Experts Question Webster Appointment
siliconinvestor.com
By MARCY GORDON 11/01/2002 02:59:57 EST
WASHINGTON (AP) - Former FBI Director William Webster, whose role at a company facing fraud accusations wasn't disclosed to members of the Securities and Exchange Commission, may not be the right choice to head a new accounting oversight board designed to bolster investor confidence, some experts say.
"He won't be able to work given the way his appointment came about," said Stephen Gillers, an ethics specialist who is vice dean at New York University's law school.
It was SEC Chairman Harvey Pitt, in the political hot seat as Democrats call for his resignation, who apparently failed to tell his fellow commissioners before they voted last week on Webster's appointment that he had headed the audit committee at U.S. Technologies.
The publicly traded company has been sued by investors who say they were defrauded of millions of dollars. It reportedly is under federal investigation. Last year, during Webster's tenure, the audit committee dismissed the company's outside accounting firm.
These revelations, made Thursday, came as the Bush administration seeks to restore investor and consumer confidence in the roller-coaster markets just days before the midterm elections.
Publicly, the administration strongly backed Pitt.
"Chairman Pitt has done a good job in cracking down on corporate wrongdoing and the SEC has a very strong record under his leadership," White House spokeswoman Claire Buchan said. "We support him."
At the same time, another presidential spokesman, Scott McClellan, acknowledged, "We don't have all the facts."
The SEC's inspector general, Walter Stachnik, will conduct an internal investigation into whether Pitt concealed the information on Webster from the other two Republican commissioners, who, along with Pitt, voted for Webster last Friday, and from the two Democrats who had voted against the candidate. Pitt and the other four requested the probe.
"This is simply a look at the process and it is not a review of Judge Webster," SEC spokeswoman Christi Harlan said. Agency spokesman John Heine insisted it was not an investigation of Pitt either.
The new board to oversee the accounting industry was created by Congress this summer in response to the wave of financial scandals that hit Enron Corp., WorldCom Inc., Global Crossing Ltd. and other big companies.
Overhanging the board "there's a cloud now, and the only question is how dark it gets," Gillers said.
Thomas D. Morgan, who teaches law at George Washington University in Washington, noted as did Gillers that Webster, a former federal judge and one-time head of the FBI and CIA, is known as a person of solid character and integrity.
Still, Morgan said, whether Webster is qualified or not to lead the watchdog board, there is a separate and compelling question of whether or not it can restore confidence among the investing public, given the controversy.
At a rancorous public meeting last Friday, the two Democratic SEC members, Harvey Goldschmid and Roel Campos, had supported another candidate, teachers' pension fund head John H. Biggs. They view Biggs as an advocate of tough regulation of the accounting industry.
Harlan, speaking as a spokeswoman for Pitt, said that in the course of the selection process, Webster told the SEC staff about his role as head of U.S. Technologies' audit committee.
"The staff reviewed the situation and identified nothing of concern regarding that service," she said.
In an interview with The New York Times, Webster said he had told Pitt that he had headed the company's audit committee.
"I told them that people are making accusations" in the shareholder lawsuits, Webster told the newspaper. "I said if this is a problem, then maybe we shouldn't go forward."
He said Pitt assured him that SEC staff had looked into the issue and it would not pose a problem.
U.S. Technologies' former outside accounting firm, other audit committee members, company executives and investors told the Times that no one at the SEC contacted them about Webster's role at the company, which invests in Internet businesses.
The three-person audit committee voted in the summer of 2001 to dismiss the company's outside auditing firm, BDO Seidman, after the auditors raised concerns about the company's internal financial controls, the Times reported.
It said Webster, 78, resigned as a director of U.S. Technologies in July after being told it could no longer provide liability insurance for officers and directors against claims from disgruntled investors. |
