Under fire for missteps, SEC chief quits
Stephen Labaton The New York Times
Thursday, November 7, 2002
iht.com
WASHINGTON Harvey Pitt, the embattled chief of
the U.S. Securities and Exchange Commission,
has resigned after igniting a fresh controversy over
how he handled the selection of the head of a new
accounting-industry oversight board.
Pitt announced his resignation Tuesday night just
as polling places were closing in the U.S.
congressional and local elections. For days he had
insisted he would continue to serve as long as he
had the confidence of the president.
At the same time, White House officials had
strained to keep the growing crisis at the agency
from becoming a political issue that would remind
voters of Washington's response to corporate
scandals. The officials publicly voiced support for
him but privately expressed deep anger about his
stewardship.
Administration officials said President George W.
Bush had not requested his resignation but that
the officials welcomed it, particularly because Pitt
had created a new round of political difficulties for
Republicans in the days leading up to the
election.
On Wednesday, the Bush administration
defended the president's appointment of Pitt and
his substantive performance at the commission,
the Associated Press reported.
"I don't think he went soft on the accounting
industry," said Ari Fleischer, the White House
press secretary. "There were other circumstances
that arose," he said, leading Pitt to resign.
Pitt's leadership of the agency had grown
increasingly tenuous in recent months with a
series of political missteps, including a widely
ridiculed effort over the summer to insert a
provision in corporate anti-fraud legislation that
would raise his pay and elevate his status to that
of cabinet level.
Pitt's position was further weakened last week by
a disclosure involving his role in the nomination of
William Webster, the new accounting board
chairman.
It was revealed that Pitt had told neither the White
House or the four other SEC commissioners that
he had known that Webster had headed the audit
committee of a company accused of fraud.
Webster, who had been recruited for the post by
the White House, was approved by a deeply
divided SEC, with two commissioners saying he
was unqualified for the job.
The disclosure that Pitt had withheld information
about Webster's ties to the company, U.S.
Technologies Inc., led quickly to three
investigations into Pitt's handling of the selection
of the new board. A fourth inquiry, by the SEC, is
examining Webster's work for U.S. Technologies,
which is virtually insolvent and under criminal
investigation.
"Unfortunately, the turmoil surrounding my
chairmanship and the agency makes it very
difficult for the commissioners and dedicated SEC
staffers to perform their critical assignments," Pitt
said in a letter to Bush. "Rather than be a burden
to you or the agency, I feel it is in everyone's best
interest if I step aside now, to allow the agency to
continue the important efforts we have started."
A woman who answered the phone at Pitt's
residence Tuesday evening said, "I'm sorry, we're
not taking any calls right now."
"This was his decision," said a White House
spokeswoman, Claire Buchan, referring to Pitt's
resignation. She said no interim chairman had
been selected.
In his letter to Bush, Pitt said he would leave "as
soon as I can help your staff ensure a smooth
transition of leadership."
Among the people being considered to replace
him are Richard Breeden, who was chairman of
the SEC under former President George Bush;
Michael Chertoff, the assistant attorney general in
charge of the criminal division at the Justice
Department and James Doty, a securities lawyer
who was general counsel to the SEC under
Breeden and who represented George W. Bush
before he became governor of Texas.
Also being considered are Rudolph Giuliani, the
former mayor of New York; Joseph Grundfest, a
former SEC commissioner now teaching at the
Stanford University law school; Frank Keating,
governor of Oklahoma and Frank Zarb, former
head of the National Association of Securities
Dealers.
Pitt, the 26th SEC chairman, is the second to
resign abruptly as a result of a political scandal. In
1973, G. Bradford Cook resigned 74 days after
taking office over a matter related to the Watergate
scandal that eventually brought down President
Richard Nixon. He had been accused of deleting
references from an SEC injunction to a secret
$200,000 cash contribution that a financier,
Robert Vesco, had made to Nixon's re-election
committee.
Pitt had been confirmed unanimously by the
Senate last year and was widely praised as one of
the most experienced securities lawyers in the
United States.
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