WASHINGTON – Jailing crooked executives and strengthening laws against corporate wrongdoing are needed to restore Americans' confidence in big business, lawmakers said Sunday as they surveyed the wreckage of companies such as Enron Corp. and WorldCom Inc.
The White House defended top market watchdog Harvey Pitt, the Securities and Exchange Commission chairman, after Senate Majority Leader Tom Daschle called for his ouster, saying Pitt was soft on the industry he regulates.
"We could do a lot better than Harvey Pitt in that position today," said Daschle, D-S.D. White House press secretary Ari Fleischer, with the president in Maine, said the SEC under Pitt has acted aggressively against wrongdoers and that the charges against him were "without merit."
The drive for corporate change was taking center stage this week: a House committee hearing Monday on WorldCom and President Bush's speech Tuesday to Wall Street about his ideas for tougher penalties on corporate officials.
"Some of these corporate criminals need to go to jail," said Rep. Billy Tauzin, chairman of the House Energy and Commerce Committee, which is investigating the massive bankruptcies of energy trading giant Enron and the telecommunications company Global Crossing.
"As soon as one of these major corporate leaders is indicted, confidence will generally come back," Tauzin, R-La., told NBC's Meet the Press.
Current and former WorldCom executives were summoned to appear Monday before the House Financial Services Committee. The big telecommunications company is battling to avoid bankruptcy since the recent disclosure that it disguised nearly $4 billion in hidden expenses.
The committee chairman, Rep. Michael Oxley, said he thinks the corporate world is placing too much emphasis on the bottom line, a drive for profits that can lead companies to act irresponsibly.
"I don't think it's as widespread, perhaps, as some people would believe, but clearly there's some real problems here," Oxley, R-Ohio, said on Fox News Sunday.
The SEC has filed a civil fraud suit against WorldCom, and the Nasdaq Stock Market plans to delist the company's shares, which have plunged from more than $64 to pennies.
"I think it's clear that particularly in the telecommunications sector ... that some of these cost-cutting efforts and their cooking the books occurred to basically hide what was a failing business practice," Oxley said.
Several lawmakers said sending corporate chiefs to jail for wrongdoing would help restore public confidence in companies.
"As long as these people can walk away with millions of stock options, having brought a company to bankruptcy, without going to a real jail, I think American investors are going to be suspicious," Tauzin said.
Added Daschle: "We have to go after the bad actors. There has to be an aggressive effort on the part of the Justice Department."
Bush's speech is intended to address the scandals and try to blunt their effect on the economy.
"The overall message on Tuesday is that he's got confidence in the strength of the overall economy and the confidence will grow as confidence is restored in corporate behavior. Everyone is accountable," Fleischer said Sunday. "He will focus on strict enforcement and tough punishment."
The president is expected to recommend new criminal penalties for corporate officers who "cook the books" or lie on financial statements, something that Bush "absolutely, absolutely" believes should draw jail time, Fleischer has said.
But Sen. Paul Sarbanes, chairman of the Senate Banking Committee and sponsor of legislation to tighten oversight of the accounting industry, said locking up executives is not enough.
"All the focus is on making the bad actors pay a price, but what also ought to happen is we ought to improve the system to prevent these things from happening," Sarbanes, D-Md., said on ABC's This Week.
Sen. Chuck Hagel, R-Neb., spoke of "a challenge here to not overreact, but to deal with the problems that we can fix by law and by regulation. But you can't regulate or legislate character and integrity."
A business leader who joined other executives in a private White House meeting last month with Bush about the scandals said Sunday the president should condemn corporate lawbreakers and those "who have violated the trust that they have been given in these positions."
John Dillon, chief executive officer of International Paper Co. and chairman of the Business Round Table, said the penalties "should be real, they should be severe, they should be prompt. ... As CEOs of America's major corporations, this is appalling to us. Trust is one of the greatest things that we have been vested with. And what we have seen in a few but too many instances is violation of this trust."
To Daschle, SEC Chairman Pitt is part of the problem.
"He has been the one who said we want a kinder and gentler SEC, just the opposite of what we should have," Daschle said on CBS' Face the Nation.
But Pitt, who represented Wall Street's big players as a private securities lawyer before Bush named him last spring to head the agency, won votes of confidence from the White House and Oxley.
"The president believes that Harvey Pitt is doing a great job," White House spokeswoman Claire Buchan. Oxley said he had "nothing but faith in Harvey's abilities and integrity."