Bush demands crackdown on corporate criminals
President George Bush called for stiff new penalties for corporate criminals and a crackdown on boardroom scandals today.
He promised in a speech on Wall Street that his administration would ‘‘end the days of cooking the books, shading the truth and breaking the law.’’
Confronting a wave of corporate wrongdoing that has undermined investor confidence and threatened political damage to the White House, Bush said, ‘‘We will use the full weight of the law to expose and root out corruption.’’
The president called on the US Sentencing Commission to recommend longer prison terms for corporate executives guilty of fraud and announced a new task force for the pursuit and prosecution of corporate criminal activity.
The task force would be headed by Deputy Attorney General Larry Thompson and include investigators from the Department of Justice and other agencies.
Bush likened it to a ‘‘financial crimes SWAT team, overseeing the investigation of corporate abusers and bringing them to account.’’
Bush said the mushrooming corporate scandals threatened to undermine economic recovery and damage the financial well-being of workers.
‘‘The business pages of American newspapers should not read like a scandal sheet,’’ Bush said. ‘‘I am calling for a new ethic of personal responsibility in the business community an ethic that will increase investor confidence, make employees proud of their companies and regain the trust of the American people.’’
Bush, wearing a Big Apple lapel pin, spoke in a Wall Street hotel ballroom.
‘‘More scandals are hiding in corporate America,’’ Bush said. ‘‘We must find and expose them now so we can begin rebuilding the confidence of our people and the momentum of our markets.’’
Bush released a ten point plan that builds on another one he issued in March. Aside from the task
force, all proposals will require approval from lawmakers, stock market executives, regulators and the companies themselves. Bush would:
* Enhance the ability of the government’s Securities and Exchange Commission to freeze improper payments to corporate executives while a company is under investigation.
* Persuade publicly traded companies to prevent corporate officers from receiving loans from their own companies.
* Convince stock markets to require that a majority of a company’s directors - and all members of the company’s audit, nominating and compensation committees - have no material relationship with the company so that they are truly independent.
‘‘The president wants to expose and punish acts of corruption, move corporate accounting out of the shadows, and protect small investors and pension holders,’’ a White House statement said.
Bush addressed the controversy and its political implications for his administration at a White House news conference yesterday.
‘‘I’m an avid backer of the free enterprise system, but I also understand that requires trust,’’ Bush said. ‘‘And we’ve had some destroy the trust of the American people, and we need to do something about it.’’
The first president to hold an advanced degree in business promised ‘‘tough new laws and actions to punish abuses, restore investor confidence and protect the pensions of American workers.’’
But Bush was bombarded with questions about his record as a director at Harken Energy Corporation in the early 1990s. The SEC forced the company to amend its books to reflect millions of dollars in losses that had been hidden by the sale of a subsidiary to a group of insiders.
As Bush described it, when the SEC cried foul on Harken’s sale of a subsidiary to a partnership of its own executives, which had the effect of concealing £6.5 million in losses, ‘‘There was an honest difference of opinion as to how to account for a complicated transaction.’’
The president rejected comparisons to Enron, where sham off-the-books partnerships were used to hide hundreds of millions of dollars in losses. Arthur Andersen was the accounting firm in both cases.
Asked if he, as a member of Harken’s board at the time, approved of the questionable transaction,
Bush shrugged. ‘‘You need to look back on the director’s minutes,’’ he said.
Bush, who was on the company’s audit committee, was the subject of a separate insider-stock trade investigation. The SEC took no action against Bush in that inquiry, which also found he had disclosed his sales of Harken stock later than the law requires on four occasions.
The president is calling for swift disclosure of such insider stock sales as part of his corporate reform package.
