Treasury Secretary censures corporate crooks

US Treasury Secretary Paul O'Neill is furious about corporate "crooks" and expressed doubt that a Senate proposal gave regulators enough power adequately to punish violators.

Speaking to the US Chamber of Commerce a day after President George W. Bush gave US Big Business leaders a tongue-lashing about ethics, Mr O'Neill said corporate leaders who committed violations with auditors' help hurt all Americans: "In their greed and gluttony, these crooks sacrificed the retirement years of teachers, truck drivers, nurses and farmers to enrich themselves."

"The President has said that CEOs who cook the books will forfeit their ill-gotten gains, and they will go to jail," Mr O'Neill said, speaking against a backdrop of steadily plunging stock-market prices that analysts blame partly on investor distrust following a slew of scandals about accounting practices and business behaviour.

Mr O'Neill said a Senate proposal for overhauling laws in the wake of the recent accounting scandals offered good intentions, but the administration had reservations: "In particular, contrary to the president's request, the Senate bill does not provide the SEC (Securities and Exchange Commission) with the authority to bar individuals who engage in serious misconduct from serving as officers and directors of any public company."

He said the SEC needed the power of banishment "to punish those that have proven themselves unworthy" of safeguarding shareholders' trust. The US Treasury chief was also critical of the Senate's proposal to give securities law enforcement powers to "an unaccountable private body," a reference to an accounting oversight board that would be created under the Senate plan. He said the board as envisioned in the bill would have a jurisdictional overlap with the SEC.

Instead, Mr O'Neill said the administration backed an SEC proposal to establish an independent board to oversee the accounting profession. "The administration believes that a two-tiered regulatory framework will best protect investors."

Mr O'Neill said that, while he headed metals giant Alcoa Inc., he had never sold a single share of the company's stock. "Other executives should do the same," he said. During his years at the helm of the aluminium producer, O'Neill said he faced "an endless stream of lawyers, investment bankers and CPAs (certified public accountants) coming in with...brazen schemes to do financial engineering or trickery" but turned them down.

In a CNBC interview late Wednesday, a questioner asked Mr O'Neill whether President Bush should sign the Leahy amendment an anti-fraud measure that unanimously passed the Senate.

O'Neill responded by cautioning against Congress "unintentionally creating ambiguity" with new proposals.

The sponsor of the fraud measure, Vermont senator Patrick Leahy, argued that creating a new crime of securities fraud would make it easier to prosecute corporate misdeeds that are frequently dealt with under mail fraud statutes.