That's pretty rich, Bush
The President started the week trying to save corporate America. He
ended it trying to save himself
Oliver Morgan
Sunday July 14, 2002
The Observer
'My friends are crooks. The companies they run look corrupt. The regulators
I appoint are too soft. My colleagues in government face lawsuits for fraud.
But I'm going to solve corporate crime with some ass-kicking laws. Hey, and
trust me, I'm the President.'
After a week in which markets globally were badly wounded by the Dow -
which fell 700 points, dragging the FTSE down by nearly 400 - it is clear
that not only Americans but people around the world are in no mood to take
George W Bush and his promised crusade against corporate corruption on
trust. In fact, the attempt to appear tough on WorldCom, Enron, Andersen
and the rest ahead of mid-term elections in November turned out
disastrously.
Day 1: Bush held a rare press conference to gain the initiative ahead of his
key Wall Street speech. Instead, he was rocked onto the defensive over
allegations concerning his own financial dealings in the oil company Harken
Energy.
Day 2: In Tuesday's speech, Bush said 'too many corporations seem
disconnected from the values of our country'. He listed measures, including a
task force that would be a 'financial crimes Swat team', anti-shredding
laws, a $100m boost for the Securities and Exchange Commission, the
forfeiture of pay gained by deception, greater accountability for CEOs, and
an increase in prison terms for fraud to ensure 'those who breach the trust
of the American people are punished'.
It read like a plea for credibility. It was snubbed. Democrats, led by the
presidential hopeful Tom Daschle, ridiculed both the rhetoric and substance,
highlighting Bush's refusal to endorse a tough package of laws being
proposed by a Democrat, Senator Paul Sarbanes. Bush was the 'unconnected'
one. As the Dow slid, a Democrat aide said: 'The markets clearly don't think
he has gone far enough, and neither do we.'
Then it got worse.
Day 3: Vice-President Dick Cheney was named in a civil action against
construction group Halliburton and its accountants Andersen.
The details of the contested action, in which Halliburton directors are
accused of colluding to inflate the company's earnings, read disturbingly like
the Enron case and follow the opening of a separate SEC investigation in
March.
Day 4: It emerges that Bush received a low-interest loan from Harken -
something that WorldCom chief executive Bernie Ebbers (currently under
investigation) did, and which Bush said should be banned.
Throughout all of this some critics made a direct link to Bush and his well-
known connections with rich business men, particularly fellow Texans.
Chuck Lewis of the Centre for Public Integrity, which investigates links
between politics and business, says: 'The reason that he does not have
credibility in trying to deal with big business is that in the public mind he
is seen as in their pockets.'
New York Representative John LaFalce, senior Democrat on the House of
Representatives financial services committee, says: 'He denied debate for the
past year and a half - especially since Enron - as the problems were
beginning to surface, and did so very little. Then because of WorldCom and
because of growing sentiment against corporate America and Wall Street, he
felt compelled to do something. But neither his words nor his demeanour on
Tuesday had any credibility.'
Republicans retort that Bush's speech was tough. Several of Bush's
proposals - forfeiting pay, preventing executives trading shares during
closed periods, preventing analysts misleading markets - sound similar to
the Sarbanes programme.
But this, says LaFalce, is misleading. For example, the $100m SEC budget
increase is dwarfed by more than $700m proposed by Democrats. The
shredding proposals are a 'smokescreen' to keep attention on Andersen, not
Bush's Texas friends at Enron.
Instead of a catchy 'Swat team', Sarbanes proposes a prosaic but independent
Public Company Accounting Oversight Board. This will have the power to
inspect big accounting firms every year and investigate complaints about
firms. Companies should not be able to offer consulting to firms they audit.
He demands compulsory rotation of firms.
The controversy is set to rumble on, to the delight of Democrats. Sarbanes's
Bill is expected to clear the Senate next week, but it must then be combined
with weaker measures proposed in the 'Oxley' Bill from the
Republican-held House.
LaFalce indicates Bush's support for Oxley will be used to beat him. 'He
praised the House-passed Bill, which gave away everything. That revealed
his true colours.'
As a member of Sarbanes's staff said: 'My boss is not going to compromise on
this. And he has support - many in the House have come to us after
WorldCom, saying they now think we need tougher laws.'
Whatever happens, Bush will be portrayed as wobbly on this issue - one
where Democrats feel they can dent his gleaming post-9/11 popularity. And
for those who want to believe that the reason for Bush's lack of conviction is
chumminess with businesses that like to bend rules, the circumstantial
evidence is well known and easily available.
In the 2000 presidential election, WorldCom, for example, gave 70 per cent
of its $1.9m political donations to the Republicans. For Andersen it was 71
per cent of $1.4m. Enron - led by 'Kenny Boy' Lay - gave their buddy
$113,800 between 1989 and 2001, while Al Gore got $13,750. Enron
gave $300,000 to the Bush inaugural fund in 2001, and helped out with the
costs of the 2000 poll recount.
There is also the criticism over Bush's sale of $849,000 of shares in
Harken in 1991. Soon afterwards the company reported heavy losses and its
shares nearly halved. The SEC found no wrongdoing on Bush's part, but did
on the company's, of which Bush was a director.
It is not just Bush. Harvey Pitt, his choice as SEC head, has been ridiculed
for suggesting a 'kinder and gentler' approach to accounting issues last year,
before the Enron scandal broke. Pitt formerly worked in accountancy.
Then there is the Cheney lawsuit, dismissed as politicking by the White
House. Tom Fitton, president of Judicial Watch, which is bringing the case,
says: 'We believe Cheney ordered the change in accounting policy which
allowed this to happen... as CEO he has responsibility for what went on. They
should be taking these issues seriously but their response to our action
shows they're not.
'That's why the speech did not work. It didn't distract attention from the
issues at hand. He has got into it too late.'
The President's men
Thomas White: Army Secretary
White, a former Enron executive, sold $12m of Enron shares between June
and November last year. He was vice-chairman of Enron Energy Services,
implicated in manipulating electricity costs in the California power crises.
Paul O'Neill: Treasury Secretary
As former chief executive of Alcoa, the world's biggest aluminium company,
O'Neill receives an annual pension from the company of $926,000. Once in
office, he delayed selling his Alcoa shares, until they rose steadily by 30 per
cent.
Larry Lindsey: White House economic adviser
Was a paid Enron consultant still on payroll when devising Bush's economic
policies for the election campaign. Lindsey conducted an investigation into
the effect of the collapse of a major energy company on the economy just
before Enron's difficulties became known.
· Additional reporting by Lucy Ballinger
Special report
George Bush's America |
