NEW YORK, July 9 (UPI) -- President George W. Bush Tuesday delivered a stern message to America's corporate executives, calling for a new ethic of responsibility to shareholders, proposing longer jail sentences for those who defraud investors, and establishing a "financial crimes SWAT team," to investigate and prosecute corporate malefactors.
"America's greatest economic need is higher ethical standards," Bush told 1,500 business leaders in the ornate grand ballroom of the Regent Wall Street Hotel, in the heart of New York's financial district.
He said the recent spate of corporate scandals -- including the collapse of Enron, and WorldCom's difficulties -- have not only touched the companies directly affected, but by shaking confidence in the stock market, have damaged the whole U.S. economy.
"They have hurt the stock market. And worst of all, they are hurting millions of people who depend on the integrity of businesses for their livelihood and their retirement, for their peace of mind and their financial well-being."
The president's speech -- delivered only a block away from the New York Stock Exchange -- follows weeks during which the WorldCom Inc. debacle came to overshadow even the G8 world leaders' summit in Calgary, and several days in which his own conduct as an executive of the Harken energy company more than a decade ago has come under renewed scrutiny.
Saying, "self regulation is important, but it is not enough," Bush announced the creation of what he called "a financial crimes SWAT team" led by Deputy Attorney General Larry Thompson -- a corporate fraud task force within the Justice Department to investigate and prosecute corporate crime.
He also called on Congress to double the maximum sentences available under mail and wire fraud statutes -- often used to prosecute corporate fraudsters -- to strengthen laws against document shredding and other obstruction of justice and to provide more funds for the Securities and Exchange Commission, the nation's most important corporate watchdog.
But congressional Democrats said they were disappointed the president did not go further, and others criticized his failure to endorse by name the bill promulgated by Sen. Paul Sarbanes, D-Md.
"His plan fails to create a new securities fraud penalty," Judiciary Committee Chairman Sen. Patrick Leahy, D-Vt., told reporters on Capitol Hill shortly after the speech.
"If you call for penalties that are indirect, that are hard to prosecute, or using mail, wire fraud statutes, that's not going to work ... As an old prosecutor, I know you do a much better job if you don't have to jury-rig a law to fit the crime," Leahy said.
For his part, Bush made it clear he wanted to strike a balance between regulating against fraud and choking off corporate initiative. "Reforms should demand integrity without stifling innovation and economic growth," he said.
Ultimately, while tougher laws and tighter regulations will help, Bush said the ethics of American business depend on the conscience of America's corporate leaders, who must know the difference "between ambition and destructive greed, between justified risk and irresponsibility, between enterprise and fraud."
Fleshing out that call to character, the president said he would "challenge every CEO (chief executive officer) in America to describe in the company's annual report -- prominently, and in plain English -- details of his or her compensation package, including salary and bonus and benefits."
Bush also "challenged" the board members of public companies to scrutinize the compensation packages of their executives more closely, ensure that auditors were not "beholden" to CEO's and end the practice of lending money to corporate officers.
Bush also restated the central tenets of his ten-point accountability plan -- issued in March in the aftermath of the Enron collapse last year.
The plan would require chief executive officers to personally vouch for their firms' annual financial statements, strengthen the rules against auditors' conflicts of interest and institute tougher treatment for executives who mislead investors about the state of their companies finances.
Under the plan, Bush said, executives who "violate the public trust" or otherwise abuse their power should be banned from holding office in public companies for life, and should have to give back anything they earned through deceit -- a process known as "disgorgement."
Bush traveled to New York along with his two top economic cabinet members, Commerce Secretary Don Evans and Treasury Secretary Paul O'Neill. But also in the audience were the New York Mayor Michael Bloomberg, Sen. Hillary Rodham Clinton, D-N.Y., and Rep. Charles Rangall, D-N.Y. Governor George Pataki was attending a funeral of a slain state trooper and was not present.
After the president's address, former New York Mayor Ed Koch seemed pleased with Bush's proposals but pointed out that corporations do not commit crimes, people do.
" If every attorney general we have as a rule when we indict a corporation, put those people in jail, you can bet they'll never do it again," said Koch.
New York State Comptroller -- and Democratic contender for the state Governor's race -- H. Carl McCall said he was disappointed with certain aspects of Bush's speech.
"He could have gone further," said McCall, adding that Bush's remarks were a good starting point.
In particular, McCall said he was dismayed that Bush did not openly back the Sarbanes bill currently before the senate.
Instead, Bush praised an alternative bill -- seen by critics as weaker than the Sarbanes proposal -- authored by Rep. Michael G. Oxley, R-Ohio, and recently passed by the House.
"The House of Representatives has passed needed legislation to encourage transparency and accountability," Bush said. "The Senate also needs to act quickly and responsibly, so I can sign a good bill into law."
Monday, Bush made clear that he and Sarbanes "share the same goals," but added, "My concern on the Sarbanes bill is that there's overlapping jurisdiction, which will make it harder to enforce rules and regulations, not easier. If you have overlapping jurisdiction, it creates confusion as to who is in charge of what. But I'm confident we can work that out. I am."
