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President Urges Harsher Penalties For Accounting Fraud Criminals

By Mike Allen

President Bush threatened Tuesday to imprison executives who falsify financial statements, appealing to capitalists’ self-interest as well as their consciences as he tries to curtail accounting fraud.

With bookkeeping scandals roiling markets and collapsing major companies, Bush said during a visit to Wall Street that he wants to enforce “a new ethic of responsibility” in boardrooms by giving more money and power to regulators and by doubling the maximum prison term for some types of fraud, from five years to 10.

“My administration will do everything in our power to end the days of cooking the books, shading the truth and breaking our laws,” Bush told an audience of 600 business, academic and religious leaders at a former customs house next to the New York Stock Exchange. “In the long run, there’s no capitalism without conscience. There is no wealth without character.”

The accounting crisis hit when the economic recovery already was looking sickly, handing Bush a new political challenge because he and his aides have longtime corporate connections and are champions of deregulation. He delivered the speech amid questions about his own conduct when he was an oil company director before running for Texas governor, and at a time when Senate Democrats are well on their way to passing more stringent measures.

“Self-regulation is important, but it’s not enough,” Bush said. “Government can do more to promote transparency and ensure that risks are honest.”

His proposals, which Democrats condemned as much weaker than measures they have long had in the works, beefed up a 10-point plan Bush issued in March when he was under fire for his political connections to the bankrupt Enron Corp.

The president signed an executive order creating a Corporate Fraud Work Force, which he called “a financial crimes SWAT team, overseeing the investigation of corporate abusers and bringing them to account.”