Common Cause Calls for The Resignation of SEC Chairman Harvey Pitt
Harshbarger: “Pattern of Conflicts Undermines Citizen and Investor Confidence”
commoncause.org
May 10, 2002
Contact:
Seth Amgott
Cleve Mesidor
Susan Quatrone
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“The SEC is holding an investors’ conference today to listen to the concerns of average Americans. Ending Chairman Harvey Pitt’s continuing conflicts of interest would send a stronger message. The stakes could not be higher: our economy depends on efficient, open markets safeguarded by the rule of law. The American public deserves an impartial Securities and Exchange Commission that safeguards the public interest and investor confidence. Instead, Mr. Pitt has demonstrated a pattern of actual and apparent conflict of interest. This pattern undermines citizen and investor confidence,” Common Cause President Scott Harshbarger said.
“As the fallout continues from the Enron collapse, Mr. Pitt’s pattern includes: taking office at a disadvantage in terms of credibility, due to his role in the accounting industry’s lobbying campaign two years ago to preserve their conflicts of interest; an improper meeting with a former client under investigation by the SEC; and leaving the role of defending shareholder protection from conflicts of interest by research analysts to the New York Attorney General. It’s time for his departure.
“At best, Chairman Pitt showed poor judgment and disdain for the public trust when he agreed to an April 26 meeting with Eugene D. O’Kelly, the new chairman of KPMG. Chairman Pitt had represented the firm as a securities lawyer, even representing them at one meeting with the SEC. KPMG was and remains the target of an investigation by the SEC for its alleged participation in a strategy to overstate Xerox profits by $3 billion.
“According to Mr. O’Kelly, he raised the subject of potential SEC enforcement actions against the firm. Mr. Pitt denies that this happened. He says belatedly that he will avoid such meetings in the future.
“His poor judgment on this meeting underlines a larger problem: As a securities lawyer for more than 20 years, Mr. Pitt made millions from representing more than 100 corporate clients including all the Big 5 accounting firms. Just two years ago, at the behest of the accounting industry, Chairman Pitt played a leading role in watering down proposed SEC regulations concerning auditor independence. His support of further self-regulation by the accounting industry is an unsatisfactory attempt to undo his previous work.
“Common Cause asked Chairman Pitt to recuse himself from the Enron/Andersen investigation because of the potential conflict of interest. The O’Kelly meeting shows Chairman Pitt has not yet made the transition from advocate for private clients to guardian of the public trust. The Enron collapse and large-scale restatements of corporate profits have the potential to further undermine confidence in financial markets. The SEC’s response threatens to undermine faith in our democratic institutions.
“We cannot afford an SEC Chairman who undermines both.
“Chairman Pitt should resign from the commission.”
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