- The Washington Times - Wednesday, July 31, 2002

President Bush yesterday signed into law new legislation to increase penalties for accounting fraud and to provide new tools to prosecute corporate corruption, warning business executives that there will be "no more easy money for corporate criminals, just hard time."
In a brief ceremony in the White House's East Room, attended by Bush administration economic advisers and congressional leaders, the president said the federal government was forced to step in to restore confidence to investors.
"Now, with a tough new law, we will act against those who have shaken confidence in our markets, using the full authority of government to expose corruption, punish wrongdoers and defend the rights and interests of American workers and investors," Mr. Bush said.
Demands for new corporate-accountability laws took political center stage recently as major U.S. companies divulged questionable and in some cases illegal accounting practices. The admissions drove the Dow Jones Industrial Average down by hundreds of points as jittery investors bailed out.
Mr. Bush traversed the country during the past few weeks in an unsuccessful attempt to allay market fears, but this week, with the bill having passed Congress and with Mr. Bush's signing imminent, markets have rebounded some.
The Dow closed down 32 points, or 0.4 percent, at 8,680. During the previous four sessions, the Dow had regained 1,010 of the 2,651 points lost in more than two months of selling.
Broader stock indicators closed modestly higher. The technology-focused Nasdaq Composite Index advanced 9 points, or 0.7 percent, to 1,344, while the Standard & Poor's 500 index rose 3.8, or 0.4 percent, to 903. It was the S&P;'s first close above 900 in nearly two weeks.
Paramount for the president was showing Americans that he intended to rein in corporate executives, some of whom sold off millions in stocks as company workers' shares were frozen.
"Free markets are not a jungle in which only the unscrupulous survive or a financial free-for-all guided only by greed. The fundamentals of a free market buying and selling, saving and investing require clear rules and confidence in basic fairness," Mr. Bush said.
Sen. Paul S. Sarbanes, Maryland Democrat and co-sponsor of the bill, said he hopes the new law "will begin to calm the economic situation and provide a framework within which we can move forward and assure our investors, both at home and abroad, that they can count on the American capital markets to reflect fairness and integrity and transparency."
House Speaker J. Dennis Hastert, Illinois Republican, said he hopes the law "is another step toward that goal of boosting consumer and investor confidence."
But House Minority Leader Richard A. Gephardt, Missouri Democrat, said the law does not go far enough.
"While I am encouraged by today's White House ceremony, I am convinced that real reform will require enactment of a broader set of legislative initiatives to reward hard work with fair play and create accountability and transparency in all of our economic institutions," he said in a statement.
Another key economic indicator, however, bore some bad news yesterday as the Consumer Confidence Index fell to its lowest level since February, when the index dropped during congressional hearings on the Enron scandal.
The Conference Board, the private research group that conducts the survey, said the decline reflected worries about the struggling stock and job markets.
The figure is closely watched, because consumer spending, which accounts for two-thirds of the economy, is viewed as crucial if a recovery is to continue.
White House spokesman Ari Fleischer said the economy is "solid" by many measures, including economic growth, low interest rates and inflation.
But, he said, "There's no question that there are some worrisome signs, like consumer confidence, and that's why the president has called on the Congress to complete its action" on such measures as legislation that would grant Mr. Bush broader powers to negotiate international trade pacts.
At the signing ceremony for the corporate-responsibility bill, the president had a message for top company executives.
"This law says to every dishonest corporate leader, you'll be exposed and punished. The era of low standards and false profits is over," he said.
"Tricking an investor into taking a risk is theft by another name. Corporate executives must set an ethical tone for their companies. They must understand the skepticism Americans feel and take action to set clear standards of right and wrong."
But Mr. Bush also said the law says:
"To honest corporate leaders: Your integrity will be recognized and rewarded because the shadow of suspicion will be lifted from good companies that respect the rules."
"To corporate accountants: The high standards of your profession will be enforced without exception. The auditors will be audited. The accountants will be held to account."
"To shareholders: The financial information you receive from a company will be true and reliable, or those who deliberately sign their names to deception will be punished."
"To workers: We will not tolerate reckless practices that artificially drive up stock prices and eventually destroy the companies and the pensions and your jobs."
"To every American: There will not be a different ethical standard for corporate America than the standard that applies to everyone else. The honesty you expect in your small businesses or in your workplaces, in your community or in your home will be expected in force in every corporate suite in this country."
The new law creates a Public Company Accounting Oversight Board, complete with subpoena power, which the White House said will "enhance the standard-setting process for accounting practices."
The law also tightens regulation of companies' financial reporting and adds criminal penalties and prison terms of up to 25 years for corporate fraud and document shredding.
It imposes restrictions on accounting firms that do consulting work for corporations whose books they audit, requires top company executives to vouch for the accuracy of their companies' reports and creates rules designed to prevent conflicts of interest for financial analysts.
Mr. Bush said the spate of corporate corruption cases "has struck at investor confidence, offending the conscience of our nation."
"There will not be a different ethical standard for corporate America than the standard that applies to everyone else. No boardroom in America is above or beyond the law," he said.


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