WorldCom scandal sparks concerns about GE

The fall-out from the WorldCom scandal continued over the weekend with the US government threatening "jail time" for cheating executives, while General Electric became the latest company dragged into the "phoney figures" wrangle.

President George Bush launched a scathing attack on corporate greed in America, saying offenders should face jail terms while adding that directors who got rich on the back of accounting scandals should be forced to pay the money back.

A senior government official promised the "get tough" policy would involve prison sentences. "This would mean jail time. The general consensus is that penalties need to be harsher," the spokesman said.

The comments came as it emerged that General Electric, one of America's biggest companies, had inflated profits by $2bn (£1.48bn) by using contributions from pension funds. The credit came despite the GE pension fund falling in value as world stock markets have fallen sharply.

According to research by Milliman USA, an actuarial and consulting firm, GE is one of many large US corporations whose profits are flattered by notional pension fund profits.

It says America's 50 largest companies declared $9bn of pension fund income. However, sliding stock markets meant the funds actually recorded losses of $36bn.

GE said it was acting within US accounting regulations. "The point about pension income is that it is a question of accounting standards. We follow the standards. IF there is a question about them, then that is one of a number we will be discussing," it said.

In the UK the Institute of Chartered Accountants is holding its annual conference in London tomorrow with accounting standards at the top of the agenda. Speakers include Melanie Johnson of the Department of Trade and Industry, Mary Keegan, chairman of the Accountancy Standards Board, and Peter Wyman, the new president of the ICA.

Separately, the billionaire financier George Soros waded into the WorldCom debate yesterday saying recent accounting irregularities in major US businesses reflected an American culture that admires success more than moral principle.

"Rules alone are not enough," he said in a BBC interview. "You need principles." The fact that so many irregularities had come to light, he said, raised "far-reaching issues about the values that guide us".

The 71-year-old added: "There is a culture in the US that success matters and that's the only principle that you really have to rely on. So anything goes."

He said he supported the move for accounting changes in the US. "America has a rules-based system of accounting. It isn't enough to have rules because rules can lead to rules-avoidance; and in fact the rules-avoidance industry is a very large industry pursued by the most respectable people in finance."