US President George W. Bush goes to Wall Street today to deliver a major speech aimed at restoring the credibility of corporate America with promises of strict enforcement and jail time for executives who break the law.
The urgency of his mission was underlined by yet another blow to investors yesterday with the news that giant drug-maker Merck recorded $12.4 billion (€12.57 billion) in revenue from its pharmacy unit over three years that it had not actually received.
The widely forecast tough line today against what he recently dismissed as "corporate shenanigans" is a remarkable turnaround for Mr Bush, who heads the most pro-business US administration in generations.
His speech will be closely analysed by critics who say the president is still too soft on corporate malfeasance.
After his election in November 2000, Mr Bush told Congress that his vision for corporate America would be "active, but limited; engaged, but not overbearing". His nominee to head the Securities and Exchange Commission (SEC), Mr Harvey Pitt, told a confirmation hearing he would replace burdensome SEC regulations with ones that were "sound, reasonable, cost-effective" and that promoted business competition.
Public outrage over the series of scandals from Enron and Arthur Andersen to Tyco and WorldCom has put intense pressure on Mr Bush to act aggressively against fraud and mismanagement and remove any perception that the SEC will not crack down hard on wrongdoers.
Democrats are trying to seize the high moral ground on business ethics by renewing scrutiny of Mr Bush's share dealings in the 1980s and 1990s.
Democratic Senator Tom Daschle, who on Sunday accused the administration "from top to bottom" of a permissive attitude to business regulation, urged Mr Bush to release all records held by the SEC of his sale of stock in Harken Energy in 1990.
Mr Bush, then a director of Harken, sold 212,140 shares in the Texas oil company two months before it announced a quarterly loss of $23.2 million and the stock plummeted. He was cleared of insider trading but the paperwork was filed eight months late, an oversight which his spokesman, Mr Ari Fleischer, last week blamed on Harken lawyers.
Both Mr Bush and Vice-President Dick Cheney have roots in the oil industry and US Army Secretary Thomas White worked at Enron. Mr Cheney was chairman of energy services giant Halliburton when it adopted accounting practices now being investigated by the SEC.
Mr Fleischer forecast that the president would recommend jail time for corporate executives who falsified their company's financial statements, saying: "The speech is going to focus on strict enforcement and strong punishment."
So far no one has been imprisoned as a result of the recent series of frauds, which have seen shareholders losing heavily while top executives enrich themselves. No top executive of Enron or Andersen has yet been indicted for any wrongdoing. This contrasts with the 1980s when Wall Street offenders like Michael Milken, Ivan Boesky and Dennis Levine were jailed, as were prominent figures in the later savings and loan scandal.
The collapse of confidence in the markets, which has seen Wall Street values fall to four-year lows, has given a huge impetus to proposed reforms in the US Senate. These aim to tighten oversight of the accounting industry. Other changes under discussion include 10-year prison sentences for executives indulging in schemes or artifices to deceive investors.
A Senate committee at the weekend issued a report accusing Enron directors of lying when they testified they knew nothing of the company's impending collapse.
However, the Bush Administration is opposing a proposal to require companies to list executive stock options as expenses, as recommended by US Federal Reserve chairman Mr Alan Greenspan as a way of discouraging stock-fixing, and the US Treasury Department is reportedly trying to kill a bill that would close the offshore loophole that allowed Enron to avoid paying taxes.
