Business Reform on Bush Agenda

WASHINGTON -- Moving to bolster its response to corporate scandals, the White House said Friday that President Bush will deliver a major address on corporate responsibility to Wall Street next month and signaled a willingness to work with congressional Democrats on business reform legislation many Republicans have resisted.

For a third straight day, Bush had strong words for corporate wrongdoers, declaring: “When we catch people doing wrong, there will be consequences.”

The president also planned to make business ethics the subject of his radio address today. White House spokesman Ari Fleischer said Bush will deliver his major address on corporate responsibility in New York on July 9. Fleischer declined to say whether Bush intends to propose additional measures beyond his March initiative to improve corporate conduct and accountability.

But Fleischer said the president shares the goal of a measure drafted by Senate Democrats that would make corporate officers more accountable for the accuracy of their companies’ financial statements. “We’ll continue to work with the Congress on this,” Fleischer said.

“[The president] believes that we need more disclosure [of financial information] ... increased corporate responsibility and a crackdown on corporate wrongdoing,” Fleischer said.

The comments from Bush and Fleischer came as the chief executive of WorldCom Inc.--the company whose disclosure this week of $3.9 billion in improper accounting rocked the corporate and political worlds--sent a letter to Bush telling the president he “rightly expressed outrage and concern about past accounting irregularities” at the company.

WorldCom President and CEO John Sidgmore also pledged to cooperate with the government in its investigation and “set an example by accepting responsibility and taking decisive action.”

Still another case of questionable corporate conduct surfaced Friday as Xerox disclosed that it had improperly recorded $6.4 billion in revenue over a five-year period.

At the Capitol, Senate Majority Leader Tom Daschle (D-S.D.) assailed the administration and the Republican-controlled House for not doing more to crack down on corporate abuses.

“It’s time to reform and strengthen the system,” Daschle said. “Unfortunately, the desire for reform is not to be found in the approaches taken by the White House, the House, and the SEC [Securities and Exchange Commission].”

The responses underscored the potency of the corporate scandals as a campaign issue--one that Democrats hope to use to portray Bush and his fellow Republicans as too cozy with big business.

But Republicans are working hard to show they are equally outraged by the scandals.

Rep. Richard H. Baker (R-La.), chairman of the House Financial Services subcommittee on capital markets, said Friday that he is optimistic that the House and Senate can come together and pass a reform bill.

“Ultimately, we will get a bill,” he said.

The House in April approved a bill that would create a board to oversee auditors and impose new financial disclosure requirements on publicly traded companies. Democrats, who control the Senate, favor a tougher measure--one that would, among other things, go further in limiting the amount of consulting that accounting firms may provide to companies they audit.

The corporate reform efforts, inspired by Enron Corp.’s collapse last year, appeared to be sputtering in recent weeks. But they quickly moved back to the top of the Washington agenda this week after revelations that WorldCom had improperly accounted for $3.9 billion. That disclosure, key lawmakers said Friday, should be enough to push both parties to try to reach a consensus on reform legislation. Indeed, after Bush delivers his radio address on business ethics today, it will be the subject of the Democratic response.

Business groups are now among those lobbying for something they usually fight--new regulation.

“The industry is in a different mind-set than it was six months ago,” Baker said. “They want closure. There is far too much money sitting on the sidelines because people are afraid of analysts, CEOs and accountants, and they don’t know if they’re getting honest information. That’s not good for anybody, Democrat or Republican.”

Daschle said he too has received calls from corporate CEOs urging him to pass legislation. “They are as appalled, if not more so, than we are,” he said. “I’ve had numerous conversations with very prominent and high-profile CEOs who are very concerned about what this has done to the perception of the corporate sector in our society.”

For Bush and congressional Republicans, corporate reform is a political imperative.

“[White House political advisor] Karl Rove and the Bush political operation ought to be at DEFCON 1,” said Larry Sabato, director of the University of Virginia Center for Politics, referring to the high state of military alertness.

“If Bush does not act swiftly and convincingly, the Republicans could be looking at a surprisingly bad November picture, including the loss of the House and a growing Democratic margin in the Senate.”

Some who have closely watched the corporate reform debate said they sense movement by House Republicans to support the tougher measure drafted by Democrats.

“Although the House GOP caucus had stuck to its guns on accounting reform, showing no interest in compromising ... the WorldCom news, in conjunction with other negative economic reports, could gain sufficient political traction over the summer to scupper the GOP’s strategy for another narrow House majority,” said Patrick Basham, a senior fellow at the libertarian Cato Institute.

“So House Republicans are probably going to buy themselves some political insurance....They’ll do this by finding some common ground with the Senate version in time for the campaign, a strategy that the White House probably won’t object to publicly.”

Peggy Peterson, spokeswoman for Rep. Michael G. Oxley (R-Ohio), chairman of the House Financial Services Committee, said: “I don’t know if these bills are as far apart as everyone likes to portray them.

“We’ve got a bit of a bad rap that our bill is ‘weak’ because it is more general,” Peterson said.

“We feel we ought to give the regulators some flexibility in how to create this board,” Peterson continued.

Some see the corporate scandals as the issue that Democrats have been waiting for.

“The Democrats clearly need an issue, and they may have found one by blasting Republican appointees for being too close to companies they are supposed to regulate,” said Greg Valliere, chief strategist for Schwab Washington Research Group.

“Bush undoubtedly realizes that the GOP could be vulnerable on this issue and he wants at all costs to avoid presiding over a weak stock market and a mediocre economy, as his father did.”

Democrats were doing all they could to keep the heat on Republicans.

Daschle on Friday took the Senate floor--on a day when almost all other senators had left town to start a weeklong Fourth of July recess--to assail the GOP response to the scandals.

The problem, he said, is “a deregulatory, permissive atmosphere that has relied too much on corporate America to police itself. It’s as if the line between right and wrong, legal and illegal, acceptable and unacceptable was so little enforced that it became blurred.”

On the other side of the Capitol, House Minority Leader Richard A. Gephardt (D-Mo.) challenged House Republican leaders to bring legislation to the floor that would crack down on offshore tax havens, portraying the measure as patriotic and accusing “hard-headed” Republican leaders of kowtowing to special interests by refusing to let it come up for a vote.

Republicans went on the counteroffensive.

The National Republican Congressional Committee sent a memo to GOP candidates telling them to remind voters that the GOP-controlled House already had passed accounting and pension reform bills before the WorldCom scandal broke, while the Democratic-run Senate has yet to act.