Bush to propose tough penalties
Sets news conference for Monday afternoon
By William L. Watts, CBS.MarketWatch.com
Last Update: 3:04 PM ET July 8, 2002
WASHINGTON (CBS.MW) - With Capitol Hill focused on the latest round of accounting scandals Monday, the White House announced that President Bush would hold an afternoon news conference a day ahead of a widely touted speech on corporate responsibility.
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The 5 p.m. ET conference is expected to focus on the domestic legislative agenda, but is certain to attract questions on the latest round of corporate accounting scandals.
Although details of Tuesday's Wall Street speech remain under wraps, The Washington Post quoted unnamed White House officials who said Bush would propose criminal penalties, including prison sentences rather than just fines, for chief executives who file misleading financial reports.
The proposal would require that the reports be intentionally misleading, something that could make prosecution difficult.
"He thinks it's important for the economy that the American people have confidence in corporations and his speech is going to be aimed at restoring that confidence," said White House press secretary Ari Fleischer as Bush returned from a 3-day birthday weekend in Maine.
Bush is seeking to distance his administration from a string of corporate accounting failures, which Democrats view as a major campaign issue heading into this fall's mid-term elections.
House Financial Services Committee Chairman Michael Oxley, R-Ohio, said Bush is likely to express outrage over recent accounting scandals.
"I suspect that tomorrow he will give a heartfelt sense that he feels betrayed, that the American people feel betrayed by some of this corporate skullduggery. He will call for tougher penalties," Oxley said on NBC's "Today" program.
Democrats say that Bush and congressional Republicans have blocked strong reforms and hope to turn the issue of corporate accountability into a key campaign theme for the November mid-term elections.
"I think [Bush is] scrambling to try and get off a position, frankly, that was a weak one," said Rep. Barney Frank, D-Mass., who joined Oxley on "Today."
Former and current executives from WorldCom (WCOME: news, chart, profile) and well-known Salomon Smith Barney telecom analyst Jack Grubman were on the hot seat Monday in front of a House Financial Services Committee hearing on the company's $3.8 billion accounting misstatement. See full story.
Democrats have leveled criticism at Securities and Exchange Commission Chairman Harvey Pitt. Senate Majority Leader Tom Daschle, D-S.D., and other Democratic lawmakers have called for Pitt's ouster. That plea was joined Monday by Sen. John McCain, R-Ariz., who also called for Pitt's resignation in a New York Times op-ed article.
Democrats have also focused on Bush's run-in with the SEC during his father's presidency more than a decade ago. The agency cleared Bush, who served as a director of Harken Energy, of insider trading after he was late in disclosing the sale of a large number of shares in the firm.
Following the sale, Harken announced a large loss and was forced to change the way it accounted for income that should have been assigned to future years. Bush was on the Harken board's audit committee.
The White House last week blamed the filing delay on Harken's corporate lawyers, saying new information had surfaced that pointed to the company's failure. See full story.
Daschle told CBS's "Face the Nation" Sunday that he had questions about the transaction and urged Bush to ask the SEC to release his case file. "Let everybody see just what is there," Daschle said.
The Democratic-controlled Senate is set Monday to begin floor debate on an accounting reform proposal by Sen. Paul Sarbanes, D-Md., inspired by accounting scandals at Enron (ENRNQ: news, chart, profile), Global Crossing (GBLXQ: news, chart, profile) and WorldCom.
The bill would establish an independent accounting oversight board with powers to investigate and punish corporate auditors. Senate Democrats may strengthen the bill by adding amendments to increase the penalties for securities fraud and to tighten pension laws.
The House has approved a separate bill to reform corporate accounting and governance. The bill would create a new self-regulatory accounting oversight board. The House bill largely incorporates suggestions made by Bush in March.
William L. Watts is a reporter for CBS.MarketWatch.com. |
