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Ashcroft urges nations to fight corruption

DAVOS, Switzerland -- Attorney General John D. Ashcroft yesterday urged nations that rallied against terrorism after Sept. 11, 2001, to unite again to fight corruption, which is costing the world economy more than $2 trillion every year.

In a speech to the World Economic Forum, Ashcroft attacked government officials who pocket payoffs and deprive their people of money for better roads, cleaner water, and more modern schools.

"We are winning the war on terrorism," he said, but corruption is threatening "the capacity of business and government to work together to end the plague of poverty and expand human achievement."

The World Bank estimates the cost of corruption represents about 7 percent of the annual world economy -- roughly $2.3 trillion, which "is equal" to the entire US federal budget, Ashcroft told more than 100 participants at a private lunch during the annual five-day meeting.

"Twenty-eight months ago, all free nations were called to defend freedom from terrorism. Today we are called to defend our freedom from corruption," the attorney general said.

"To defeat terrorism, we must prevent acts from occurring in the first place," he said. "Just as we cannot wait for the next terrorist to strike, we must not wait for the next bribe to be paid before moving to stop future corrupt activity."

Ashcroft called for leadership, unprecedented international cooperation, and openness to detect and deter corruption.

Last month, Ashcroft signed a landmark UN anticorruption treaty requiring politicians to disclose their campaign finances and countries to return tainted assets to the nation they were stolen from. The United States was one of 95 countries to sign the UN convention, which Ashcroft said shows "a worldwide conviction that the crime of corruption . . . must be defeated."

Later at the forum of business and government leaders, President Pervez Musharraf of Pakistan stressed his commitment to resolve his country's dispute with India over Kashmir.

"I strongly believe that we must not live perpetually in enmity," he said. "I am very glad that mutually we agreed on a way forward."

India and Pakistan are expected to start talks next month aimed at resolving the Kashmir conflict and other disputes.

Musharraf also said his government would prosecute any scientists in Pakistan who sold nuclear secrets. He said it was possible that individual scientists may have sold secrets, adding that Pakistan is investigating "any proliferation that may have been done by any individual for their personal financial gain," he said. "We will deal with them as antistate elements." On the business side, leaders tackled the thorny issue of how to resist stock market pressure to distort company earnings -- one factor cited in the scandal involving energy trader Enron. In a discussion among the heads of major corporations, the practice of rewarding top executives with stock options was both praised and blamed, depending on how those options are structured.

Options that pay off in the short term can push executives to cut corners and pump up quarterly earnings to satisfy the market, while long-term options can promote better strategic thinking, panel members said.

"It's the best thing or the worst thing, depending on how you use it," said Bertrand Collomb, chairman of French building materials company Lafarge.

Pressure from stock markets is considered one of the factors contributing to corporate accounting scandals such as the collapse of Enron. European officials have been confronted with a mushrooming scandal of their own in the collapse of Italian dairy giant Parmalat.

Some said such pressure can be averted by simple approaches, such as clearly explaining the company's strategy to employees and investors.

"If we do that, the share price takes care of itself," said Joe Forehand, chairman and chief executive of US consulting giant Accenture.

Corporate governance and ethics have assumed a more prominent role at the annual gathering with the passage of US legislation -- the Sarbanes-Oxley Act -- imposing new accountability on companies and executives for the truthfulness of their earnings.

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