SEC Chief: Criminal Charges Appropriate For Those Who Caused WorldCom Scandal

Harvey Pitt, chairman of the Securities and Exchange Commission, commented as the agency prepared to make public a report by WorldCom, a telecommunications giant, detailing its financial condition.

"We think the American public is entitled to a full accounting of what went wrong here," Pitt said on NBC's '"Today."

"I don't want to prejudge any case but ... from what I've heard, I'm outraged. The American public is outraged. Criminal charges may be too good for the people who brought about this mess," Pitt said.

WorldCom disclosed last week that it disguised nearly $4 billion in expenses to make earnings appear greater. The company has laid off thousands and seen its stock become almost worthless and is on the verge of bankruptcy.

The company's woes, coming on the heels of major accounting problems with Enron, the big Arthur Andersen auditing firm and Xerox, has traumatized stock markets. Pitt said Sunday that if the WorldCom report is truthful 'and people get to know at least what the circumstances are, then we'll have an informed market, and there won't be insiders who can play games with the unsuspecting public.'

The SEC filed civil fraud charges and gave WorldCom, based in Clinton, Miss., until Monday morning to file a detailed report on the 'circumstances and specifics of these matters.'

"If there's even an iota of false statement in there, people will pay heavily," Pitt said on ABC's 'This Week.'

President Bush appears to have left open the possibility of a criminal investigation, pledging Friday that the Justice Department will "hold people accountable" for mismanaging their companies through deceit and corruption.

Bush plans to address the issue more fully in a speech July 9. Advisers are prepared to recommend that he propose new criminal penalties for corporate executives who certify misleading financial statements, a senior aide has said.

A Democratic-written bill to tighten oversight of the accounting industry with a new private-sector body is expected to reach the Senate floor after Congress returns from its July Fourth recess.

The White House has said the president might support the legislation if it is changed to give the SEC greater administrative authority.

"What we want is a much tougher set of rules that is subject to the SEC's oversight and jurisdiction, and that's the way we hope ultimately the Senate bill will go," Pitt said Sunday. "I want the toughest, most pragmatic approach that we can take."

Xerox announced Friday that it improperly recorded billions of dollars more revenue in the past five years than the SEC had estimated when it took enforcement action against the company this spring.

"We're not finished with the Xerox case," Pitt said. "Everyone who may have been involved is still under investigation. And before much longer, we're going to make all of them responsible for what they've done."

The SEC also is investigating Halliburton for its accounting practices in 1998, when Vice President Dick Cheney was its chief executive.

Asked if the administration's tough stand on the responsibility of corporate bosses would apply in that case, Pitt said: "We don't give anyone a pass. If anybody violates the law, we go after them."

Seeking to prevent future abuses, the SEC on Thursday ordered large companies to provide sworn statements from their chief executive officer and chief financial officer certifying the accuracy of financial reports.

The SEC also has sought to prevent the destruction of documents by WorldCom and payouts to company executives while the commission investigates.

WorldCom, second to AT&T in the long-distance market, grew from a small telephone company into one of the telecom industry's biggest players through more than 60 acquisitions over the past 15 years.

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