White House backs corporate fraud enforcer
WASHINGTON (CNN) -- The Bush administration expressed confidence Saturday in the president's choice to lead a corporate fraud crackdown despite reports that he served on the board of a company that paid $400 million to settle fraud allegations.
Deputy Attorney General Larry Thompson, the head of the new corporate fraud task force, was an outside director of Providian Financial Corp. from 1997 until he took his post in the Justice Department in 2001. The San Francisco-based company specialized in lending to people with weak credit.
In June 2000, it agreed to pay settlements of more than $300 million with the Office of the Comptroller of the Currency, the San Francisco District Attorney's Office and the Connecticut Attorney General's Office over charges that its credit card customers were assessed hidden fees and that interest rates on cards weren't accurately disclosed.
Providian also settled a class action lawsuit related to the same charges, as well as another stockholder suit that claimed its financial statements were inaccurate because of questionable businesses practices. The company admitted no wrongdoing but agreed to change its business practices.
Justice Department spokesman Mark Corallo told CNN that Thompson learned of the problems only when regulators began to make inquiries and that he personally worked to resolve them.
"As soon as he was aware of the issues, he personally took the lead in making the company do the right thing, and it was his personal efforts that were a driving force in the company's settling over $400 million and in implementing internal reforms and compliance measures," Corallo said Saturday.
Thompson also disclosed all of his financial activity to the Senate Judiciary Committee during the confirmation process after he was nominated for the Justice Department's No. 2 post, Corallo said. The committee unanimously recommended Thompson's confirmation.
The Washington Post reported Saturday that after his confirmation, Thompson sold his holdings in Providian for nearly $5 million to comply with federal ethics rules.
President Bush announced a series of reform proposals Tuesday in a speech on Wall Street and called for higher ethical standards for corporate America.
Saturday, White House spokesman Gordon Johndroe reiterated Bush's confidence in Thompson, saying "the president thinks Deputy Attorney General Thompson will do an excellent job leading this task force."
Bush calls for reform, but questions linger
Bush's Tuesday speech came following a series of corporate scandals involving the energy trader Enron Corp., accounting giant Arthur Andersen and telecommunications firms Global Crossing and WorldCom.
But Bush has faced questions himself about his 1990 sale of Harken Energy Group stock when he was a director of the company. The Securities and Exchange Commission investigated the matter and decided to take no action against him.
Bush also took out a $180,000 loan from Harken while serving on the board, a business practice he is seeking to ban. But White House spokesman Ari Fleischer dismissed the renewed focus on Bush's tenure on the Harken board Friday.
"After a week of noise about nothing, people are seeing a scandal-seeking Washington that's out of touch with a solution-seeking nation," he said.
He stressed the need to clean up Wall Street in his weekly radio address Saturday.
"Perhaps the greatest need for our economy at this moment is restoring confidence in the integrity of the American business leaders," he said. "Nearly every week brings news of greater productivity or strong consumer spending, but also a discovery of fraud or scandal, problems long in the making now coming to light." (Full story)
But a CNN/Time poll conducted July 10-11 found that 49 percent of people surveyed did not think the president's reform policies go far enough, while 27 percent do. And Democrats used their weekly radio address to discuss the corporate scandals and said the president's plan won't solve the problems.
"It's time we put some teeth into protecting employees and investors from these corporate misdeeds and hold the wrongdoers accountable," said Rep. David Phelps, D-Illinois. (Full story)
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