- The President started the week trying to save corporate
America. He ended it trying to save himself...
-
- 'My friends are crooks. The companies they run look corrupt.
The regulators I appoint are too soft. My colleagues in government face
lawsuits for fraud. But I'm going to solve corporate crime with some ass-kicking
laws. Hey, and trust me, I'm the President.'
-
- After a week in which markets globally were badly wounded
by the Dow - which fell 700 points, dragging the FTSE down by nearly 400
- it is clear that not only Americans but people around the world are in
no mood to take George W Bush and his promised crusade against corporate
corruption on trust. In fact, the attempt to appear tough on WorldCom,
Enron, Andersen and the rest ahead of mid-term elections in November turned
out disastrously.
-
- Day 1: Bush held a rare press conference to gain the
initiative ahead of his key Wall Street speech. Instead, he was rocked
onto the defensive over allegations concerning his own financial dealings
in the oil company Harken Energy.
-
- Day 2: In Tuesday's speech, Bush said 'too many corporations
seem disconnected from the values of our country'. He listed measures,
including a task force that would be a 'financial crimes Swat team', anti-shredding
laws, a $100m boost for the Securities and Exchange Commission, the forfeiture
of pay gained by deception, greater accountability for CEOs, and an increase
in prison terms for fraud to ensure 'those who breach the trust of the
American people are punished'. It read like a plea for credibility. It
was snubbed. Democrats, led by the presidential hopeful Tom Daschle, ridiculed
both the rhetoric and substance, highlighting Bush's refusal to endorse
a tough package of laws being proposed by a Democrat, Senator Paul Sarbanes.
Bush was the 'unconnected' one. As the Dow slid, a Democrat aide said:
'The markets clearly don't think he has gone far enough, and neither do
we.' Then it got worse.
-
- Day 3: Vice-President Dick Cheney was named in a civil
action against construction group Halliburton and its accountants Andersen.
The details of the contested action, in which Halliburton directors are
accused of colluding to inflate the company's earnings, read disturbingly
like the Enron case and follow the opening of a separate SEC investigation
in March.
-
- Day 4: It emerges that Bush received a low-interest loan
from Harken - something that WorldCom chief executive Bernie Ebbers (currently
under investigation) did, and which Bush said should be banned.
-
- Throughout all of this some critics made a direct link
to Bush and his well- known connections with rich business men, particularly
fellow Texans. Chuck Lewis of the Centre for Public Integrity, which investigates
links between politics and business, says: 'The reason that he does not
have credibility in trying to deal with big business is that in the public
mind he is seen as in their pockets.' New York Representative John LaFalce,
senior Democrat on the House of Representatives financial services committee,
says: 'He denied debate for the past year and a half - especially since
Enron - as the problems were beginning to surface, and did so very little.
Then because of WorldCom and because of growing sentiment against corporate
America and Wall Street, he felt compelled to do something. But neither
his words nor his demeanour on Tuesday had any credibility.' Republicans
retort that Bush's speech was tough. Several of Bush's proposals - forfeiting
pay, preventing executives trading shares during closed periods, preventing
analysts misleading markets - sound similar to the Sarbanes programme.
-
- But this, says LaFalce, is misleading. For example, the
$100m SEC budget increase is dwarfed by more than $700m proposed by Democrats.
The shredding proposals are a 'smokescreen' to keep attention on Andersen,
not Bush's Texas friends at Enron.
-
- Instead of a catchy 'Swat team', Sarbanes proposes a
prosaic but independent Public Company Accounting Oversight Board. This
will have the power to inspect big accounting firms every year and investigate
complaints about firms. Companies should not be able to offer consulting
to firms they audit. He demands compulsory rotation of firms.
-
- The controversy is set to rumble on, to the delight of
Democrats. Sarbanes's Bill is expected to clear the Senate next week, but
it must then be combined with weaker measures proposed in the 'Oxley' Bill
from the Republican-held House.
-
- LaFalce indicates Bush's support for Oxley will be used
to beat him. 'He praised the House-passed Bill, which gave away everything.
That revealed his true colours.'
-
- As a member of Sarbanes's staff said: 'My boss is not
going to compromise on this. And he has support - many in the House have
come to us after WorldCom, saying they now think we need tougher laws.'
-
- Whatever happens, Bush will be portrayed as wobbly on
this issue - one where Democrats feel they can dent his gleaming post-9/11
popularity. And for those who want to believe that the reason for Bush's
lack of conviction is chumminess with businesses that like to bend rules,
the circumstantial evidence is well known and easily available.
-
- In the 2000 presidential election, WorldCom, for example,
gave 70 per cent of its $1.9m political donations to the Republicans. For
Andersen it was 71 per cent of $1.4m. Enron - led by 'Kenny Boy' Lay -
gave their buddy $113,800 between 1989 and 2001, while Al Gore got $13,750.
Enron gave $300,000 to the Bush inaugural fund in 2001, and helped out
with the costs of the 2000 poll recount.
-
- There is also the criticism over Bush's sale of $849,000
of shares in Harken in 1991. Soon afterwards the company reported heavy
losses and its shares nearly halved. The SEC found no wrongdoing on Bush's
part, but did on the company's, of which Bush was a director.
-
- It is not just Bush. Harvey Pitt, his choice as SEC head,
has been ridiculed for suggesting a 'kinder and gentler' approach to accounting
issues last year, before the Enron scandal broke. Pitt formerly worked
in accountancy.
-
- Then there is the Cheney lawsuit, dismissed as politicking
by the White House. Tom Fitton, president of Judicial Watch, which is bringing
the case, says: 'We believe Cheney ordered the change in accounting policy
which allowed this to happen... as CEO he has responsibility for what went
on. They should be taking these issues seriously but their response to
our action shows they're not. 'That's why the speech did not work. It didn't
distract attention from the issues at hand. He has got into it too late.'
-
- The President's Men
-
- Thomas White: Army Secretary White, a former Enron executive,
sold $12m of Enron shares between June and November last year. He was vice-chairman
of Enron Energy Services, implicated in manipulating electricity costs
in the California power crises.
-
- Paul O'Neill: Treasury Secretary As former chief executive
of Alcoa, the world's biggest aluminium company, O'Neill receives an annual
pension from the company of $926,000. Once in office, he delayed selling
his Alcoa shares, until they rose steadily by 30 per cent.
-
- Larry Lindsey: White House economic adviser Was a paid
Enron consultant still on payroll when devising Bush's economic policies
for the election campaign.
-
- Lindsey conducted an investigation into the effect of
the collapse of a major energy company on the economy just before Enron's
difficulties became known.
-
- Additional reporting by Lucy Ballinger
|
