Bush calls for stiffer penalties corporate criminals

Published 12:00 am Wednesday, July 10, 2002

BNI Newswire

President George Bush on Tuesday called for stiffer penalties for corporate criminals, but Democrats said he did not go far enough to help restore investor confidence and stem the tide of corporate wrongdoing.

"We have much to be confident about in America," Bush said. "Yet our economy and our country need one more kind of confidence ­ confidence in the character and conduct of all of our business leaders. The American economy today is rising, while faith in the fundamental integrity of American business leaders is being undermined. Nearly every week brings better economic news, and a discovery of fraud and scandal ­ problems long in the making, but now coming to light

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The business pages of American newspapers should not read like a scandal sheet."

Bush proposed a number of ways to deal with corporate scandals, including:

· A task force headed by the Justice Department to direct investigations, prosecutions and coordination between agencies in fighting corporate crime.

· Doubling to 10 years the maximum prison sentence for mail fraud and wire fraud.

· Longer prison sentences for corporate officers and directors

convicted of fraud.

Bush also urged Congress to give another $20 million to allow the Securities and Exchange Commission to hire 100 new enforcement officers and another $100 million in the next fiscal year for more officers and better technology.

Democrats, though, said that $100 million still falls below a proposal passed by a bipartisan committee in the House.

Democrats in general said the president’s speech was sincere but did not go far enough in proposing action to combat corporate crime.

"The test for the president today is not whether he shares the outrage that the workers and shareholders in these companies feel. I have no doubt he does," said Senate Majority Leader Tom Daschle, D-S.D. "The question is whether he is willing to take action on that outrage and support the legislation that will actually help solve the problem."

Bush, speaking on Wall Street, made some of his proposals directly to corporate officers and directors.

He called on CEOs to share how their compensation packages are in the best interests of their companies’ shareholders, for example, and asked companies to prevent officers from receiving loans from their companies.

Bush noted in his speech that most corporate officers are not the people targeted by his reforms.

"The vast majority of businessmen and women are honest," he said. "They do right by their employees and their shareholders. They not not cut ethical corners, and their work helps create an economy which is the envy of the world."

Nancy Young, vice president of communications and community relations for Alexander City-based Russell Corp., agreed that the scandals are only affecting a handful of companies.

"It is a horrible thing," she said of the scandals, led by Enron and WorldCom. "But when you look at 10,000 companies that are traded on the New York Stock Exchange, we’re talking about a very small percentage of companies."

And Russell, which has not seen its stock dip as the market reacts to each new scandal, is still hoping to reap some benefits from the situation, because its practices are clean, Young said.

"We’re thinking some of this is going to benefit us," she said. "We’re sitting back and waiting to see what kind of changes in regulations the SEC might have, and we will follow them. It’s basically a non-issue for us."

One of Bush’s proposals is that a majority of a company’s directors be barred from having a material relationship with the company. Young said of the 10-member Russell board, only one ­ CEO Jack Ward ­ is an employee, and only two have family ties to the company and its founders.