Bush to propose jail time for corporate misconduct
CNN Washington Bureau
WASHINGTON (CNN) -- President Bush on Tuesday will propose new criminal penalties for deliberate corporate financial misconduct and will say it is critical to "take accounting out of the shadows."
The proposals are part of a package of measures Bush will push as critical to restoring the credibility of corporate America and investor confidence in the stock market and broader U.S. economy.
Aides familiar with late drafts of the president's speech also said Bush will make a spirited defense of his administration's enforcement efforts -- an bid to counter Democratic efforts to paint the White House as too cozy with big business and, more specifically, to defuse calls for Securities and Exchange Commission Chairman Harvey Pitt to resign.
The president details a number of enforcement actions aides call significant and in some cases unprecedented, including an SEC request that more than 900 major companies go back and double-check the veracity of their financial statements, senior officials tell CNN.
Bush will make the case that efforts to expose and prosecute corporate corruption are critical to restoring confidence and, as part of that focus, will propose new criminal penalties including possible jail time for CEOs convicted of deliberately making misleading financial statements.
Other changes advocated by the president will include requiring corporate insiders to disclose within two business days any major sale or purchase of company stock; current reporting guidelines allow up to a year for such filings.
And Bush will call for new powers to revoke or "disgorge" bonuses and other incentives paid to CEOs if it is later determined they were involved in or responsible for corrupt or unethical practices.
Advisers said Bush will say it is imperative that new reforms be made to, as one put it, "take accounting out of the shadows" so that investors can be confident corporate balance sheets have been independently verified.
Senior aides describe the president as irritated by Democratic efforts to accuse him and Vice President Dick Cheney of having lead roles in companies that employed "Enron style" accounting. But Democrats say they will continue this line of debate, and point to Bush's admission at a Monday news conference that even he was still not sure exactly why a required form disclosing a major stock transaction 11 years ago was not filed until eight months after the deadline. The president was a director at a Texas company called Harken Energy at the time.
Bush was investigated for possible insider trading, but the SEC concluded there was no evidence that he knew at the time of his June 1991 stock sale that the company would soon revise its earnings downward.
Bush said Democrats were recycling the allegation as part of "old time politics" in an effort to make political gain of the growing debate over corporate corruption and what the federal government should do in the wake of the Enron and WorldCom accounting scandals.
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