Pitt a political target ahead of elections
" The SEC a week ago picked William Webster to head the new
accountancy board, one of the central legislative efforts to restore
investor confidence. But Mr Webster, former head of the CIA and the FBI,
had headed the audit committee of a company now embroiled in financial
fraud allegations. Worse for Mr Pitt, it seems
Mr Webster warned him but the information was not passed on to the other four
commissioners, who had to vote on Mr Webster's suitability."
Sunday November 3, 5:40 pm ET
By Adrian Michaels in New York
biz.yahoo.com
Harvey Pitt hit a low point a few days ago. The chairman of the Securities and
Exchange Commission, under almost constant fire since he took the job in August last
year, had tried to quell the storm over the agency's new accountancy regulator by
announcing an internal inquiry. "Pitt probes himself," trumpeted one headline, exposing
a growing lack of respect for the head of one of Washington's most important agencies.
The declining deference comes after a year of huge stock market losses and a wave of
corporate scandal that started with Enron. The SEC's deeds and thoughts have been a
target for politicians seeking votes in tomorrow's mid-term elections. Mr Pitt was the
choice of the Republican administration of George W. Bush. So Democrats have for
months been calling for his head. With the mid-term elections the catcalls have
reached fever pitch.
The SEC a week ago picked William Webster to head the new
accountancy board, one of the central legislative efforts to restore investor confidence.
But Mr Webster, former head of the CIA and the FBI, had headed the audit committee
of a company now embroiled in financial fraud allegations. Worse for Mr Pitt, it seems
Mr Webster warned him but the information was not passed on to the other four
commissioners, who had to vote on Mr Webster's suitability. It is the final indignity in a
process of selection that had become fiercely political, bogged down in leaks and
sniping, and already slammed as "inept" by Harvey Goldschmid, the leading Democrat
commissioner. While Mr Webster may have nothing to be ashamed of for his conduct
at the company, US Technologies, even some of Mr Pitt's close team admit privately
that the audit information should have been passed on. Instead, when it came out in
the press last week, it was far more explosive. Milder Democrats such as Senator
Paul Sarbanes, the architect of the law that created the new accountancy board, have
called for Mr Pitt's resignation.
Carl Levin, another influential senator, wrote to Mr
Bush: "From his personal meetings with companies under investigation, to his
deference to accounting firms fighting tougher oversight, to his mishandling of the new
oversight board, Mr Pitt has shown that he has neither the judgment nor the credibility
to continue in this important position." And some Republicans have publicly questioned
his judgment. Crucially, Richard Shelby, who will take over from Mr Sarbanes as head
of the Senate banking committee if the Republicans take control of the Senate, was
reported to be in favour of an outside probe of the SEC's appointment process.
The
administration is still offering support for Mr Pitt, as it has throughout his troubles, and
senior Republicans did not over the weekend expect Mr Bush to ask for his resignation.
"Harvey Pitt retains the confidence of the president," a senior administration official
said on Sunday. "The inspector general's review of the issue is welcomed, we think, a
way to get in all the facts." The Senate banking committee, headed by Mr Sarbanes
or Mr Shelby, would have to approve any replacement candidate. Oddly, though a
Republican-controlled Senate would take much of the heat off Mr Pitt, it would be easier
to push through a replacement's nomination. If the Democrats were still in charge after
the election, Mr Sarbanes could be harder to please. The present team at the White
House has a reputation for loyalty. Paul O'Neill, Treasury secretary, has had detractors
within the Republican party for months, but the president has stood by him. Andy Card,
the chief of staff, and Karl Rove, the president's politicial guru, would not be inclined to
let the Democrats run Mr Pitt out of town. Mr Shelby's doubts about Mr Pitt are a big
blow since they underscore how difficult life may continue to be for him even if he
retains White House support. The Alabama senator takes over as lead Republican on
the Senate banking committee from Phil Gramm. Mr Gramm is retiring after decades as
one of the main power brokers in Congress and more recently one of Mr Pitt's most
vocal and influential supporters. Additional reporting by Peter Spiegel in Washington
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