Bush says law means 'hard time' for corporate crooks

Patricia Wilson, Reuters, Washington

Hoping to restore investor confidence after a wave of boardroom scandals, U.S. President George W. Bush vowed "hard time" instead of "easy money" for corporate crooks on Tuesday as he signed a law that quadruples penalties for accounting fraud.

But just hours after the signing ceremony, lawmakers and congressional aides warned that Bush may already be trying to roll back provisions that protect whistle-blowers who come forward with allegations of fraud. "This is disturbing," said Sen. Charles Grassley, an Iowa Republican.

The new law, largely written by Maryland Democratic Sen. Paul Sarbanes and designed to make it harder for company executives to deceive investors, was spurred by weak stock markets, voter anger and approaching congressional elections.

The legislation was far tougher than measures proposed by Bush, who has been questioned about his own stock sales and a low-interest loan he accepted while he was an outside director at Harken Energy Corp more than a decade ago.

Challenged by the perception that his administration is too close to big business, Bush was under pressure to sign the tougher law quickly amid public outrage at recent staggering stock market losses and fear that his fellow Republicans could face political repercussions at the ballot box on Nov. 5, 2002.

"No more easy money for corporate criminals. Just hard time," Bush promised as he signed the measure in an elaborate White House East Room ceremony attended by about two dozen key Democrats and Republicans, but few corporate CEOs.

The legislation creates a new oversight board for the accounting industry, until now a largely self-regulated profession implicated in a series of corporate meltdowns ranging from Enron Corp. to WorldCom Inc..

Only months ago, the drive to reform corporate America looked to be stymied, with industry successfully lobbying to block reforms in Congress and Bush insisting that a few bad apples among CEOs were to blame.

But revelations of huge accounting errors at WorldCom in June and a 1,200-point plunge in the Dow Jones industrial average earlier this month galvanized lawmakers to pass a tough bill and forced Bush into embracing it. Both Congress and the White House feared the wrath of voters whose retirement savings were savaged by the market's decline.

Maximum jail time for executives who commit mail or wire fraud is quadrupled to 20 years. The bill establishes a new crime of securities fraud with a maximum sentence of 25 years and increases funding for the Securities and Exchange Commission, the government's corporate watchdog.

The law also includes provisions protecting employees of publicly traded companies when they take "lawful acts" to assist federal regulators, law enforcement agencies, as well as "any member of Congress or any committee of Congress."

But in a statement issued late on Tuesday, Bush said these protections would apply to whistle-blowers who provide information to congressional committees conducting investigations, and not necessarily individual lawmakers.

Key lawmakers said this interpretation could amount to a rollback of what Congress intended to protect whistle-blowers from retaliation. "I would hope the administration is not beginning to water down the law within hours of the president's signing it," said Senate Judiciary Committee Chairman Patrick Leahy, a Vermont Democrat.

Democratic Party Chairman Terry McAuliffe said as well as calling for more arrests, the president should call for greater disclosure by corporate executives and urged Bush to set an example by releasing all documents relating to the SEC's investigation of Harken.

Bush said corporate corruption had struck at investor confidence, the sell-off in stocks has fueled fears of another economic downturn, and offended "the conscience of our nation."

"This law says to corporate accountants the high standards of your profession will be enforced without exception," Bush said. "The auditors will be audited. The accountants will be held to account."

Bush signed the bill a day after a new CNN and USA Today Gallup poll showed his economic approval rating slipping, although his overall job approval rating remained strong, amid a growing impression that the president values big corporations over ordinary Americans.

The poll also showed Democrats gaining an edge over Republicans in handling of the economy and in voter preference for congressional seats, key gauges ahead of November elections to determine control of both houses of Congress.

"My administration pressed for greater corporate integrity, a united Congress has written it into law, Bush said.

"There will not be a different ethical standard for corporate America than the standards that applies to everyone else ... No boardroom in America is above or beyond the law."

With questions lingering over Bush's stock sales and loans while at Harken, and the SEC investigating accounting practices at the Halliburton oil-services firm during Vice President Dick Cheney's tenure as chief executive, Bush is in an awkward position in convincing voters he is serious about cracking down on abuses by big business.

The legislation bans insider loans like the ones Bush received in 1986 and 1988 from Harken. The SEC in 1991 investigated Bush's 1990 sale of Harken shares, before the company reported large losses, and ended the probe without taking action.