Bush: No more WorldComs

Bush wants lawmakers to pass his proposals to improve corporate responsibility

NEW YORK (CNN/Money) -- U.S. President George W. Bush wants corporate leaders who cook the books to go to jail, a White House spokesman said Friday, as the government rolls out measures to restore investor confidence in the wake of the WorldCom scandal.

White House Press Secretary Ari Fleisher outlined the plans that Bush will detail in a Saturday radio address and a July 9 speech in New York.

Bush has expressed outrage over the financial scandal surrounding telecommunications company WorldCom, demanding that corporate leaders live up to higher ethical standards.

Speaking at a fund-raising event for Maryland Republican Rep. Connie Morella, Bush said Corporate America has a responsibility to be above board instead of trying to "fudge the numbers."

MORE STORIES WorldCom to start layoffs

"I believe if somebody is running a corporation and somebody has got responsibilities to shareholders and employees, they have the responsibility to be above board at all times, to be frank and honest with all the numbers," the president said.

A senior administration official told CNN Friday that Bush also will use the radio address and New York remarks to press lawmakers to pass his proposals to improve corporate responsibility.

The president last March outlined a 10-point plan, a series of measures that included calling on CEOs to personally vouch for the veracity of their companies' financial statements.

Meanwhile, WorldCom President and CEO John Sidgmore said Friday that the company's management was equally surprised and outraged by the $3.8 billion accounting scandal. Sidgmore, in a letter to Bush, reaffirmed his commitment to working with the president and appropriate agencies to investigate the matter and will take further decisive action.

"Yesterday, you rightly expressed outrage and concern about past accounting irregularities at WorldCom," Sidgmore said in the letter. "I am proud that our own people discovered these irregularities and had the courage and professionalism to act quickly."

WorldCom has retained William McLucas, former chief of the enforcement division at the Securities and Exchange Commission, to investigate the accounting irregularities at the company that will cause it to restate its financials for 2001 and the first quarter of 2002.

The troubled telecom is in close consultation with its banks to secure additional lines of credit and is selling its non-core businesses to raise more than $1 billion, Sidgmore said.

Earlier this week, WorldCom rocked the financial world when it said it misstated $3.8 billion in expenses, which inflated its pretax earnings. The telecom has since said it is taking numerous steps to ensure its survival, including selling assets and laying off 17,000 people.

Meanwhile, New York State Attorney General Eliot Spitzer now is looking at possible criminal conduct in connection with Salomon Smith Barney analyst Jack Grubman and the collapse of WorldCom, a spokesman told CNNfn.

The criminal investigations bureau of the attorney general's office will be leading the investigation of Grubman, who cut his rating on the company a day before it announced it had misstated $3.8 billion in expenses.

Separately, investigators looking into the accounting scandal at WorldCom have found no records to support the shift of $3.8 billion in expenses, according to a published report.

The New York Times reported Friday that the lack of records increases the likelihood that the transactions involved criminal fraud. The newspaper also said that just enough expenses were shifted during the past five years to allow WorldCom to exactly meet its profit goals over that period.

The paper also quoted unnamed people close to the company as saying that Scott Sullivan, who was fired as chief financial officer when the accounting scandal broke earlier this week, told the company's board that he shifted the expenses without consulting the company's outside auditor, embattled accounting firm Arthur Andersen, and also implied that he did not consult other top company executives, either.

The lack of documentation also raises questions as to why the problems were not detected by auditors from Arthur Andersen, which previously was the company's outside auditor, the paper reported.

The Chicago-based accounting firm was found guilty earlier this month of federal obstruction of justice charges for its role in the destruction on documents for bankrupt energy trader Enron late last year.

In other developments at the nation's No. 2 long-distance provider, WorldCom is set to start laying off 17,000 employees due to its current financial problems. The layoffs were announced Tuesday night when the accounting scandals were revealed.

The financial situation worsened Thursday when the company's major lenders refused to lend it any more money, and talks to extend the company's outstanding loans to $5 billion were halted.

Also, a judge issued a restraining order Thursday to WorldCom's former CEO Bernie Ebbers, ex-Chief Financial Officer Scott Sullivan, and officials from Arthur Andersen to ensure that they don't destroy documents related to the telecommunications company.

An earlier order from the Securities and Exchange Commission prevented current WorldCom employees, officers and auditors from destroying documents.

The restraining orders follows a vote from a House of Representatives panel Thursday to subpoena four people to testify about the accounting scandal at WorldCom, including former CEO Ebbers, ex-CFO Sullivan, current CEO Sidgmore and Salomon analyst Grubman.