Corporate issues trouble Bush

On eve of speech, he insists on `responsibility'

His '90 stock sale also an issue

July 09, 2002|By Julie Hirschfeld Davis | Julie Hirschfeld Davis,SUN NATIONAL STAFF

WASHINGTON - On the eve of a major speech he will deliver on corporate responsibility, President Bush defended himself yesterday against a flurry of questions about his own lucrative stock sale in 1990, when he was a director of a Texas energy company.

Bush spoke at a hastily called news conference one day before he will call for stronger business ethics and a more aggressive Securities and Exchange Commission to monitor corporate behavior and punish those who break the rules. His comments came as the Senate opened debate on a Democratic bill to tighten regulation of the accounting industry.

Offering a glimpse of the themes he will highlight today, the president sounded notes of outrage against corporate wrongdoing at a time of rising concerns about the financial health of American businesses.

"I have been calling for a renewed sense of responsibility in America, and that includes corporate responsibility," he said. "I'm very worried about a country that could conceivably lose confidence in the free enterprise system."

But the president was pressed repeatedly to explain his failure to inform the SEC promptly about his sale of stock in the Harken Energy Corp. more than a decade ago. That sale netted Bush nearly $850,000. Soon after, Harken reported a larger-than-expected loss, and the value of its stock plunged.

The SEC reviewed the matter and chose to take no action against Bush, at a time when his father was the president. Bush has said that when he sold the stock, he did not know Harken was about to report its huge loss. If he had known, it could have amounted to unlawful insider trading.

The president's spokesman has further explained that Bush's failure to disclose the stock sale promptly, as the law requires, resulted from a "mix-up" by lawyers for Harken.

"Nothing has changed," Bush said yesterday, noting that the stock sale has been re-hashed by his political opponents for most of the past decade. "This was fully looked into by the SEC, and there's no `there' there."

Later, he called the issue "old politics."

Bush's remarks about the need to address the recent accounting scandals were the latest move in a concerted White House drive to get out in front of the issue and show that the president is prepared to embrace the proper remedies.

The SEC, Bush said, needs more investigators and more money. And he said the agency should have primary responsibility for monitoring corporate behavior and determining when securities and accounting laws have been violated.

"That's why we need a strong, vibrant SEC - to make those judgments."

Bush also dismissed the objections on Capitol Hill to Harvey L. Pitt, the SEC chairman.

Pitt, who came to the agency promising "a kinder, gentler SEC," has come under fire from Democrats - most recently Senate Majority Leader Tom Daschle - for what they call his lax approach to abuses and his ties to former clients in the accounting industry.

Yesterday, in an opinion article in The New York Times, Sen. John McCain of Arizona became the first Republican to suggest that Bush and Congress should call for Pitt's departure.

Brushing aside such concerns, Bush said: "I think Harvey Pitt was put in place to clean up a mess, and he's working hard to do that.

"The man barely got his uniform on, barely got a chance to perform, and now, for whatever reason, people think he ought to move on."

Bush spoke at what he characterized as a critical time for Congress to join him in achieving three major goals: "We need to win the war. We need to protect our homeland. And we need to strengthen our economy."

With less than nine legislative work weeks left before the midterm elections, Bush said Congress should work with him to create a Cabinet-level Homeland Security Department, broaden his ability to negotiate trade deals and send him a bill to overhaul U.S. energy policy.

But for the moment, Senate Democratic leaders are focused on one priority: an accounting reform bill that they say will ensure independent oversight of the industry and prevent abuses.

The Democrats argue that the approach favored by Bush and the Republicans would be too passive, punishing violators only after infractions have been discovered.

"When you punish the bad actor, they've already done the bad deed," said Sen. Paul S. Sarbanes, the Maryland Democrat who is chairman of the Senate Banking Committee and is chief architect of the bill the Senate began debating yesterday.

Bush said he and Sarbanes "share the same goals" but he was concerned that the Senate bill would create "overlapping jurisdiction" and make enforcement more difficult.

"If you have overlapping jurisdiction, it creates confusion as to who is in charge of what," the president said. "But I'm confident we can work that out."

Strengthening the SEC's oversight and enforcement roles, Bush said, is the most important step the government can take to fix the problems.

"I know the Democrats are trying to divert attention from the major goal," he said.

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