And one wonders why Bush appointed Pitts to this post. Simple! So that nothing can be done to bring the crooks to justice...to think! The Bush effort and the SEC to bring corporate executives to justice and you have the fox guarding the hen house...
"Recusals Doom an SEC Case
By David S. Hilzenrath
Washington Post Staff Writer
Wednesday, July 3, 2002; Page E01
The Securities and Exchange Commission's ties to the accounting industry got in the way of a recent enforcement action against Ernst & Young yesterday when an administrative law judge dismissed the case.
Chief judge Brenda P. Murray found that the SEC improperly initiated the case on the vote of only one commissioner, Isaac C. Hunt Jr., last month after the other two commissioners recused themselves. Past ties to Ernst & Young prevented Chairman Harvey L. Pitt and Commissioner Cynthia A. Glassman from voting, and two other seats are vacant.
The judge's action highlights the potentially complicating connections between the agency and the embattled accounting industry at a time when the SEC is considering rules to more strictly regulate auditors in the aftermath of accounting blowups at Enron and other major companies.
In May, the SEC alleged that Ernst & Young violated its duty to remain independent from companies it audits by jointly developing and marketing software with client PeopleSoft Inc. The enforcement action had the potential to disqualify Ernst & Young from auditing companies listed on the stock markets, which would have been crippling.
Ernst & Young had argued that the enforcement action was illegitimate because at least two commissioners are required to participate in such decisions.
Pitt formerly represented Ernst & Young and other accounting firms as a lawyer in private practice. Before President Bush appointed him to the SEC last year, he represented Ernst & Young in the case dismissed yesterday, a securities lawyer familiar with the case said.
Glassman, another Bush appointee, worked as an economist at Ernst & Young.
"We are pleased that the administrative law judge agreed with our position that the proceeding was not properly authorized and dismissed the complaint," Ernst & Young spokesman Les Zuke said. The firm's conduct "was entirely appropriate and permissible under the profession's rules," Zuke added.
In papers filed in the case, SEC officials said the firm was a repeat offender and "remains both positioned and likely to commit future violations of the auditor independence rules." Ernst & Young's partner in charge of independence issues, Ed Coulson, erroneously determined that the firm's relationship with PeopleSoft did not impair the firm's independence and testified several months ago that "if presented with the same issue again, he would make the same determination," the SEC filing said.
The SEC staff argued that Hunt voted to initiate the case under authority delegated to him as the commission's duty officer to handle urgent matters, but the judge said the SEC failed to prove the matter was urgent.
The judge's order, which does not prohibit the SEC from filing the case again in the future, can be appealed to a federal appellate court. But securities lawyers said the judge's order means that, unless the agency can prove the case is urgent, at least two commissioners must be able to participate in the vote. Under ethics rules, Pitt's one-year recusal expires on Aug. 3, and after that he will decide whether to participate in matters on a case-by-case basis, SEC spokeswoman Christi Harlan said.
Hunt, who is a Clinton appointee temporarily held over, and Glassman are both on the five-seat commission through recess appointments. President Bush has named former SEC general counsel Harvey Goldschmid, Houston broadcast executive Roel Campos and Paul S. Atkins, a lawyer at the accounting firm PricewaterhouseCoopers, to fill vacancies, though they need Senate confirmation. |
