- The Washington Times - Friday, March 8, 2002


President Bush, with Enron in mind, lectured big business yesterday about fairness in financial dealings and proposed reforms aimed at keeping companies honest.

"You have a responsibility to obey the law and tell the truth," Mr. Bush said as he handed out the Malcolm Baldrige National Quality Awards, which honor companies for their sound business practices.

Mr. Bush released a 10-point plan that bundled various proposals made recently by lawmakers and by Harvey Pitt, head of the Securities and Exchange Commission (SEC). He advocated creating an independent regulatory board under the supervision of the SEC to develop standards of professional conduct and competence. The board would monitor, investigate, enforce ethics standards and punish violators.

Mr. Pitt, who was appointed by Mr. Bush, proposed a new private-sector body to regulate the accounting profession. It would be dominated by executives and analysts from outside the accounting industry.

Under Mr. Bush's proposal, the government would bar external auditors from performing any other services, such as consulting, for the same corporate client if that other service compromises the independence of the audit. Some of Mr. Bush's proposals would require new laws; others simply could be implemented by the SEC.

Democrats immediately decried Mr. Bush's effort as insufficient.

"It falls short of what I think would have to be the minimum standards," said Senate Majority Leader Tom Daschle, South Dakota Democrat. Specifically, Mr. Daschle said, Mr. Bush did not suggest penalties.

Sens. Christopher J. Dodd, Connecticut Democrat, and Jon Corzine, New Jersey Democrat, put forward legislation yesterday that would, among other things, bar accounting firms from also performing significant consulting services for companies whose books they would audit.

"I would hope that the president would work with the Congress on a bipartisan basis to put real teeth into his proposal so we can guarantee substantive reform, not cosmetics," said Rep. John J. LaFalce, New York Democrat, ranking member of the House Financial Services Committee, who also has proposed legislation.

Mr. Bush clearly wanted to contain the damage of ties to Enron, the Houston-based energy trading company that hid more than $1 billion in debt while its auditors endorsed financial statements riven with distortions. The company gave campaign donations to both Republicans and Democrats.

Without ever referring to the players in the Enron debacle by name, Mr. Bush called on the federal government to prevent ill-gotten bonuses by company chief executives and create an agency to monitor the accounting industry.

"In America, by far most businesses fulfill their responsibilities. They do not cut ethical corners, or neglect workers, or disregard community standards," Mr. Bush said. "We have seen lately just how important these standards are, and the harm that can follow when they are ignored."

He continued: "Exactly where the blame lies may take a long time to determine, and legal judgments are for regulators and for courts. But this much is clear: To properly inform shareholders and the investing public, we must adopt better standards of disclosure and accounting practices for all of corporate America."

Enron entered into the largest corporate bankruptcy in U.S. history on Dec. 2. Congress, the Justice Department and the SEC were investigating practices by Enron and its longtime auditor, the accounting firm Arthur Andersen LLP, that led to the collapse.

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