Dateline: 07/09/02

President Bush today called for enhanced criminal penalties, including longer jail terms and financial restitution for business executives found responsible for corporate scandals like those at Enron and telecommunications giant WorldCom. 

"At this moment, America's greatest economic need is higher ethical standards, enforced by strict laws and upheld by responsible business leaders," said Bush in a speech to the Association for a Better New York. "All investment is an act of faith, and faith is earned by integrity. In the long run, there's no capitalism without conscience; there is no wealth without character."

• Called for legislation to double the maximum prison terms for those convicted of financial fraud from five to 10 years
  
  
• Called for laws requiring corporate officers found guilty of criminal fraud to forfeit all monies gained as a result of their acts
  
  
• By Executive Order created a Corporate Fraud Task Force to provide oversight and enable improved inter-agency coordination of civil and criminal investigations
  
  
• Proposed tougher laws against against improper document shredding and other forms of obstruction of justice
  
  
• Asked Congress to strengthen the Securities and Exchange Commission (SEC) by giving it the power to freeze improper payments to corporate executives while a company is under investigation
  
  
• Called for an end to the practice of allowing corporate executives to secure loans from their own companies
  
  
• Challenged CEOs to comply with the spirit of existing disclosure rules by explaining how their compensation packages are in the best interests of their companies' shareholders, and describing in plain English in their companies' annual reports every detail of their compensation packages
  
  
• Urged Congress to pass his proposed $20 million funding increase for the SEC allowing the commission to hire 100 new enforcement officers this year, and to approve an additional $100 million in 2003 for more enforcement officers and upgraded technology
  
  
• Called on the stock markets to require that a majority of a company's directors be truly independent so that they have no material relationship with the company
  
  
• Called on the stock markets to require listed companies to receive shareholder approval for all stock option plans and to explain investment options in easily understandable terms. 

Additionally, the president demanded that stock analysts explain investment options to investors in honest, understandable terms, acting as trustworthy advisors, rather than merely as stock salespeople.

"'Buy' should not be the only word in an analyst's vocabulary. And they should never say 'hold' when they really mean 'sell,'" said Bush.

President Bush also proposed passage of a law requiring companies to provide workers with truthful quarterly reports about the value of their investments company stock, expand workers' access to sound investment advice, and allow them to build their retirement funds with stocks from outside the company.

"Responsible business leaders do not jump ship during hard times ... do not collect huge bonuses when the value of their company dramatically declines ... do not take on tens of millions of dollars in compensation as the company prepares to file for bankruptcy, devastating the holdings of investors," said Bush.

Calling for a "new ethic of responsibility," President Bush concluded by stating that through the changes he had proposed, "We will show that markets can be both dynamic and honest, that lasting wealth and prosperity are built on a foundation of integrity. By reasserting the best values of our country, we will reclaim the promise of our economy."

Senate Debates Corporate Reform Bill
On Monday, the Senate began debate on a bill designed to place tough restrictions on corporate accountants and auditors, and to place the accounting industry under federal regulation. 

After the stock market crash of 1929, Congress delegated private accounting firms to act as corporate "watchdogs" on behalf of investors. An arrangement that has turned out like the proverbial "fox in the henhouse," according to senators supporting the bill.

Under the bill, S. 2673 - The Public Company Accounting Reform and Investor Protection Act of 2002 - accounting firms would be banned, in most situations, from providing consulting services to those companies for which they also perform public audits. In addition, the bill requires corporations to change auditing firms periodically.

The bill also beefs up funding for the Securities and Exchange Commission (SEC), and creates a Public Company Accounting Oversight Board, to oversee the audit of public companies that are subject to SEC regulation.

McCain Calls for Resignation of SEC Chairman
U.S. Sen. John McCain (R-Arizona), called Monday for the resignation of SEC Chairman Harvey Pitt. McCain joined Senate Democratic leader Thomas Daschle (D-South Dakota), in accusing Pitt of failing to respond adequately to recent accounting scandals.

"While Mr. Pitt may be a fine man, he has appeared slow and tepid in addressing accounting abuses, and concerns remain that he has not distanced himself enough from his former clients," McCain wrote in a New York Times editorial.

"Government's demands for corporate accountability are only credible if government executives are held accountable as well," wrote Sen. McCain.

President Bush defended Pitt, saying he was making progress at cleaning up corporate accounting.

"The man [Pitt] barely got his uniform on, barely got a chance to perform, and now, for whatever reason, people think he ought to move on," Bush said. "Since I am the decision-maker, I'm going to give him a chance to continue to perform," said Bush, in a Monday press conference.