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Bush Cites the Need to Restore Faith in Corporate America

June 30, 2002|From Reuters

WASHINGTON — Saying that executives involved in corporate scandals will face fines and jail time, President Bush called Saturday for rules and laws to "restore faith in the integrity of American business" in the wake of a series of events shaking the country's economy.

"No violation of the public's trust will be tolerated. The federal government will be vigilant in prosecuting wrongdoers to ensure investors and workers maintain the highest confidence in American business," Bush said in his weekly radio address.

Democrats joined the president in calling for quick action to stem "the crisis of confidence" but urged passage of their own legislation, approved June 18 by the Senate Banking Committee on a bipartisan vote of 17 to 4.

The panel's chairman, Sen. Paul S. Sarbanes of Maryland, said in the Democrats' radio response that the bill he sponsored "strengthens corporate accountability and auditor integrity, addresses conflicts of interest, and protects employees, pension holders and investors against fraud and deception."

Bush expressed outrage last week when telecommunications giant WorldCom Inc. revealed $3.8 billion in accounting irregularities and Xerox Corp. on Friday disclosed a $2-billion revenue gap in its books.

Bush said that those responsible for corporate scandals will be held accountable.

The president warned that "executives who commit fraud will face financial penalties, and, when they are guilty of criminal wrongdoing, they will face jail time."

"We must have rules and laws that restore faith in the integrity of American business."

The issue of how to clean up corporate America has become a dominant topic at the White House and on Capitol Hill. Republicans and Democrats agree something must be done but differ on the details.

Bush's political fortunes could depend on his stewardship of the U.S. economy, which he said Saturday remains fundamentally strong "despite recent abuses of the public trust." Democrats would like to blame Republicans for creating a deregulatory atmosphere conducive to corporate greed.

Senate Majority Leader Tom Daschle (D-S.D.) said Friday that "unfortunately, the desire for reform is not to be found" in approaches favored by the White House, the Republican-controlled House and the Securities and Exchange Commission.

The Sarbanes bill is seen as providing tougher enforcement. It would create a regulatory board that Democrats see as more independent. Under the Republican plan, the regulatory board would be supervised by the SEC.

White House spokeswoman Claire Buchan said the administration is working with Congress and hopes to resolve the differences "so that the president can sign good legislation."

Bush, who plans a major speech July 9 in New York concerning corporate responsibility on Wall Street, said in his radio address that accounting-related abuses should be punished by banning corporate executives from profiting from erroneous financial statements.

"When bad accounting practices make the company appear to be more successful than it actually is, corporate executives should lose their phony profits gained at the expense of employees and stockholders," Bush said.

He added that corporate officers "who violate the public's trust should never be given that trust again."

His plan would require top executives to disclose when they buy or sell company stock within two days of the transaction. Currently, executives can wait a year or more before disclosing personal transactions.

Bush said the SEC has sought to take away the profits of senior executives from four companies.

On Thursday, the SEC ordered the top executives of the 1,000 largest public companies to certify that the financial information they submitted in the last year was fair and accurate.

"America is ushering in a new era of responsibility, and that ethic of responsibility must extend to America's boardrooms," Bush said. "The unethical actions of a few should not be allowed to call into question our whole free enterprise system."

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