Bush Signs Corporate Crackdown Bill

Hoping to restore investor faith in U.S. companies after a wave of boardroom scandals, President Bush Tuesday signed into law a bill that increases penalties for accounting fraud and provides new grounds for prosecuting corporate corruption.

"No more easy money for corporate criminals. Just hard time," Mr. Bush vowed as he signed the measure in a White House East Room ceremony.

The legislation, designed to make it harder for company executives to deceive investors, was spurred by weak stock markets, voter anger and approaching congressional elections. It went beyond Bush's original proposal. Investor anger at staggering losses and fear of political fallout prompted Mr. Bush to support the tougher law.

It creates a new oversight board for the accounting industry, until now a largely self-regulated profession that has been implicated in a series of corporate meltdowns ranging from Enron Corp. to WorldCom Inc.

Maximum jail time for executives who commit mail or wire fraud is quadrupled to 20 years. The bill establishes a new crime of securities fraud with a maximum sentence of 25 years.

At least two dozen members of Congress, many instrumental in forging the compromise that passed the House and Senate on overwhelming votes, also were in attendance. Conspicuously left off the invitation list were corporate CEOs. White House spokeswoman Claire Buchan said she knew of no company chiefs expected in the audience except the New York Stock Exchange chairman, Richard Grasso.

On the eve of the signing, stocks moved sharply higher. The Dow Jones industrial average closed up 447.49 points, a 5.4 percent gain at 8,711.88; Nasdaq was up 73.13, or 5.8 percent at 1,335.25; and the Standard & Poor's 500 index advanced 46.12 points, up 5.4 percent at 898.96.

Optimists emerged to call the end of the bear market, but there were plenty of more cautious views about the rally. Stocks were down moderately on Tuesday morning.

"It's a mistake to read too much into what happened in one night in New York," said Charles Wheeler, director of Asian equities at Standard & Poor's in Singapore.

With midterm congressional elections looming, lawmakers mindful of the pre-eminence of the economy on voters' minds hurried to deal with the string of corporate accounting scandals that has shaken the stock market and devastated retirement savings.

The struggling economy, along with a Bush administration agenda critics call too pro-business, have Democrats hopeful they can make gains in November.

In part as a result, House Republicans last week accepted most of the stricter parts of a bill passed by the Democratic-controlled Senate to create the final version.

The measure tightens regulation of companies' financial reporting and provides new oversight of independent auditors.

It does so by adding criminal penalties and prison terms for corporate fraud and much document shredding; imposing restrictions on accounting firms that do consulting work for corporations whose books they audit; requiring top company executives to vouch personally for the accuracy of their companies' reports; creating new rules for financial analysts designed to prevent conflicts of interest; and establishing an independent board, with subpoena power, to oversee the accounting industry.

Meanwhile, there were some developments early this week involving major companies and their accounting woes: