Bush vows to jail crooked execs

Elizabeth Hollander
Wednesday 04 December 2013 05:24
comments

In a desperate bid to shore up trust in corporate America, President George Bush yesterday vowed to punish executives who benefit from accounting irregularities.

His comments come at the end of a week in which two blue-chip US names have become embroiled in scandal and world markets lost faith in the stability of the dollar.

"Executives who commit fraud will face financial penalties and, when they are guilty of criminal wrongdoing, they will face jail time," Mr Bush said in his weekly radio address.

The President's promises follow the twin shocks of a $3.8bn (£2.4bn) accounting gap at the telecommunications firm WorldCom and a $1.9bn mis-statement by Xerox, the photocopier giant.

Although stock markets managed to stage solid rallies at the end of the week, the scandals shook investor confidence to the core. The WorldCom revelations caused Wall Street and the City to plumb depths last seen in the aftermath of September 11.

But while WorldCom was clearly a shock, the irregularities at Xerox produced a more fundamental depression among traders.

Its announcement of a larger-than-expected reversal of revenues gave traders a chilling sense that no area of the market could now be assumed immune from scandal. Xerox shares plunged 14 per cent on Friday.

These scandals followed the collapse of the energy trader Enron last year and could spell more bad news for Andersen, which audited both WorldCom and Enron. As the dollar fell on international markets, Mr Bush called for stricter rules to "restore faith in the integrity of American business".

"No violation of the public's trust will be tolerated," he said. "The federal government will be vigilant in prosecuting wrongdoers."

President Bush said that corporate officers would be barred from benefiting from accounting sleights-of-hand by collecting salaries or bonuses. "When bad accounting practices make the company appear to be more successful than it actually is, corporate executives should lose their phony profits gained at the expense of employees and stockholders," he said.

Mr. Bush stressed that the American economy was strong enough to withstand "recent abuses of the public trust". The economy could determine the Republicans' fate in November's elections, with Democrats in Congress arguing that the Republican-backed legislation does not go far enough to clean up corporate America.

"The desire for reform is not to be found" in measures put forth by the Bush administration, said Senate Majority Leader Tom Daschle, a Democrat, on Friday. The Democrats want to establish a regulatory board that would be more independent than the Securities and Exchange Commission, which reports to the President.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments