Bush enacts law cracking down on corporate and accounting fraud

Tuesday, July 30th 2002, 12:00 am
By: News On 6

WASHINGTON (AP) _ Lawmakers criticized White House action on a brand-new law cracking down on corporate fraud, saying President Bush appeared to be weakening the measure mere hours after signing it.

Bush turned the legislation into the law of the land in a grand East Room ceremony Tuesday, with tough talk against boardroom crooks and promises that his administration would pursue them as aggressively as it has hunted terrorists.

Eight hours later, the White House quietly issued a statement outlining how it was interpreting several provisions, including one that grants federal protection to corporate whistle-blowers who present Congress with information that books had been cooked or investors misled.

Bush spokeswoman Claire Buchan said the White House views the provision as shielding whistle-blowers from company retaliation only if they talk to a congressional committee ``in the course of an investigation.'' The protections would not apply when evidence is provided to individual lawmakers or aides, she said.

The belated presidential statement called the interpretation a ``careful construction by the executive branch as it faithfully executes the act.''

The Bush administration interpretation could most affect lawmakers _ usually those in the minority party who cannot control whether full committees launch formal investigations _ who undertake their own inquiries.

A Senate aide, speaking on condition of anonymity, also said investigations often do not begin until someone brings information forward about wrongdoing.

David Carle, a spokesman for Sen. Patrick Leahy, D-Vt., who crafted the whistle-blower section, said the White House's take on the law ``is contrary to the plain language of the statute, which is intended to protect whistle-blowers who provide crucial information to Congress whether or not an active investigation is under way.''

Leahy said: ``I would hope the administration is not beginning to water down the law within hours of signing it.''

Leahy's co-author, Sen. Chuck Grassley, R-Iowa, called the White House move ``disturbing.''

``Our intention is to protect any whistle-blower who exposes wrongdoing to an individual member of Congress, a congressional committee, a media outlet or any other public entity,'' Grassley said. ``Whistle-blowers need full protection. Otherwise they won't come forward. Problems won't see the light of day.''

The nonprofit National Whistleblower Center said the new law marks the first time that federal whistle-blower protections have been extended to employees of publicly traded companies.

``Without protecting the whistle-blowers, corporate reform efforts would have failed,'' said a statement from Kris Kolesnik, the group's executive director, after the bill's signing.

A full lineup of government enforcers and key lawmakers, but not a single CEO, stood witness in the East Room as Bush enacted the most extensive assault on corporate fraud since the Depression era.

``Corporate corruption has struck at investor confidence, offending the conscience of our nation,'' he said. ``Yet, in the aftermath of September the 11th, we refused to allow fear to undermine our economy and we will not allow fraud to undermine it either.''

The law, which passed the Senate by 99-0 and the House by 423-3, was tougher than Bush had proposed and included measures he and many fellow Republicans initially resisted.

But with a new wave of corporate scandals this summer, Bush and lawmakers from both parties _ eager to keep public outrage over the sputtering economic recovery from darkening their prospects in the Nov. 5 midterm elections and beyond _ rushed to embrace the stricter legislation.

The law quadruples sentences for accounting fraud, creates a new felony for securities fraud that carries a 25-year prison term, places new restraints on corporate officers, and establishes a federal oversight board for the accounting industry.