President Bush called WorldCom's revelation of billions in disguised expenses "outrageous,'' announced a government investigation and said he could understand why jittery investors have come to doubt "the balance sheet of corporate America.''
Congressional leaders chimed in, too, talking about jail for any lawbreakers and asking where regulators had been. Bush on Wednesday called for more corporate accountability and said the recent string of accounting scandals has contributed to declines in stock prices.
"We will fully investigate and hold people accountable for misleading not only shareholders but employees as well,'' Bush said on the opening day of an eight-nation economic summit in the Canadian Rockies.
Senate Majority Leader Tom Daschle, D-S.D., said there must be "aggressive enforcement of the law. And if laws were broken, somebody needs to go to jail.''
Daschle scheduled Senate debate on legislation to tighten accounting oversight as the first order of business after the Fourth of July recess. Bush announced a Securities and Exchange Commission investigation and appeared to leave open the possibility of a Justice Department inquiry as well.
"The matter is under review,'' department spokesman Bryan Sierra said later.
Bush's quick response to the disclosure, and harsh criticism of "egregious practices,'' contrasted with the pace of the White House reaction last winter to disclosures of questionable accounting at Enron. His comments also underscored the administration's concerns over a growing crisis of confidence in corporate America's behavior that has taken a toll on the stock investments of millions of people and could threaten a fragile economic recovery.
Stocks declined Wednesday on the news that WorldCom, the nation's second-largest long-distance telephone carrier, had improperly booked expenses to help boost its cash flow and profits in one of the largest-ever cases of financial deception.
"The market isn't as strong as it should be,'' Bush said, also blaming the weakness on anemic corporate profits and concern about possible new terror attacks.
Seeking to reassure investors and consumers, he added: "I do believe the economy is strong.''
On Capitol Hill, Rep. Billy Tauzin, R-La., chairman of the House Energy and Commerce Committee, announced his staff had begun an investigation into the massive restatement of earnings and losses. He suggested the case was "eerily similar to the accounting hocus-pocus that occurred at Enron.''
Opening a Senate hearing on corporate responsibility, Sen. Byron Dorgan, D-N.D., called the WorldCom development the latest example that "there is arrogance, there is greed and dishonesty and it is appalling.''
He cited "a complete breakdown in corporate responsibility.''
"Where was the SEC? ... Why didn't they do their job?'' asked Dorgan, chairman of the Senate Commerce subcommittee on consumer affairs.''
New York state Attorney General Eliot Spitzer, testifying before the committee, said, "We've had an absolute void at the SEC.''
Responded Sen. John McCain, R-Ariz: "I agree.''
McCain questioned whether the SEC can be effective under the leadership of Chairman Harvey Pitt, who represented big Wall Street brokerages and major accounting firms as a private securities lawyer.
At the SEC, meanwhile, officials said they had nothing to add to Tuesday night's statement that the WorldCom disclosures "confirm that accounting improprieties of unprecedented magnitude have been committed in the public markets.''
Bush said he knows many Americans are concerned "about the validity of the balance sheet of corporate America and I can understand why.''
"We've had too many cases of people abusing their responsibilities and people just need to know that the SEC is on it, our government is on it, and Arthur Andersen has been prosecuted. We will pursue, within our laws, those who are irresponsible.''
Arthur Andersen was the accounting firm for Enron, the giant energy company that collapsed and took with it millions of dollars in stockholders' savings. Andersen was a WorldCom auditor.
In addition to Enron's collapse, accounting problems have hit other big-name companies, including Tyco International Ltd., Global Crossing and Adelphia Communications, which filed for bankruptcy Tuesday. Bush also has made critical comments about Enron and Andersen.
"There is a need for renewed corporate responsibility in America,'' Bush said.
"When we find egregious practices such as the one revealed today, we'll go after them.''
"It's outrageous,'' Bush said of the newest revelation.