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Spitzer stays on war path
As WorldCom crisis deepens, New York attorney general stresses need for reform.
July 2, 2002: 2:23 PM EDT

NEW YORK (CNN/Money) - New York Attorney General Eliot Spitzer stepped up his calls Tuesday for higher ethical behavior by investment bankers and corporate executives as regulators try to restore the shattered investor confidence that has sent stocks to five-year lows.

Spitzer, speaking on CNN's American Morning with Paula Zahn, said CEOs need to personally vouch for the accuracy of their companies' finances. And he said investment banks must put investors' need ahead of the their investment banking clients.

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"The American public no longer has confidence in Wall Street and we've got to change that," Spitzer said.

The remarks, which Spitzer has made before, came a day after the accounting scandal at WorldCom (WCOME: Research, Estimates) deepened, with the telecom company saying cash flow may have been exaggerated as far back as 1999.

In a separate matter, New York State's comptroller, H. Carl McCall, filed a motion Tuesday in Federal District Court, alleging that WorldCom's misleading accounting inflated its stock price. McCall, who runs New York's $112 billion pension fund, says fund investors lost more than $300 million because of the tumble in WorldCom shares, which fetched more than $60 in 1999.

The comptroller, a Democrat, is running for governor.

Congress, President Bush, the Securities and Exchange Commission, and the Justice Department all are involved with investigating the growing accounting and ethical scandals that began with Enron and have spread to Global Crossing and Tyco International.

Spitzer, without naming anyone, criticized one of the regulators.

"I wish the SEC would hop in and get more aggressive," he told Zahn.

A Democrat who has been accused of using his platform to prepare for a run at higher office, Spitzer said, "I'm running for re-election for A.G. This is the job I love."

Spitzer has focused on Wall Street, securing a $100 million settlement from Merrill Lynch (MER: Research, Estimates) earlier this year after accusing the No. 1 brokerage of hyping stocks to win business for its investment banking unit.

The Nasdaq composite index fell to its lowest levels since June 1997 Monday, six days after WorldCom said it hid more than $3.8 billion in expenses. The SEC has charged the company with fraud.

"There has been a decline in ethics and we've got to turn it around," Spitzer said.  Top of page