After a cheerful forecast of an economic recovery three months ago, CFOs are once again concerned about future financial prospects at home and abroad. No doubt the scandals at WorldCom, Adelphia, and Tyco International--and the subsequent drop in the Dow and Nasdaq--have dampened their outlook.

In fact, CFOs are the most pessimistic about the short-term prospects of the U.S. economy since December of last year, when the recession gave them good reason to be gloomy.

According to our Global Confidence Survey of U.S. finance executives, 58 percent of those who responded say their attitude toward the domestic economy in the next year is either "concerned" or "very pessimistic," up from 19 percent in the last quarter.

For the next five years they are more hopeful, with 77 percent reporting that they are "confident" or "very optimistic" about the future economy. Still, those figures are down from last quarter, when 90 percent of respondents had a positive view of the long-term economic picture.

When it comes to the global economy, CFOs are similarly glum. A full 45 percent of respondents were "concerned" about the global economy in the next year, and another 5 percent were "very pessimistic." An additional 36 percent rated their outlook as "neutral."

Again, a longer time horizon brings more optimism, with 55 percent of respondents citing a favorable attitude toward the global economy in the next five years.

So just when do they expect things to brighten up? Not too soon. Only 16 percent expect a broad recovery to begin this year. Another 35 percent expect the recovery to begin in the first half of next year, while 29 percent say it won't start until the second half of next year. And 20 percent aren't looking for things to get a whole lot better until -- yikes -- 2004.

The economic downturn itself is by far the biggest source of anxiety for finance executives. Nearly half ranked it number one on a list of their greatest business concerns.

Other major worries include gaining access to capital and, despite relatively high unemployment, attracting and retaining employees. For the first time since the survey was begun in September 2000, "increased regulation" and "accounting concerns" weighed heavily on the minds of respondents, with 43 percent ranking one or the other among their top three concerns.

These responses are likely a response to the Sarbanes-Oxley Act and the mandate from the Securities and Exchange Commission that executives certify their financial statements. Of those surveyed, 10 percent are planning a write-off by the end of the year and 8 percent are planning a business divestiture.

To be sure, concerns about unemployment, technology spending, and accounting woes linger. Even more cautionary is the survey's finding that more CFOs plan to reduce capital spending next quarter: 24 percent say they will make cuts.

Capital-spending plans for the fiscal year are more bullish: a stout 53 percent plan to increase spending.

Volcker Turns Down Offer
Former Federal Reserve Chairman Paul Volcker told the SEC he isn't interested in heading the new accounting oversight board, according to Bloomberg, citing people familiar with the process.

Volcker was said to top SEC chairman Harvey Pitt's list for the position.

The leading candidates, now, are Mary Schapiro, vice chairwoman of the National Association of Securities Dealers, and John Biggs, the chairman of TIAA-CREF, according to the wire service.

Volcker's rejection "is a blow to the board's credibility," Charles Mulford, accounting professor at the Georgia Institute of Technology, told Bloomberg. "I can't think of anybody they could get that would have the kind of credibility that he has."

Volcker was reportedly concerned that the job would conflict with his other activities, such as chairing the foundation that oversees the International Accounting Standards Board.

The SEC must fill the accounting board by the end of October.

Tyco Arrests Signal Tougher Approach
When prosecutors and regulators hauled Tyco International's former chief financial officer Mark Swartz, former chairman L. Dennis Kozlowski and former general counsel Mark Belnick into a Manhattan courtroom in handcuffs, charging them with stealing more than $600 million from the conglomerate, it signaled an expansion of a relatively new front in their war on high-profile corporate executives.

So far this year, law enforcement and SEC officials have focused mostly on fraudulent financial statements and fancy accounting practices.

They also arrested Kozlowski for alleged tax evasion earlier in the year.

But, just one month ago, Adelphia Communications Corp. founder John Rigas and a few of his family members were accused of stealing more than $1 billion from the cable company, sending it into bankruptcy.

According to the SEC's complaint at the time, since at least 1998, Adelphia, through the Rigas family and Brown, made fraudulent misrepresentations and omissions of material facts to conceal extensive self-dealing by the Rigas family. Such self-dealing included the use of Adelphia funds to finance undisclosed open-market stock purchases by the family, purchase timber rights to land in Pennsylvania, construct a golf club for $12.8 million, pay off personal margin loans and other Rigas family debts, and purchase luxury condominiums in Colorado, Mexico, and New York City for the Rigases.

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