Bush Signs Corporate Reform Law, Then Undermines It

by Philip E. Daoust

Members from both parties of Congress are openly criticizing the President's action, accusing him of endorsing a "watered-down" version of the legislation.

Only hours after signing the Accounting Industry Reform Act in a grand East Room ceremony on Tuesday, the White House released a statement that it was narrowly interpreting a number of the bill's provisions, including a section that offers federal protection to corporate whistle-blowers who present Congress with evidence of fraud.

In the statement the White House contends that only persons who present evidence to a Congressional committee during a formal investigation are protected under the new law.

White House press secretary Ari Fleischer said whistle-blowers are already protected under the law. Fleischer hinted that if Congress granted individual members the power to conduct investigations, the matter would be resolved.

"This is up to Congress," Fleischer said.

David Carle, press secretary for U.S. Sen. Patrick Leahy (D-Vermont), told The American Reporter Thursday that Sen. Leahy, a co-author of the bill, sent a second letter to President Bush detailing his concerns with the president's actions.

"The senator," Carle said, "is disturbed by that development in the White House and has made his concerns clear to the president."

Carle would not say whether the White House had answered any of Leahy's letters to the president.

Criticism about the White House interpretation came from both parties of Congress, who agree that the law was written to provide whistle-blowers protection, whether they present evidence of corporate misdeeds to the media, a member of Congress or a committee, said U.S. Sen. Charles Grassley (R-Iowa), a co-author of the original bill.

"I hope the White House will rethink its interpretation of this law and show it isn't going soft on corporate fraud before the ink is even dry," Sen. Grassley said.

Senate Minority Leader Trent Lott, who is usually tongue-and-groove with the White House, also questioned the White House statement.

"Whistle-blowers that are trying to do the right thing and provide information within the government or corporate world, certainly you don't want them to be harassed," said Lott (R-Mississippi). "Most members of Congress would take a pretty firm position on that."

And Senate Majority Leader Tom Daschle told the Capitol Hill press corps he was "dismayed" by the president's reversal.

"I can't believe that before the ink is even dry, the White House would be acting to diminish its strength and power," Sen. Daschle said. "It does cause me to question how serious this administration is with regard to corporate accountability."

Sen. Leahy, according to Carle, pushed for tougher accountability within the scandal-ridden accounting industry. As a result, provisions in the law makes it illegal for accountants to audit and consult for the same corporation and mandates the top brass of firms sign-off on all financial disclosures.

The irony of the President's signing of a corporate reform bill came to light Wednesday after a New York Daily News article reported that Houston-based Harken Energy had opened a subsidiary in the Cayman Islands, a popular haven for companies wishing to avoid U.S. taxes.

The President seemed to dodge reporters' direct questions about whether he knew of the tax-sheltering scheme while he was a director of Harken from 1986 to 1993.

"I think we ought to look at people who are trying to avoid U.S. taxes," Bush said. "I think American companies ought to pay taxes here."

According to the Securities and Exchange Committee, the Dallas-based Halliburton Co. set up as many as 20 subsidiaries in the Cayman Islands from 1995 to 2000, when Vice President Dick Cheney was its chief executive.

In addition to the SEC investigating the Vice President's accounting actions while at Halliburton, a Washington consumer group, Judicial Watch, is suing Cheney.

Another important provision included in the bill makes it illegal for corporate executives to receive loans from the company coffers. The President has acknowledged he received a loan from Harken in the late 1980s.

But one key measure that many congressional reformers wanted was not included. The bill's authors bent to intense pressure from the corporate lobby and omitted a provision that would have required corporations to report stock options as income.

Critics charge that not requiring the reporting of stock options as income leaves room for corrupt corporate executives, often compensated with huge blocks of stock incentives, to find ways to cook the books in the interest of lucrative paydays when the options increase in value.

"This [bill] is largely a cover-up, a way of putting the public at ease, claiming that everything settled, and we can all go back to business as usual," Virginia Rasmussen, a director of Council on International and Public Affairs, told Reuters.

In recent weeks, members of both parties have been scrambling to push through a corporate reform bill for the president to sign, hoping to appease investor outrage and calm frustrated voters. In fact, the bill is the only significant piece of legislation passed recently that Congressman can hope to tout for political gain as the fall elections approach.

It was unclear what impact, if any, the President's statement would have on the nation's troubled markets, which sank 230 points Thursday as the statement circulated in the nation's press. Botht eh President and members of Congress had hoped to reverse a steep slide in equities that accompanied months of revelations of illegal and unethical corporate wrongdoing.