Jul 16, 2002 By Marcy Gordon Ap Business Writer 5 min read

WASHINGTON (AP) – President Bush on Monday coupled an upbeat assessment of the economy with a warning to corporate America to “behave responsibly,” an attempt to restore investor confidence in the wake of a wave of business scandals. Bush’s remarks in Birmingham, Ala., came as the Senate neared passage of legislation that would create stiff penalties and jail terms for corporate fraud and tightening oversight of the accounting industry.

The markets dropped even further despite Bush’s remarks.

Bush has been dogged in recent weeks by a decade-old Securities and Exchange Commission investigation into his sale of stock in his former oil company, Harken Energy Corp.

And Vice President Dick Cheney’s former company, Halliburton Co., is being investigated by the SEC for its accounting practices. In his remarks, Bush repeatedly condemned corporate fraud, saying he expected “the highest ethical standards in corporate America.”

“In order to be a responsible American, you must behave responsibly,” Bush said in a message intended for business executives.

He urged Congress to get legislation designed to combat corporate fraud on his desk before it adjourns for the summer recess.

The Senate was expected to pass its version of the bill later Monday; the House already has acted on a measure widely considered to be weaker because it does not contain penalties for corporate fraud. Differences between the two measures would have to be resolved before a compromise bill could be sent to Bush.

Bush insisted that the economy is fundamentally strong, and said its problems stemmed from a “hangover” from the 1990s.

“America must get rid of the hangover as a result of the binge, the economic binge we just went through,” Bush said at the University of Alabama in Birmingham. “We were in a land where there was endless profit, no tomorrow when it came to the stock markets and corporate profits, and now we’re suffering a hangover from that binge.”

At a fund-raising luncheon Monday in Hartford, Conn., Cheney touched briefly on corporate responsibility and the president’s calls for reform.

“Government will clearly investigate and pursue the wrongdoers,” he said.

CEOs who are found to be cooking the books “must be held to account,” Cheney said, although he did not mention allegations about his conduct.

Investor confidence has been shaken since a series of corporate accounting scandals, beginning with the collapse of Enron Corp. WorldCom Inc., Xerox Corp. and Global Crossing Ltd. also are under investigation.

SEC Chairman Harvey Pitt, himself, is under fire because of his past work representing the accounting industry and big corporations before the agency. Several members of Congress have urged his resignation.

In a round of talk show appearances Sunday, Pitt pledged that the SEC will take enforcement action, if needed, against Cheney’s former company. “If there’s a problem with Halliburton or any other company, we will investigate it and we will take whatever action is appropriate,” Pitt said on NBC’s “Meet the Press.”

He said he would remove himself from an SEC decision on Halliburton.

And he said it was up to Bush to decide whether to release documents related to the Harken probe.

White House spokesman Ari Fleischer said Monday the president still did not intend to call on the SEC to release the documents.

“The SEC has released its conclusions. They’ve taken a look at all the facts,” Fleischer told reporters on Air Force One as Bush traveled to Alabama. “There’s no change in anything the White House is doing or saying,” he said.

Fleischer also shrugged off repeated calls for Pitt’s resignation, saying “the president stands by his team.”

“I’m the right person for the job,” said Pitt, appointed by Bush last year as the top market watchdog. “This guilt by occupation is really a needless diversion.”

Bush and the Republicans have been on the defensive as Democrats have made corporate accountability a political issue in this congressional election year. Fleischer portrayed the questions the White House has been facing over its handling of corporate scandals as mere politicking by Democrats.

“The closer it gets to the election it’s going to be expected that some people are going to engage in statements that are political in nature,” Fleischer said. “The president understands that and it’s not going to stop him from focusing on the problems in corporate America.”

Partisan bickering continued over Bush’s sale of Harken Energy Corp. stock for $848,000 in June 1990, two months before Harken reported millions of dollars in losses. Bush was a director of the company.

The SEC’s insider-trading inquiry into the sale, made when Bush’s father was president, was closed with no action against Bush. “But unless there’s a reason to reopen ancient history, we should move on with the future and start helping today’s investors,” Pitt said.

If Bush asked him to release the file, Pitt said, he would do so.

Sen. Paul Sarbanes, chairman of the Banking Committee, said Monday the president should do precisely that.

“I think what ought to be done here is that the president ought to call on the SEC to review all the facts,” the Maryland Democrat said on NBC’s “Today” show. “The president ought to lay out all the facts and let the country take a look at them, and that way this constant agitation about this issue would be put to rest.”