Stock Options Worry Some Investors
By MARCY GORDON
.c The Associated Press
WASHINGTON (AP) - Investors are expressing their concern to the Securities and Exchange Commission about company executives' stock options, about the accuracy of corporate financial reports - and about the SEC chairman's own prior association with ``pirates of Wall Street.''
The fallout from Enron's collapse overshadowed the agency's first ``investor summit,'' held Friday at its Washington headquarters and broadcast over the Internet and on cable television.
SEC Chairman Harvey Pitt, who presided over the event, has come under recent criticism for meeting privately last month with the chairman of KPMG - a big accounting firm that Pitt represented as a private securities lawyer and whose audits of Xerox Corp. are being investigated by the SEC.
The government watchdog group Common Cause said Friday that Pitt should resign because of ``a pattern of actual and apparent conflict of interest ... (that) undermines citizen and investor confidence.''
Eugene O'Kelly, the new chairman and chief executive of KPMG, said in an e-mail to employees last week that he had discussed with Pitt the SEC's investigation of the Xerox audits. He said he told Pitt the agency should not take any action.
Pitt has said he did nothing improper and did not discuss any enforcement matters in his April 26 meeting with O'Kelly, a 10-minute session for the two to get acquainted. Pitt said they also discussed KPMG's plans to acquire some operations of the embattled Arthur Andersen accounting firm, which formerly audited records of bankrupt Enron Corp.
Pitt said Friday, ``The meetings I engaged in were proper. They were for the benefit of investors.''
Several Democratic lawmakers this week told Pitt and O'Kelly that they have serious concerns about the meeting.
Other lawmakers of both parties, however, have expressed support for Pitt, as has the White House.
At the SEC summit, Pitt read a question from someone named ``CA'' who cited Pitt's former association ``with the current pirates of Wall Street'' and suggested there should be public representatives in top positions at the SEC.
As a prominent attorney before President Bush named him to head the SEC last spring, Pitt represented major Wall Street brokerage firms, the New York Stock Exchange, all Big Five accounting firms, including KPMG and Andersen, and British insurer Lloyd's of London.
Answering the question Friday, Pitt said his past associations ``have absolutely nothing to do with my intent to serve investors.''
Pitt, the other SEC commissioners and agency department heads took only written questions from members of the sparse audience or from people around the country using the Internet. The SEC received more than 600 questions, many of them sent before the summit, which was announced last week.
The questions answered Friday covered a wide range of subjects, including whether shareholders should get to approve company executives' stock options and other compensation, whether mutual funds should be required to disclose social and environmental risks of companies whose stock they have, compensation of financial analysts and the accuracy of companies' accounting and financial reports.
On Wednesday, the SEC approved rules designed to curb conflicts of interest among analysts that, among other things, will require them to clearly disclose in research reports and TV and radio interviews their financial interest in companies whose stock they recommend.
Before the flap over Pitt's meeting with the KPMG chairman, he had been criticized by several Democrats in Congress and some ethics groups for not totally removing himself from the SEC's investigation of Enron and Andersen. He also has defended in Senate testimony his private meeting with accounting industry executives in December on a post-Enron reform proposal.
The SEC is examining KPMG's audits of Xerox, which allegedly inflated its reported profit by some $1.5 billion and hid its true performance from investors.
Xerox agreed last month to pay a record $10 million civil penalty and to revise financial statements back to 1997 to settle the SEC's allegations of accounting fraud. The office-equipment maker neither admitted nor denied the allegations.
On the Net:
Securities and Exchange Commission: sec.gov
05/10/02 18:53 EDT |
