More SEC power struggles
Reuters Business Report
Top Democrats Demand SEC's Pitt Resign
Wednesday October 9, 5:53 pm ET
By Kevin Drawbaugh
WASHINGTON (Reuters) - Congress' two top Democrats on Wednesday wrote to President Bush seeking the resignation of Securities and Exchange Commission Chairman Harvey Pitt, and questioning his handling of the creation of a national board to police corporate accounting.
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Senate Majority Leader Tom Daschle and House Minority Leader Richard Gephardt said in the letter they were concerned about Pitt's actions in the selection of a chairman for the Public Company Accounting Oversight Board.
"We believe that you should replace him immediately as SEC chair," said South Dakota's Daschle and Missouri's Gephardt.
White House spokesman Ari Fleischer dismissed the appeal. "It's a political charge that has no merit and substance," he said, adding the market-regulating SEC has a record of aggressively pursuing corporate misdeeds.
SEC spokeswoman Christi Harlan said: "The chairman serves at the pleasure of the president. We've heard enthusiastic endorsements from the president on the chairman's work."
Pitt was in Brussels to meet with European Union officials and was unavailable for comment.
As Democrats try to swing the attention of voters from talk of war with Iraq to the sluggish economy and corporate misdeeds, Pitt and his handling of the accounting board and the SEC, in general, are becoming a political punching bag.
Securities law experts said it was unlikely Pitt -- appointed in summer 2001 after a career as an elite Wall Street lawyer and earlier as an SEC staff attorney -- would resign.
"Anybody that looks at the record of what Chairman Pitt has done would not come to the conclusion he needs to be replaced," said David Ruder, a law professor at Northwestern University in Chicago who served as SEC chairman from 1987 to 1989.
In a statement, Republican Ohio Rep. Michael Oxley, who co-sponsored newly enacted corporate reform legislation, called on Democrats "to stop this outrageous effort of politicizing the (SEC) and undermining its current chairman."
Congress ordered the SEC to set up the PCAOB this summer after a cascade of corporate and accounting scandals that hammered Wall Street and undermined investor confidence.
The scandals -- ranging from Enron Corp. (Other OTC:ENRNQ.PK - News) to WorldCom Inc. (Other OTC:MCWEQ.PK - News) -- have reflected poorly on the accounting profession, which had policed itself for years. The PCAOB will end self-regulation and impose new authority over accountants.
The SEC was moving smoothly to set up the board, with TIAA-CREF pension fund chief John Biggs seen as the front-runner to become chairman, until a flap broke out last week with Biggs' backers accusing accounting lobbyists of moving to block him.
Citing news reports, Daschle and Gephardt said that Biggs had been assured he would get the high-profile PCAOB chair. Then, they said, Pitt suddenly dropped his support for the 66-year-old, reform-minded economist.
LAWMAKERS SAY PITT HURTING SEC
The two highest-ranking Democrats in the Congress said in the letter, "The latest incident involving Mr. Biggs ... represents the culmination of a pattern of behavior by Mr. Pitt that is steadily eroding the credibility of the SEC."
Gephardt later told reporters, "We need to clean the record. We need new leadership at the SEC. And we certainly need a (PCAOB) appointment that is beyond reproach."
Responding on Tuesday to an earlier letter from other Democratic lawmakers questioning him on the affair, Pitt wrote, "I do not intend to allow either this agency, or the (SEC) commissioners, to be coerced into selecting, or rejecting, any candidate for board membership, simply because a publicly orchestrated campaign has been undertaken."
Confronted first with the Sept. 11 attacks that briefly shut down New York markets and then the proliferation of accounting scandals, Pitt has lurched from one crisis to another in his tenure as SEC chief, surviving previous calls for his resignation.
Last week, two Democratic lawmakers queried him about a recent meeting he held with officials from Goldman Sachs (NYSE:GS - News), which, like most major U.S. financial houses, is under SEC scrutiny over new stock offering and analyst practices.
Pitt said the Goldman conference did not violate his pledge to avoid meetings giving even the appearance of impropriety.
The SEC chairman caught the Bush administration off guard in July by suggesting to Congress, without first consulting the president, the SEC be elevated within the government and he be promoted to Cabinet level. The idea quickly vanished.
Arizona Republican Sen. John McCain in July called for Pitt to step down, criticizing him for recusing himself from some key SEC votes. Pitt was then blasted by some members of Congress for meeting in April with the head of accounting firm KPMG (KPMG.UL), a former client then under SEC investigation.
Daschle and Gephardt said, "At best, Chairman Pitt's repeated insensitivity suggests an arrogant indifference to the appearance of conflicts of interest that can only weaken the confidence the SEC should be working to build.
"At worst, Chairman Pitt has allowed associations with past clients and the industries he is regulating to influence his judgement and actions in ways that are improper or unethical. In either case, Mr. Pitt is not the right person to head the agency that oversees our financial markets."
Maryland Democratic Sen. Paul Sarbanes, who co-authored the accounting board legislation with Ohio Republican Rep. Michael Oxley, said in a statement that the PCAOB selection process was "in disarray." He praised Biggs and urged the SEC to act soon.
Under the Sarbanes-Oxley Act, the board's members must be appointed by the SEC by Oct. 28 and be up and running by next spring. |
