Brushing aside questions about his own record as a businessman, US President George W. Bush said on Monday he would propose tough new laws to crack down on corporate misconduct and give the Securities and Exchange Commission extra cash to investigate abuse.
"In the corporate world, sometimes things aren't exactly black and white when it comes to accounting procedures," Bush said in defending a controversial decade-old transaction at a Texas oil company where he served as a director.
But in proposing what he called "tough new laws and actions to punish abuses," Bush said he hoped to restore "consumer and investor confidence in our markets and in the integrity of corporate America" following scandals at telecom giant WorldCom Inc., Enron Corp. and other high-flying firms.
"Right now that confidence has been shaken," Bush said. Previewing policies, Bush vowed to close regulatory loopholes that allow corporate abuse and to enact federal laws to punish dishonest executives.
"We have a duty to every worker, shareholder and investor in America to punish the guilty, to close loopholes and protect employee pensions, and we will," Bush said.
Administration officials said Bush would recommend longer sentences for company officers who submit intentionally misleading financial statements. Currently they face fines and other civil penalties.
A proposal backed by Democrats would create a new crime for "any scheme or artifice" to defraud shareholders. Those convicted could be punished with a 10-year sentence.
While Bush expressed some reservations about a proposal by Sen. Paul Sarbanes, a Democrat from Maryland, to regulate the accounting industry, he said he was confident a compromise would be reached with Democrats.
Earlier on Monday, former WorldCom Chief Executive Bernard Ebbers and former Chief Financial Officer Scott Sullivan refused to testify before the House Financial Services Committee, exercising their right against self-incrimination.
Asked about the WorldCom case, Bush said: "It's pretty clear when somebody's trying to defraud... But everybody ought to have their day in court. We ought not to rush to judgment on every single case that comes up."
Ebbers was appointed by Bush in July 2001 to serve on the National Security Telecommunications Advisory Committee. The White House said WorldCom has been represented on the committee since 1997, and that Ebbers, as the company's former CEO, was the automatic designee.
In addition to proposing new criminal penalties, Bush said he would seek extra funding for the SEC. "I'll call for a stronger SEC, more investigators and more budget," he said.
Bush is under pressure to act decisively after Republican Senator John McCain of Arizona joined Democratic lawmakers in calling for the resignation of SEC Chairman Harvey Pitt, a former Wall Street lawyer whose clients included major accounting firms. McCain said Pitt's response to the crisis "appeared slow and tepid".
Bush countered that Pitt was making good progress, and urged lawmakers to give him a chance.
"The man 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."
By publicly taking a harder line on corporate crime, the first US president with a master's degree in business hoped to distance himself from recent boardroom scandals. Bankrupt energy trader Enron Corp. was one of Bush's biggest contributors.
Democrats say Republican policies have rewarded corporate greed at the expense of workers and investors.
Bush's own conduct as a businessman has been questioned since an internal SEC memo detailed his 34-week delay in reporting stock sales worth more than $1 million while serving as a director of Texas-based Harken Energy Corp. in 1990.
The SEC investigated whether insider information prompted Bush to sell Harken stock before company announced a $23 million loss in August 1990.
At the White House news conference, Bush also fended off questions about Harken's 1989 sale of its 80 per cent stake in Aloha Petroleum Ltd. In a later agreement with the SEC, Harken changed the way it accounted for the gain from the sale.
The SEC found no evidence of any wrongdoing, and Bush said that it was an "honest difference of opinion" over how to account for the transaction.
The White House is also worried about fallout from a probe of accounting practices at Halliburton Co., the energy company that Vice President Dick Cheney ran from 1995 to 2000. Army Secretary Thomas White is a former senior Enron executive, and other administration officials were Enron consultants.
By most accounts, the Republican president faces an uphill battle restoring confidence in US markets. The sell-off worsened on Monday amid revelations drug company Merck & Co. recorded revenues of $12.4 billion from its pharmacy benefits subsidiary that the unit never actually collected.
In March, Bush proposed measures to stop corporate abuses, but stopped short of backing tougher reforms advocated by lawmakers and his own treasury secretary.