldCom's woes might not prove convincing, the researchers concluded.
Shortly after news of the WorldCom scandal broke, the National Republican Congressional Committee issued advice to Republican office-seekers on how to handle the corporate accountability issue.
Among other things, it reminded candidates that 178 Democrats had voted to deregulate the telecommunications industry in 1996. Democratic efforts to politicize the WorldCom debacle are "extremely hypocritical," according to the candidate alert.
Some also contend that recent scandals may reflect an approach to business that predates the current Bush administration. The boom years of the Clinton era fostered an "anything goes" climate that critics say was reflected in lax oversight.
"Everything that I'm hearing are things that I inherited when I got the job," Pitt said Sunday.
How the brouhaha ultimately plays out may depend more on whether it deals a long-lasting wound to the economy than on the intricacies of legislation on corporate accountability or the war of words in Washington.
"Obviously, a bad economy and a bad stock market is bad for the party in power," said William Kristol, editor of the conservative Weekly Standard. But he maintained that unless such damage is severe, Democrats could find it difficult to translate the misdeeds of financial executives into a major issue that would make a big difference in a local campaign.