KANANASKIS, Alberta – President Bush on Wednesday called reports that WorldCom Inc. disguised $3.8 billion in assets outrageous and said the government "will fully investigate and hold people accountable."
Bush said he feared the pending bankruptcy would hurt "not only shareholders but employees as well." He said the latest evidence of corporate irresponsibility has hurt the United States stock market.
Bush said the SEC and the government will investigate. A senior administration official, speaking on condition of anonymity, said Bush was referring to the likelihood that the Justice Department will investigate the case as it did Enron Corp., the failed energy trading company.
Bush said the U.S. markets are not as strong as they should be because of weak corporate profits, fears about future terrorist strikes and concerns about corporate malfeasance.
"There is some concern about the validity of the balance sheet of corporate America and I can understand why," the president said at a photo opportunity with British Prime Minister Tony Blair during a meeting of the world's industrial powers.
"We've had too many cases of people abusing their responsibilities and people just need to know that the SEC is on it, our government is on it, and Arthur Andersen has been prosecuted. We will pursue, within our laws, those who are irresponsible."
Nonetheless, Bush said, "I do believe the economy is strong and I know that most of the people that run the businesses in America are aboveboard (and) honest."
WorldCom, which owns the nation's No. 2 long-distance carrier MCI, said Tuesday that more than $3 billion of expenses in 2001 and $797 million in the first quarter of 2002 were wrongly listed on company books as capital expenses, thus not reflected in its earnings results.
News of the WorldCom accounting scandal sent stocks falling sharply Wednesday.
The Dow Jones industrials dropped 130 points to hit below 9,000 for the first time since Oct. 10. The Nasdaq composite index sank below 1,400 and was in jeopardy of hitting a closing low not seen in five years.
In addition to Enron's collapse, accounting problems have hit other big-name companies, including Tyco International Ltd., Global Crossing and Adelphia Communications, which filed for bankruptcy Tuesday.
Bush also has made critical comments about Enron and Andersen, its accounting firm, when Enron went bankrupt, taking the savings of stockholders with it.
Andersen also was WorldCom's auditor for all of 2001 and the first quarter of 2002 — the period for which WorldCom said it would restate earnings.
WorldCom, second to only AT&T in the long-distance market, grew from a small long-distance company into a telecommunications force through more than 60 acquisitions in the past 15 years. The growth was stopped in 2000 when federal and European regulators blocked WorldCom's proposed $129 billion merger with Sprint Corp., citing competition concerns.
Bush, in a private meeting at the White House last week with company executives, linked the stock market's recent weakness to mistrust among big and small investors.
Bush urged the business leaders to "step up our focus on corporate governance," said one executive at the meeting, John Dillon of International Paper Co. He said Bush told the executives: "I want you to get out in front of this and make any corrections that are required."