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CNN Sunday Morning

Bush Plans to Deliver Speech on Corporate Wrongdoing Tuesday

Aired July 07, 2002 - 11:31   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN ANCHOR: A report released today by a Senate subcommittee investigating the Enron collapse says that the company's board is to blame. Among the findings, directors failed to stop Enron from using misleading accounting and did not insure the independence of their auditor. The 60-page report also says the board should have protected shareholders from what it called unfair dealings in a company run outside partnership.

Corporate wrongdoing is a subject that's becoming increasingly uncomfortable for President Bush. He's planning to deliver a major policy speech on that issue on Tuesday. To look at what this very pro-business president may be up against, let's go to our CNN Political Analyst Ron Brownstein. He's a writer with the Los Angeles Times and he joins us from Washington. Good to see you.

RON BROWNSTEIN, CNN POLITICAL ANALYST: Good morning, Fredricka.

WHITFIELD: All right, well news of this Senate subcommittee saying that Enron board members, their leaders and the directors of the company are really to blame here. Does this set the tone or perhaps call for some modification in President Bush's planned speech for Tuesday?

BROWNSTEIN: No, I think everything was going in this direction already. You know it may, the phrase may seem a bit of a contradiction in terms after the headlines of the last few weeks, but the theme of this week in Washington is going to be corporate responsibility.

President Bush, as you mentioned, is going to be delivering a major speech on Tuesday, talking about taking a hard line against corporate misconduct, a change in tone for him. I mean this is a president who came in by and large, and as governor of Texas talking more about increasing cooperation between business and government, less confrontational, less coercive application of federal regulation.

He's appointed an awful lot of people from industry to run the various federal regulatory agencies and many of them have echoed that message. So for him now, this is a bit of a shift in direction, one that is, I think, largely driven by this very different backdrop in which you have this really cascade of scandals that have put corporate conduct right at the frontier of Washington issues.

WHITFIELD: Well, congressional leader Tom Daschle spoke on the very subject early this morning. Let's listen in what he had to say.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: Well, I know that there are big differences of opinion about what we can do and how quickly we can do it, but I think we have a job to do and we've got to maximize what time there is left for us to achieve those goals.

(END VIDEO CLIP)

WHITFIELD: Well, Ron, we talk about you know listening from Daschle. He says we've got a lot to do. Is it time now for them to narrow or refine a plan that says, jail time is exactly what these corporate leaders would get if found guilty?

BROWNSTEIN: Well, what's going to happen this week is the Senate is going to consider really an omnibus package of measures designed to deal with various aspects of the problems that have emerged in the last few months, and what's striking about this is that only a few weeks ago, the entire reform drive in the Senate seemed derailed.

There was a lot of opposition from business groups who felt that many of these individual measures went too far, but the new, the second round of scandals, as is often the case, has provided an engine for reform.

So what you're going to have on the floor of the Senate this week is a measure that deals with accounting reform, creating a new outside body with more authority to audit the accounting industry itself, pressure limits on the ability of accounting firms to also consult for the companies they audit, and some tougher corporate penalties for securities fraud that are going to be added and possibly even pension reform, which has really seemed stalled.

Now, this is going to set up a conflict between the House and the Senate. The Bush administration and the Republican House generally want, support measures that don't go quite as far in extending government's reach here. The House has already moved in that direction.

But the question is going to be, can they resolve these differences? Will President Bush put his oar in the water to try to resolve these differences in what is going to be a very contentious conference committee between the House and the Senate to get something to his desk and something that would actually change the rules of the game.

WHITFIELD: You mentioned conflict. Could this even potentially present a conflict or perhaps magnify any potential, any dealings that President Bush himself may have had specifically with Harken by not reporting you know his selling of stock for eight months, even though the Securities & Exchange Commission eventually once the investigators said there was no wrong doing, but could this further magnify his past dealings?

BROWNSTEIN: Yes, well, you know, it's certainly uncomfortable timing for the president right before this speech. What we're talking about is his sale of stock in Harken Energy Corporation back in 1990 when he was director of the company. He sold some stock several months before the company reported very weak results and the stock price went down.

He was cleared in a SEC investigation in 1991, but there are some questions about that investigation because of ties between the commission at that time and his family. Of course his father was president at that time, and also last week he changed his explanation of why he didn't report the stock sale, as you say for eight months.

Yes, I think that those questions are going to be there. The Democrats are gingerly raising them. There have been some columnists who have, in the "New York Times," Paul Krugman again today has twice raised questions about the accounting practices of Harken, which seemed to follow some of the same issues as at Enron, and Bush of course, as I mentioned, was on the audit committee.

So those questions are going to be around. I don't think they're going -- I don't know yet that they're going to reach critical mass and be a huge political problem for him. The public, I think, these kinds of issues tend to be most powerful when they fit in a preexisting storyline or preconception of the public. It's not really there yet.

The broader problem may be something that is there as a preconception is that the administration is too close and too sympathetic to big business, a lot of these appointments and so forth. That may be an issue that he faces over the next several months.

WHITFIELD: Would you expect that not only would the magnifying glass be on the Executive Branch, but perhaps on some congressional leaders themselves and they may, many members may be trying to clean up their act to make sure that you know their past dealings are all clean and good:

BROWNSTEIN: Yes, and in fact, it's a good point because when some of these reforms that they're going to vote on tomorrow, particularly the limits -- I'm sorry, this week, the limits on accounting firms consulting for companies they audit.

The Clinton chairman of the SEC tried to do these through regulation and there was enormous congressional pressure brought to bear against him by people who were lobbied by the accounting industry, members of the Senate and the House, to back off on that.

So they don't have clean hands in this area, really no one does. The accounting industry has been extremely effective going back decades at resisting federal oversight. It simply is, when you have enough scandal, and we have had just as I said cascades. I mean it looks like the Texas floods. That changes the political dynamic. It broadens the realm of people who are interested in the issue and it makes it much more difficult for the narrow interests to exert their influence.

They do better, there's almost an adverse relationship between the amount of attention and issue garners in Washington and the amount of influence a special interest can have.

WHITFIELD: All right, Ron Brownstein, thank you very much, appreciate it.

BROWNSTEIN: Thank you.

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