Bush Sends Pitt to Prosecute His Former Clients
-g-
DOW down ANOTHER -130 points?
LMAO.
truthout.org
Bush Sends Pitt to Prosecute His Former Clients
By Stephen Labaton
New York Times
Wednasday, 17 July, 2002
WASHINGTON, July 17 -- Harvey L. Pitt, the embattled head of the
Securities and Exchange Commission, said today that with the expiration of
ethics restrictions that have bound him during his first year in office, he would
play a direct role in enforcement cases involving companies and accounting
firms that were once his law clients.
In an interview today, Mr. Pitt -- who had generally avoided questions about
his intentions -- said that his background as a leading securities lawyer was an
asset, not the liability cited by critics who say he should continue to recuse
himself from matters involving former clients.
"This will inevitably sound self-serving, but the fact is it is an enormous
advantage to the public to have somebody who knows about the securities
business and the securities law as I do, and it would be unthinkable to deprive
people of my expertise," he said in the interview.
The restrictions, under federal ethics rules and an agreement that Mr. Pitt
made with the agency, expire in two weeks, though Mr. Pitt could have
voluntarily continued to limit his role.
In recent months Mr. Pitt -- who as a Wall Street lawyer represented all of
the top investment houses and exchanges, all of the largest accounting firms
and the accounting industry's trade group -- has come under withering criticism
just for maintaining contact with former clients. Some members of Congress
have been calling for his resignation -- most prominently Senator John McCain,
Republican of Arizona, who reiterated that view today.
"I think he is damned if he does and damned if he doesn't," Mr. McCain said
in an interview. "If he doesn't recuse himself, there will be questions as to
whether he should have or not, and whether he will be objective. If he does
recuse himself, we have an S.E.C. without a chairman. That is why he should
serve the country in another capacity."
In more than two dozen instances, including the investigation of Arthur
Andersen for its role in the collapse of Enron, Mr. Pitt has recused himself.
With two vacant seats on the five-member commission and two other
commissioners serving without Senate confirmation, some of those decisions
have presented problems for the agency.
One case involving accusations that Ernst & Young violated independence
rules by maintaining a business relationship with a client has already been
thrown out by a judge, because only one commissioner was able to vote on it.
A large fraud case, involving senior executives at Waste Management, could
encounter the same problem.
Two more nominees to the commission are to go before a Senate
committee for confirmation on Thursday, and hearings for two others may be
held next week. The confirmation of those nominees could take some of the
political pressure off Mr. Pitt -- but the ethical decisions he faces in the months
ahead have the potential to be politically dangerous.
Moreover, his decision to wade into cases involving former clients is certain
to fuel further criticism by some that the administration and its appointees have
been too cozy with the corporate and accounting interests at the heart of the
current market crisis.
But Mr. Pitt said today that if he continued to recuse himself, he would be
largely ineffective. Instead, he promised to pursue an aggressive approach in
enforcement proceedings, saying that the markets and investors demand that
the agency come down mercilessly on accounting firms and corporations that
have misled investors.
"There is a reason for a one-year cooling-off period, a period that is used by
other officials and federal judges all the time," said Mr. Pitt, who was a senior
partner at the New York firm of Fried, Frank, Harris, Shriver & Jacobson before
his appointment to the S.E.C. by President Bush. "At the end of that period,
people should focus on the substance and not on my past."
Mr. Pitt has said it is unfair to criticize him because of clients, calling it
"guilt by occupation." He emphasized that he remains beholden to none of his
former clients, particularly since he has no intention of ever going back into
private practice.
"I cannot carry my past with me forever," he said. "I have no intention of ever
practicing law again. So all of the concern of me currying favor with my clients
misperceives who I am."
Mr. Pitt said, too, that he had no intention of stepping aside. " As corny as
it sounds, this is the only job I really wanted since I got steeped in securities
law," he said. "To me this is the greatest job in the world. I don't even want to
think about leaving."
Mr. Pitt and the other commissioners are not involved in the day-to-day
handling of enforcement proceedings, which are left to career officials. But the
commissioners do play crucial roles in authorizing investigations and in
ultimately deciding whether the agency should bring or close a case.
Senator Jon S. Corzine, Democrat of New Jersey, said that Mr. Pitt ought to
participate in cases involving his former clients as the rules permit, although "he
needs to be extraordinarily sensitive" to possible ethics issues and
appearances.
"If you believe he should continue as S.E.C. chairman, which I do, I think he
ought to follow the rules," he said. Ethics rules bar Mr. Pitt from ever
participating in any matter in which he had been substantially involved when he
was in private practice.
But other politicians said that the current climate of distrust in the markets
-- and the questions raised about Mr. Pitt's earlier meetings with former clients
like Xerox and the KPMG accounting firm -- obliged him to go the extra mile
and extend his recusal period.
"There is no confidence that he is an independent judge of the complaints
which will come before the S.E.C. regarding the accounting industry," said
Representative Edward J. Markey, Democrat of Massachusetts, who has also
suggested that Mr. Pitt step down. "There is a crisis of confidence, and the
S.E.C. needs a leader who has the confidence of the American investor."
Alan R. Bromberg, a securities law expert at the Southern Methodist
University School of Law, said that Mr. Pitt should extend his recusal period for
at least another year, saying that "he is still carrying the baggage of
representation of many of the people who will likely be involved in future
decisions of the S.E.C."
Politically, Professor Bromberg said, it will be impossible for Mr. Pitt to vote
in favor of a former client, even if the facts and law support that decision,
because he will be seen as taking a dive. "If he votes against taking any action,
it's bound to be thrown out that he's protecting his clients again," he added.
(In accordance with Title 17 U.S.C. Section 107, this material is distributed
without profit to those who have expressed a prior interest in receiving the
included information for research and educational purposes.)
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