VideoThe moment was absolutely dripping with irony. Yesterday, a President who was elected, in large part, for his pro-business stance signed one of the toughest business-crime bills in the history of the United States.
In a ceremony in the White House on Tuesday, President Bush signed sweeping legislation aimed at deterring corporate fraud. While signing the bill, the President harkened back to the days of the Great Depression, calling the provisions of the legislation "the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt."
Added Bush: "No more easy money for corporate criminals, just hard time. This law says to every dishonest corporate leader: 'You'll be exposed and punished. The era of low standards and false profits is over. No boardroom in America is above or beyond the law.'"
The President promised that the arrests last week of five Adelphia executives was merely the opening salvo in the Administration's plan to crack down on accounting abuses. Warning that the government will use all the tools at its disposal, Bush noted that the recently created corporate fraud task force "is just getting started."
The antifraud bill, which was passed by Congress last week, creates a regulatory board to oversee the accounting industry and punish lawbreaking auditors.
In addition, the bill calls for stiff prison sentences for corporate officers who intentionally defraud investors.
"Free markets are not a jungle in which only the unscrupulous survive, or a financial free-for-all guided only by greed," said Bush. "For the sake of our free economy, those who break the law—break the rules of fairness, those who are dishonest, however wealthy or successful they may be—must pay a price."
AFL-CIO Offers Its Plan
While President Bush was signing the new corporate crime bill, the largest American union gathered the former employees of Enron, WorldCom, and Arthur Andersen for a rally on Wall Street.
Noting that "corporate greed cost 28,500 workers their jobs, and nearly $2 billion in retirement savings" at those three companies, John Sweeney, the president of the AFL-CIO, told the boisterous crowd that the United States faces a unique moment to make major changes in how corporations are run.
"We're not going to restore confidence in the stock market, or renew trust in American business, or bring equity to our economy unless we seize this historic opportunity," said Sweeney. "We have to hold CEOs accountable and put integrity back into the companies they lead."
The AFL-CIO president then detailed a five-point plan to "put a stop to business as usual." The proposal includes:
- Getting the Securities and Exchange Commission and all three stock exchanges to agree to a single higher standard for publicly traded corporations.
- Requiring companies to expense and index stock options they give CEOs—or ban them outright.
- Prohibiting CEOs from selling their company stock while they are in office.
- Outlawing the use of offshore tax havens.
- Giving workers and their pension funds the power to choose corporate directors.
The reason for that last proviso? "So we can replace the yes-men and women and the rubber-stampers with genuinely independent directors," explained Sweeney.
IBM to Buy PwC Consulting
IBM has agreed to buy PwC Consulting, PricewaterhouseCoopers's global business consulting and technology services unit. The price of the acquisition: $3.5 billion in cash and stock
The IBM deal means PwC will now scrap its earlier plans to spin off its consulting unit in an initial public offering. PwC had planned to call that new company "Monday," a choice that had many industry watchers baffled.
The transaction is expected to be completed around the end of the third quarter.
It appears IBM got a good deal in picking up the consulting unit. In 2000, Hewlett-Packard had reportedly agreed to pay a whopping $18 billion to buy PwC Consulting. That deal eventually fell apart.
"The client is the driving force behind today's announcement with PwC," said IBM CEO Samuel Palmisano. "Clients are not only looking for innovative ideas to improve their businesses, they are seeking a partner with deep business expertise and the ability to exploit leading open standards—based technology to turn these ideas into bottom-line business benefits."
PwC CEO Samuel DiPiazza Jr. had similarly glowing words for the deal. "This transaction fulfills our commitment to fully separate PwC Consulting from PwC," he said. "It will unleash the consulting unit from the regulatory restraints of our industry, and will allow the business to reach its full potential."
Mr. Fastow Sells His Dream House
It appears Andrew Fastow may not be moving into Xanadu after all.
According to Reuters, the former Enron CFO is now planning to sell his palatial dream house in River Oaks, Texas, when it is completed in September. Rather than move into the 11,000 square foot mansion, located in Houston's most exclusive neighborhood, Fastow will remain in his current home.
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