The reform party's over
By Molly Ivins
Syndicated Columnist
Posted on Thu, Oct. 10, 2002
Star-Telegram
We just lost the whole ballgame on corporate reform without the news even making it to the front page. The sick, sad tidings were tucked away discreetly on the business pages: "SEC Chief Hedges on Accounting Regulator." Now there's a sexy headline.
All of you who were shafted by Enron, shucked by Worldcom, jived by Global Crossing, everyone whose 401(k) is now a 201(k) (I think that's Paul Begala's line), you just got screwed again. They're not going to fix it.
They've already called off the reform effort; it's over. Corporate muscle showed up and shut it down. Forget expensing options, independent directors, going after offshore shams, derivatives regulation. For that matter, forget even basic reforms like separating the auditing and consulting functions of accounting firms and rotating accounting firms every few years.
Bottom line: It's all going to happen again. We learned zip from the entire financial collapse. Our political system is too bought-off to respond intelligently.
Even the normally impeccable Lou Dobbs had taken to referring to SEC Chairman Harvey Pitt as "a reformer," a usage that stretches the language.
Pitt, President Bush's appointee to the chair of the Securities and Exchange Commission and a career-long mercenary for the securities industry, is the lawyer who memorably advised in one law journal article: If you get in trouble, shred the evidence.
He came in promising to make the SEC "a kinder, gentler place for accountants." This unpromising champion of reform -- appointed to keep the corporations happy -- came under such heavy political fire during the financial collapse that he was suddenly out there flirting with Paul Volcker, Arthur Levitt and other genuinely concerned citizens with actual ideas about how to fix this ghastly mess.
No mas. According to The New York Times: "Harvey L. Pitt, under pressure from Republicans and former clients in the accounting industry, is backing away from the choice he and other members of the SEC favored to lead the new federal agency that will oversee the industry. Industry executives and at least one prominent Republican lawmaker complained that the top choice, John H. Biggs, was too tough on the industry."
Biggs, the citizen in question, is head of the pension investment plan TIAA-CREF -- not exactly a commie. Nevertheless, he has spoken up strongly for the need to make companies more stringently accountable for stock options, making companies rotate their auditors every few years, and for separating the auditing and consulting functions of accounting firms.
Gee, how bold and daring of him. Quel overthrow of capitalism is implied by these obvious, fundamental reforms.
The Sarbanes bill set up a new five-member board to oversee the accounting industry. Biggs was the much-touted choice to head this board -- both Pitt and another SEC commissioner had announced their support -- when, oops, the accounting industry weighed in.
"Congressional aides and current and former SEC officials say the episode illustrates the continued political influence of the accounting profession despite its defeat … on the Sarbanes bill." Duh.
Lynn Turner, former chief accountant for the SEC, told the Times: "It appears that the accounting firms, the Republicans and now chairman Pitt are trying to circumvent the Sarbanes legislation by making certain that the board does not include a reform-minded person: If we lose Biggs, we lose a reform-minded board."
The ever-flexible Rep. Michael Oxley, R-Ohio, chairman of the House committee that oversees the SEC, is one of my favorite players in the corporate scandals. First, he was against reform. Then the pressure for reform got so strong that even the White House rolled over in front of it, and Our Man Oxley became a reformer, too, signing on to the Sarbanes bill. But now he wants a person of "moderate views," as opposed to this reincarnation of Vladimir Lenin, the head of a major pension fund.
You will not be amazed to learn that Oxley's major contributors are securities and investment firms, commercial banks, insurance, finance and credit companies, and accounting firms. You got to dance with them what brung you.
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Molly Ivins writes for Creators Syndicate. 5777 W. Century Blvd., Suite 700, Los Angeles, CA 90045
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