Corporate Reform Lite?

Just eight hours after the fanfare around his signing of landmark corporate reform legislation, President Bush quietly issued an interpretation of the new law that critics charge will make it harder for employees to blow the whistle on corporate fraud.

The new law for the first time gives employees of publicly traded companies who speak out about wrongdoing protection against losing their jobs.

But the president's statement said it should only apply under very limited conditions, reports CBS News Correspondent Bill Plante.

Bush spokeswoman Claire Buchan said the White House views the provision as shielding whistle-blowers from company retaliation only if they talk to a congressional committee "in the course of an investigation." The protections would not apply when evidence is provided to individual lawmakers or aides, she said.

The belated presidential statement called the interpretation a "careful construction by the executive branch as it faithfully executes the act."

That was too much for Republican and the Democrat who put the whistleblower language into the new law. They cried foul and fired off a letter to the White House calling it "flawed interpretation" and saying they meant to protect anyone who talks to Congress.

"If they mean what they said it's going to send a clear signal to the people of this country that they're going soft on corporate accountability," said Sen. Charles Grassley, R-Iowa.

Grassley and Vermont Democrat Patrick Leahy noted that investigations often do not begin until someone brings information forward about wrongdoing, often to their own senator or representative.

The Bush administration interpretation could most affect lawmakers — usually those in the minority party who cannot control whether full committees launch formal investigations — who undertake their own inquiries or receive information from constituents.

White House press secretary Ari Fleischer said Wednesday that whistle-blowers could be protected when bringing information to an individual lawmaker under the new interpretation, but only if Congress changes its rules to give lone lawmakers the authority to conduct congressionally sanctioned investigations. "This is up to Congress," he said.

Asked why the White House felt compelled on Tuesday night to specify those congressional powers, Fleischer said: "This is what lawyers do."

On Wednesday, Mr. Bush dismissed a new report that in 1989, Harken Energy Corp., where he was a director, set up a subsidiary in the Cayman Islands to avoid paying U.S. taxes.

White House spokesman Ari Fleischer said the Harken subsidiary was set up as part of an oil-drilling venture with the government of Bahrain, and was not designed to avoid American taxes.

Mr. Bush told reporters he "opposed" the Bahrain venture, but offered no explanation why he did so.

Mr. Bush said Americans "ought to pay taxes and be good citizens''. But in the capital's politically charged atmosphere, Democrats pounced on the story.

"If it is true, I think it gets harder and harder to take his position on corporate accountability seriously," said Senate Majority Leader Tom Daschle, D-S.D.

The corporate reform law, which passed the Senate by 99-0 and the House by 423-3, was tougher than Mr. Bush had proposed and included measures he and many fellow Republicans initially resisted.

But with a new wave of corporate scandals this summer, Mr. Bush and lawmakers from both parties — eager to keep public outrage over the sputtering economic recovery from darkening their prospects in the Nov. 5 midterm elections and beyond — rushed to embrace the stricter legislation.

The law quadruples sentences for accounting fraud, creates a new felony for securities fraud that carries a 25-year prison term, places new restraints on corporate officers, and establishes a federal oversight board for the accounting industry.