President to take Wall Street to task
Former WorldCom execs take Fifth on Capitol Hill
WASHINGTON (CNN) -- President Bush heads to Wall Street on Tuesday packing a promise of "tough new laws and actions to punish abuses, restore investor confidence and protect the pensions of American workers."
In a White House press conference Monday, the president said tougher laws were necessary because U.S. economic growth was dependent on "consumer and investor confidence in our markets and in the integrity of corporate America."
But that confidence has been shaken by recent corporate scandals. (Allegations)
The president Tuesday is expected to call for criminal penalties -- including jail time -- for corporate leaders who knowingly misreport their companies' earnings. (Full story)
Also Tuesday, the Senate is to begin debate on a bill that would provide a framework to help ensure corporate responsibility, address conflicts of interest among stock analysts and create an independent board to oversee the auditing of public companies.
Hours before Bush spoke, former top executives of WorldCom were on Capitol Hill asserting their Fifth Amendment right not to answer questions about the downfall of their company after overstated profits became public. (Key players in WorldCom hearings)
Members of the House Financial Services Committee called past and current WorldCom executives to get to the bottom of a scandal that could bankrupt the No. 2 long-distance provider. (Full story)
Former Chief Executive Officer Bernard Ebbers, who ran WorldCom when it hid more than $3.8 billion in expenses, exercised his Fifth Amendment right against self-incrimination.
Scott Sullivan, fired as WorldCom's chief financial officer on the same day the telecommunications giant dropped its accounting bombshell, also took the Fifth.
Both Ebbers and Sullivan told panel members their attorneys had recommended they not testify.
WorldCom disclosed last month that it improperly disguised expenses as profits. The Securities and Exchange Commission has filed a suit against the company, alleging fraud.
Democrats and Republicans say tougher penalties on rogue executives are needed to calm jittery investors.
"As soon as one or more of these major corporate figures is indicted and convicted for the thievery that occurred at the expense of the American investor, I think confidence will gradually come back," said U.S. Rep. Billy Tauzin, R-Louisiana, chairman of the House Energy and Commerce Committee.
In his speech Tuesday, Bush is expected to highlight proposals he already has unveiled, including giving the SEC the authority, without going to court, to ban corporate officers who abuse their power from serving on corporate boards, a senior Bush administration official said.
The president also will describe the SEC's efforts to seize any financial gains that corporate leaders make based on fraudulent information.
Bush is expected to say that the excesses of the 1990s -- during the Clinton administration -- contributed to corporate abuses, a point his economic team has made in recent weeks, a senior administration official said.
SEC chairman on the defensive
Members of both parties have singled out SEC Chairman Harvey Pitt, a former securities industry lawyer whose clients once included the now embattled accounting firm Arthur Andersen.
The White House has vigorously defended him, claiming Pitt has been doing a "great job," but some lawmakers disagree.
In an op-ed piece in Monday's New York Times, Sen. John McCain, R-Arizona, a frequent critic of the White House, said Pitt's resignation should be one of the first steps to improve investor confidence after a string of Wall Street scandals.
"While Mr. Pitt may be a fine man, he has appeared slow and tepid in addressing accounting abuses, and concerns remain he has not distanced himself enough from former clients," McCain wrote.
Senate Majority Leader Tom Daschle criticized what he termed a "cozy, permissive relationship" between the SEC chairman and big business. (Full story)
Democrats have raised questions again about Bush's controversial sale of Harken Energy Corp. stock in 1990 when he was on the company's board of directors. The sale came two months before the company disclosed a major loss.
Asked whether the administration would release the SEC file, White House press secretary Ari Fleischer said the matter is an old issue that the president's political opponents are trying to use against him.
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