Bush Seeks Stiff Corporate Penalties

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 U.S. 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."

Titters of knowing laughter rippled through the ballroom when Bush took after stock analysts who have misled clients in order to inflate stock prices. "'Buy' should not be the only word in an analyst's vocabulary, and they should never say 'hold' when they really mean 'sell,' " Bush said.

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 from a hotel ballroom on Wall Street.

"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 also wants to double the maximum prison term for mail fraud and wire fraud to 10 years, and strengthen laws criminalizing document shredding and other forms of obstruction of justice.

Bush released a 10-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 or the companies themselves. Bush would:

- Enhance the ability of the Securities and Exchange Commission to freezeimproper 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; and

- Ask 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.

Bush addressed the corporate scandals and their political implications for his administration at a White House news conference Monday.

He was bombarded by questions about his record as a director at Harken Energy 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 Monday, 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 $10 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 LLP 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 directors' 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.

Pressed to explain his eight-month delay in reporting such a sale on one occasion, Bush said, "I still haven't figured it out completely." Previously, he had said he thought regulators lost the documents. Last week, the White House called it a mix-up by lawyers.

Bush acknowledged that unscrupulous accountants could use some of his own explanations on internal "differences of opinion" about his company's accounting to justify improper decisions by corporations.

"Sure, this is a handy excuse," he said. "But good prosecutors and a strong SEC will determine the difference between what becomes a handy excuse by somebody willing to defraud, and somebody who has just a difference of opinion."

He said that in New York he would call for a "stronger SEC," one with 100 new enforcement officers, plus more investigators with $100 million more he asked Congress for.

Earlier this year, the White House proposed a "zero-growth" budget for the SEC that calls for staff reductions in securities fraud investigations.

Democrats were pouncing on the Harken history to promote their argument that Bush's strong financial and political ties to the business world undercut his credibility as a reformer.

"Bush and his economic team promising to crack down on corporate America is like letting the fox guard the henhouse," said American Family Voices, a group with ties to labor unions.

The organization was running TV commercials in Washington and New York reminding viewers of Bush's role at Harken.

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