Bush Defends Chief of SEC, His Own Sale of Energy Stock

President Bush on Monday stood by the besieged chairman of the Securities and Exchange Commission while rejecting suggestions that his own past business conduct may rob him of credibility.

During a news conference, Bush found himself repeatedly on the defensive on the eve of his long-awaited speech on Wall Street, in which he is expected to demand tougher penalties against dishonest executives and give the SEC significantly more money to investigate illegal business practices.

SEC Chairman Harvey L. Pitt has come under fire for not taking tougher and more timely actions against corporate wrongdoers. But Bush said he has no intention of heeding calls for Pitt’s ouster.

“Pitt’s doing a fine job,” the president said.

Much of the news conference focused on Bush’s own record as a businessman. In recent days, new questions have arisen about his tardiness, by eight months, in reporting to the SEC his sale of nearly $850,000 worth of stock in a Texas-based energy firm 12 years ago. Just weeks after Bush sold the stock, its value plummeted.

The president flatly refuted the notion that he had sought to enrich himself improperly by engaging in insider trading or sought to hide the stock transaction. He noted that before the deal occurred, he had properly filed with the SEC an intent-to-sell notice.

The White House last week, in a new explanation of why Bush was late in filing the required post-sale report with the SEC, cited “a mix-up with the attorneys.” That contradicted Bush’s statements in past years that he had indeed filed the report and that the SEC must have lost it.

Bush also counseled against a rush to judgment in the current scandal atmosphere, saying that there can be genuine differences of professional opinion--as in the case of his 1990 sale of 212,140 shares of stock in Harken Energy Corp. and a dispute over the company’s accounting practices.

“All I can tell you is--is that in the corporate world, sometimes things aren’t exactly black and white when it comes to accounting procedures,” the president said.

Bush on Monday blamed the renewed focus on his business dealings as “old politics.” He added: “This was fully looked into by the SEC, and there’s no there there.”

When Bush sold his stock, it was worth $4 a share. It subsequently fell to about $1 per share, but later rebounded.

Bush noted that 14 months after the sale, “the person who bought my stock could have sold it for 8 [dollars]--could have doubled his or her money.”

In a preview of his remarks today in New York, Bush said the proposals he will unveil are intended to restore investor confidence in corporate America. He warned that the recent spate of scandals could cause the public to “lose confidence in the free enterprise system,” making clear his concern that the misdeeds could undermine the U.S. economy.

“If people lose confidence in the system, it will be hard to attract capital in the markets,” Bush said. “And that’s one reason I’ve reacted so steadily against what I have seen. And I don’t like it a bit, and I’m going to talk about it” today.

Bush also argued anew that the rash of high-profile cases of corporate accounting abuses and questionable financial practices does not suggest a systemic problem.

“I think by far the vast majority of CEOs in America are good, honorable, honest people who have nothing to hide and are willing to let the true facts speak for themselves,” he said.

“It’s the few that have ... created the stains that we must deal with.”

Bush made his comments in a wide-ranging news conference shortly after returning from a long holiday weekend in Kennebunkport, Maine.

His news conference came on the same day a congressional hearing probed WorldCom Inc.’s recent report of a $3.9-billion accounting irregularity. It was that report that set off the renewed focus on corporate wrongdoing and may have provided the impetus for passage of business reform legislation that had been stalled on Capitol Hill.

At Monday’s hearing by the House Financial Services Committee, lawmakers threatened former WorldCom Inc. Chief Executive Bernard J. Ebbers with contempt for refusing to testify and called for jail time for others involved in the phone giant’s accounting scandal.

Also on Capitol Hill, Sen. John McCain (R-Ariz.) joined the ranks of those calling for Pitt’s resignation, saying that the Bush-appointed SEC chairman has seemed “slow and tepid in addressing accounting abuses.”

Numerous lawmakers, mostly Democrats, have leveled similar accusations against the former securities lawyer, whose clients included accounting firms.

But Bush did not waver in his support of Pitt.

“Harvey Pitt has been fast to act,” he said, noting that Pitt was unanimously approved by the Senate a year ago. “He was the right man for the job--and I still think he is.”

The debate over Pitt unfolded as the Senate began debating a Democratic-sponsored accounting reform bill that had been stalled, in part due to administration qualms about it. But the WorldCom scandal has given the measure momentum and it is expected to pass the Senate this week with considerable GOP support.

Bush indicated a more favorable attitude toward the bill. He said he and its sponsor, Sen. Paul S. Sarbanes (D-Md.), chairman of the Senate Banking Committee, “share the same goals.”

But Bush said he disagrees with Sarbanes’ desire to create an independent board appointed by the SEC to broadly police the accounting industry.

“My concern ... is that there’s overlapping jurisdiction, which will make it harder to enforce rules and regulations--not easier,” Bush said.

The president also disagrees with a provision that would require the SEC to go to court before taking action against corporate directors or officers, said White House Press Secretary Ari Fleischer.

“The president sees that as slowing down tough enforcement,” he said.

Nevertheless, Bush said he was “confident we can get a good piece of legislation out of the Congress.”

Before about 1,000 Wall Street executives today, Bush is expected to call for tougher enforcement, stricter penalties and a significant increase in the SEC’s annual budget of $467 million for the fiscal year that begins Oct. 1.

“Listen, I’m a believer in the free enterprise system,” Bush said. “But I’m also a strong believer in holding people accountable when they betray the trust of employees and shareholders. And that’s exactly what we’re going to do.”

In rejecting suggestions that he had engaged in wrongdoing while a director of Harken Energy Corp. more than a decade ago, Bush said his sale of company stock two months before the firm reported a big loss had been fully “vetted” by the SEC.

The president also denied that Harken recorded a phantom profit on the 1989 sale of one of its subsidiaries, Aloha Petroleum, in an effort to deceive investors by reducing the size of its reported losses.

The SEC determined that Harken had used improper accounting procedures and required it to restate its earnings to reflect millions of dollars in losses that had been masked by the sale of Aloha.

“There was an honest difference of opinion as to how to account for a complicated transaction,” Bush said. He then made his comment that “things aren’t exactly black and white when it comes to accounting procedures.”

Bush opened his 36-minute news conference by urging Congress to act on a long list of legislative priorities he called “unfinished business”--including bills to expand his power to negotiate international trade treaties, to increase domestic energy production and to create a Cabinet-level Department of Homeland Security.

“The agenda is full, the time is short and the nation is watching,” he said.

He was particularly urgent in his demand that Congress approve his request for about $27 billion in supplemental funding for the military operation in Afghanistan and other anti-terrorism initiatives. Bush submitted his request four months ago.

A $29-billion version of the bill has passed the House and a $31.5-billion bill has passed the Senate. Bush budget officials have threatened to veto a compromise bill if it goes beyond what the House approved.

Times staff writers Janet Hook, Jube Shiver Jr., Richard Simon and Warren Vieth contributed to this report.