WASHINGTON, June 29 (UPI) -- President George W. Bush used his traditional Saturday radio address to reassure Americans that the economy "remains fundamentally sound" in the wake of WorldCom Inc.'s disclosure last Tuesday that it hid nearly $4 billion in expenses so it could show investors a profit.
But Bush's statement came as both the White House and the Democrats recognized that WorldCom Inc. and more than a score of other corporate reports or allegations of malfeasance moved boardroom scandals to center stage with the earmarks of a major political as well as a financial crisis.
Only Friday, Xerox Corp. said accounting errors forced it to restate $6.4 billion in revenue for the past five years, more than twice the $3 billion the company estimated when it settled fraud charges with Securities and Exchange Commission.
"Despite recent abuses of the public trust," Bush said, "our economy remains fundamentally sound and strong, and the vast majority of business people are living by the rules."
In his radio address, Bush acknowledged that "a few bad actors can tarnish our entire free enterprise system" and called for rules and laws "that restore faith in the integrity of American business."
He pledged that his administration will fully investigate corporate fraud and "hold the guilty parties accountable" and said "executives who commit fraud will face financial penalties, and, when they are guilty of criminal wrongdoing, they will face jail time."
WorldCom's plight renewed criticism of the Bush administration's willingness to crack down on white collar criminals and SEC Chairman Harvey Pitt's ability to regulate the securities industry.
Democrats searching for a campaign issue for the November elections have seized on corporate malfeasance. And even Republicans are anxious, two strategists said privately, that Bush grab the reins and convince Americans their interests are being protected.
Bush was certainly mindful of a Pew Foundation poll taken on Wednesday and Thursday, after WorldCom stunned investors, that showed 62 percent of 1,212 adult sampling thought he could be doing more to help the economy. In January, for instance, only 46 percent thought so.
Senate Majority Leader Tom Daschle, D-S.D., Friday said, "It's time to abandon this laissez-faire attitude and take action... The SEC and Justice Department need to do more to aggressively and consistently investigate and prosecute cases of corporate fraud."
On Saturday, Bush reiterated the 10-point program to tighten business standards that he proposed in March as the Houston-based Enron Corp.'s scandal was blossoming.
He called for executives to lose bonuses or other financial rewards if the company's accounting is not "above board."
"If accounting practices make the company appear to be more successful than it actually is, Bush said, "corporate executives should lose their phony profits gained at the expense of employees and stockholders."
He also called in March for corporate officers who were proven to have violated their trust to be barred from assuming similar responsibilities.
"Since my call for action," Bush said, the SEC "has sought to take away profits of senior executives of four different companies" and endeavored to bar 54 officers and directors.
Bush reminded the listeners that during the Enron scandal he also proposed more safeguards for investments and retirement programs.
The president, the White House said, would deliver a major address on July 9 calling for corporate responsibility and asking for the enactment of several proposals he made after the collapse of Enron.
The problem for Bush and his SEC chairman is the enormous similarity between the WorldCom collapse and Enron's. Like Enron, WorldCom allegedly manipulated its earnings to hide losses, keeping it in line with Wall Street's expectations and keeping its stock price artificially inflated. The falsified statements covered all of 2001 and the first quarter of 2002, which would indicate that hundreds of internal financial reports needed to be falsified.
To make matters worse for the regulators, the accounting firm that handled these reports was Arthur Andersen LLP, which earlier this month was convicted of obstruction of justice in Enron case.
The SEC filed fraud charges against WorldCom on Wednesday, charging that senior management had directed the scheme to hide the $3.8 billion in losses. Pitt said he was moving to avoid destruction of records as had happened in the Enron case, but there were reports that records already may be missing.
WorldCom's chief executive officer, John Sidgmore, told Bush in a letter released Friday that he was "surprised and outraged" about the disclosure and committed his company to work with the president and federal investigators. Though Sidgmore had been with WorldCom since the merger in 1999, he had recently taken over as CEO. Financial analysts reported that there was massive infighting among the three top men, Sidgmore, Bernie Ebbers and Scot Sullivan.
Sullivan, Sidgmore said in an interview, admitted manipulating the company's books and resigned. Ebbers was forced out earlier this year.
In March, Bush proposed to require chief executives to personally attest to the company's financial statements and disclose their purchases of stock more quickly. Pitt only last week put into effect the requirement that executives swear to the accuracy of the figures which would open them up to perjury charges.
Pitt, who was a lawyer and lobbyists for the accounting industry, has been accused of being too close to the industry he is charged with regulating and his slowness to invoke the Enron protections is under criticism. But Congress too shares criticism, where lobbying by the energy industry and the accounting industry has delayed many of the reforms proposed in the House and Senate.
Daschle said a bill by Sen. Paul Sarbanes, D-Md., to reform those practices would be taken up after the Fourth of July recess.
