'Crisis Of Trust'

The U.S. economic system has been shaken by a series of scandals that range from massive accounting fraud at Enron and WorldCom to allegations of insider trading swirling around home fashion queen Martha Stewart.

The high-profile boardroom misdeeds have shaken investor confidence in the economic system and prompted calls for change from the White House and Congress, where several investigations are already under way.

President Bush, angered at the relentless scandals, will use his Saturday radio address and a July 9 speech in New York to urge Congress to approve his plan for corporate responsibility, the White House said.

"Our Justice Department will hold people accountable, but Corporate America has got to understand there's a higher calling than trying to fudge the numbers and try to slip a billion here and a billion there and they hope nobody notices," Mr. Bush told a Republican audience Friday.

The president has already proposed plans that if enacted, would ban corporate executives from profiting from erroneous financial statements. That was in response to the implosion last year of the Texas-based Enron Corp.

House Minority Leader Dick Gephardt, D-Mo., spoke of a "crisis of trust" and likened corporate wrongdoers "to when a policeman goes bad or a politician goes bad."

Sens. John McCain, R-Ariz., and Byron Dorgan, D-N.D., asked where were the Securities and Exchange Commission regulators? "The SEC ought to hang its head in shame," said Dorgan, chairman of a Senate Commerce subcommittee.

Here are the scandal highlights:

WorldCom

Federal investigators are scrutinizing WorldCom's accounting practices after the telecom giant said it hid $3.8 billion in expenses, a disclosure that has propelled the former telecom giant toward bankruptcy.

Enron

The company used a complex web of partnerships to conceal more than $1 billion in debt, hedging against losses with an esoteric and bogus strategy that experts still find hard to decipher. Congress is taking a
long look at the fallen energy giant.

Arthur Andersen

The accounting giant is at the center of the Enron and WorldCom scandals. Numerous critics have wondered why the Chicago accounting firm failed to uncover the massive book-juggling at both corporate giants.

Andersen's response: Just as with Enron, WorldCom officials held back critical material concerning its financial dealings.

Andersen said in a statement this week that important information "was withheld from Andersen auditors by the chief financial officer at WorldCom." WorldCom fired Andersen as its auditor in the spring, making it one of many corporate clients to desert the struggling firm after the Enron scandal broke.

Xerox

A recent Xerox Corp. audit determined that the company improperly recorded more revenue in the past five years than federal regulators had estimated when they reached a settlement with the company in April, The Wall Street Journal reported.

The Securities and Exchange Commission estimated in April that the company improperly listed $3 billion from 1997 through 2000.

The paper cited unnamed people familiar with a new audit, which looked at figures from 1997 to 2001, who said auditors found that the total amount of improperly recorded revenue over that period could be more than $6 billion.

In The Chorus...

Accounting problems have also hit other big-name companies, including Tyco International Ltd., Global Crossing and Adelphia Communications, which filed for bankruptcy protection this week.

Martha Stewart

The hearth-and-home queen has added the spice of celebrity to an insider trading investigation being carried out by federal prosecutors. Stewart and her Merrill Lynch broker, Peter Bacanovic, have said Stewart's sale of nearly 4,000 shares of Imclone was in accordance with a previously established order to sell the stock if it dipped below 60.

On the day after the sale, the Food and Drug Administration announced that it would not consider approval of the biotech company's experimental anti-cancer drug.

ImClone stock plummeted after the announcement, and congressional and federal inquiries into the transaction were subsequently initiated.

The scandals are certain to speed up congressional action on legislation to overhaul accounting standards and to provide more federal oversight of corporate America.