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Corporate Crime: Why It's Not Sticking to Republicans

Just a few months ago, Democratic strategists who watched the TV parade of corrupt CEOs, conflicted accountants, and shady stock analysts looked heavenward and whispered, "Thank you." With midterm elections looming, here at last was an issue that could turn voters against a popular President and his congressional allies.

The Democrats' accusation: The corporate crime wave wasn't just a natural outgrowth of boom times, as White House economists claimed. The rip-off of the Investor Class was actually driven by GOP deregulatory policies and a bred-in-the-bones blindness to Big Business excesses.

It was an enticing summer idyll. But with the first winds of autumn swirling through Washington, it's increasingly clear that corporate crime is not the magic bullet Democrats sought. Indeed, a Sept. 5-16 Pew Research Center poll found that by 36% to 31%, Republicans are now viewed as the party best able to deal with business misdeeds. One sign of the times: TV stations in Indiana and West Virginia have yanked Democratic attack ads after concluding they unfairly linked GOP House candidates with "Enron-style corruption."

How did Republicans defuse an issue that looked like political dynamite? Start at the top, with the about-face at the business-friendly White House. The President last summer began criticizing corporate leaders for losing their moral compass. Lecturing Manhattan financiers against a backdrop that proclaimed "corporate responsibility," Bush began to co-opt the issue when he appeared to bite some of the hands that signed his campaign checks. Chief among them: longtime patron Kenneth L. "Kenny Boy" Lay.

Bush didn't stop with sermons, though. He stressed criminal sanctions against corporate miscreants, a point driven home when a string of fallen tycoons subsequently did the "perp walk" before TV cameras. By dealing with corporate crime in a typically Republican manner--throw the book at the criminals--Bush was able to look responsive.

Hill Republicans were just as nimble when it came to protecting themselves. They did it the old-fashioned way, by turning on a dime from opposition to the auditing-reform bill championed by Senator Paul S. Sarbanes (D-Md.) to a position of noisy support. What's more, House GOP committee chairmen W.J. "Billy" Tauzin (R-La.) and Michael G. Oxley (R-Ohio) became the impresarios of ex post facto angst, staging high-profile hearings that cast a harsh light on questionable practices at energy, telecom, accounting, and investment banking giants. Not surprisingly, the incendiary sessions have overshadowed more sedate inquiries by Senate Democrats. "Hill Republicans have been very aggressive in picking on people nobody likes," says Democratic strategist Michael Berman. "That's helped to neutralize this issue."

Democrats have been further handicapped by their own problems with business ethics. Senator Robert G. Torricelli (D-N.J.) was rebuked by his colleagues for accepting improper gifts from a now-jailed exec. And Global Crossing co-founder Gary Winnick has close ties to Democratic National Committee Chairman Terry McAuliffe. "The last time I checked, Martha Stewart was a Democrat," jabs Connecticut's John G. Rowland, chairman of the Republican Governors Assn.

The disappearance of the corporate-crime issue has cheered the GOP, but the party still has plenty to worry about between now and Nov. 5. With the Dow Jones industrial average below 8000, unemployment expected to rise, and fears of a prolonged bout of economic malaise increasingly weighing on voters' minds, Republicans could yet face a backlash at the polls. The last time the public was this pessimistic about the economy--in 1994, according to a recent ABC/Money survey--the Democrats lost control of Congress. "I wish the election were today," says one veteran GOP fund-raiser. "If we're talking about the economy on Election Day, Republicans are in trouble." After months of negotiations, the House has hammered out a deal that would accelerate Food & Drug Administration reviews of new products for the $71 billion medical device and diognostics industry. Under the deal, companies will pay the FDA $225 million in user fees over five years to help it hire more reviewers and catch up with rapidly evolving science. In exchange, the FDA will agree to cut approval times--now averaging more than 13 months for new products--by at least 25%. The measure would have a huge impact, says industry lobbyist Stephen J. Ubl. The plan also would permit companies to hire FDA-approved third parties to carry out agency-required inspections. With House passage expected by the beginning of October, industry officials are optimistic that the deal can squeeze through the Senate before Congress recesses for the year. President Bush's strategy to woo Hispanic Americans appears to be yielding mixed results. According to a Sept. 20-22 Gallup Poll, 57% of Latinos approve of the President's job performance, far higher than other minorities. But this affinity for Bush is not translating into support for GOP candidates this fall. By 57% to 32%, Hispanics say they will vote Democratic for Congress.

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