Ex-F.B.I. Chief Seen as Choice for Accounting Post
October 25, 2002
By STEPHEN LABATON
nytimes.com
ASHINGTON, Oct. 24 — The Securities and Exchange Commission has settled on William H. Webster, the former F.B.I. and C.I.A. director, to head a new agency regulating the accounting profession, commission officials and Congressional aides briefed about the decision said today.
The selection was made by the three Republicans on the five-member commission, some of whom praised Mr. Webster as a vigorous voice for law enforcement who would be tough on the profession.
But the two Democrats planned to issue a bitter dissent when the commission formally votes on the membership of the new agency on Friday. They prefer it be headed by John H. Biggs, a leading voice for aggressive oversight of the profession who until recently had appeared to have the bipartisan support of a majority of the commissioners.
The selection of Mr. Webster was made after Harvey L. Pitt, the S.E.C. chairman, and the two other Republicans on the commission — all three of whom have had career ties to the accounting profession — decided to reject Mr. Biggs. Mr. Biggs, who is chairman of TIAA-CREF, the large pension system, testified this year for an independent regulator and tighter restrictions on the profession. His selection had been opposed by some accountants and one of their most important Republican allies in Congress, Representative Michael G. Oxley, Republican of Ohio, who heads the committee that oversees the commission.
Mr. Webster, 78, now a partner at the law firm of Milbank, Tweed, Hadley & McCloy, is widely known for his long record of government service and law enforcement. Mr. Webster did not return a telephone call seeking comment, but officials said he had accepted the offer.
But some experts noted that he had little recent experience in accounting issues and had played no role in recent years in the debates over a variety of regulatory and accounting issues that will have to be addressed by the new board.
"Webster has been an administrator and judge of unblemished integrity," said James D. Cox, a professor of corporate and securities law at Duke University. "But there is nothing in his background to show that he will be an instrument of change or that he has any recent experience in these areas."
Others were more blunt.
"I'm putting my money in money markets," said Lynn E. Turner, a former chief accountant at the commission. "It's unfortunate that William Webster is being used as a pawn by the administration and Harvey Pitt and that the accounting profession has succeeded in vetoing somebody they didn't want. Investors, Webster and the reputations of accountants are going to suffer for this."
But Paul S. Atkins, one of the Republican commissioners, said there was no validity to the idea that he or the other Republicans on the commission had buckled to pressure from accountants. He said the commissioners liked Mr. Webster because they were looking for a person with a strong background in law enforcement who would be both tough and independent.
"They will not find Bill Webster to be an easygoing guy," Mr. Atkins said. "He will not be a paper tiger. If they think they are getting a milquetoast guy, they are mistaken."
Officials said that in accepting the offer, Mr. Webster asked that an old friend be appointed to the accounting board. That friend is Robert L. Virgil, a senior executive at Edward D. Jones, the brokerage house, and emeritus professor of accounting and former dean at the John M. Olin School of Business at Washington University in St. Louis. Mr. Virgil met with some agency officials today to discuss the job.
Other people mentioned today for possible board positions include Kayla J. Gillan, a former general counsel of the California Public Employees Retirement System, and Charles D. Niemeier, chief accountant of the enforcement division at the S.E.C. It is not clear whether they have the support of a majority of commissioners.
Mr. Pitt had repeatedly vowed to seek a candidate to lead the board who would garner unanimous support from the commission, particularly because the creation of the new accounting oversight board was viewed as the most important element of the regulatory response to the spate of corporate scandals and plunging stock markets. Mr. Pitt declined to discuss the selection process today.
The commission set a public vote for Friday for the five members of the new board after one of the Democrats at the agency, Harvey J. Goldschmid, objected to a request by Mr. Pitt to conduct a private vote, agency officials said.
Some lawmakers and members of the commission opposing the choice of Mr. Webster said the selection demonstrated that the profession had successfully lobbied to veto the candidacy of Mr. Biggs.
Mr. Biggs drew objections for his repeated advocacy of a variety of proposals and a strong reluctance to delegate authority from the new oversight board to the profession to set auditing standards.
He testified this year that he favored requirements that companies regularly rotate auditors, as his company has. He wanted stronger restrictions to prevent accounting firms from performing both auditing and consulting services for the same clients. And he wanted stricter accounting of stock options awarded as compensation to executives. These positions conflicted with the views of accounting lobbyists who have sought through much of the year to kill or water down tougher regulation.
As a lawyer in private practice, Mr. Pitt represented the top firms and their primary lobbying organization, the American Institute of Certified Public Accountants. He wrote a white paper arguing against stronger oversight of the profession. The two other Republicans, Cynthia A. Glassman and Mr. Atkins, came to the commission after serving as top executives at Ernst & Young and PricewaterhouseCoopers, respectively.
Mr. Webster has had a career in public service dating back to his brief time as a United States attorney in Missouri in 1960 and his appointment to the federal bench 11 years later. He was elevated to the federal appeals court in St. Louis in 1973. President Jimmy Carter appointed him director of the Federal Bureau of Investigation five years later and President Ronald Reagan transferred him to head the Central Intelligence Agency in 1987.
As he contemplated the job, Mr. Webster heard from a lot of people. Democrats, including the two on the commission, urged him not to take it. On Wednesday he received a call from Andrew H. Card Jr., President Bush's chief of staff, who urged him to accept the offer. Claire Buchan, a White House spokeswoman, said Mr. Card had known Mr. Webster for a long time and "knows that he's highly respected."
"He reached out to him to thank him for considering serving," Ms. Buchan said. "The White House would like to see a highly qualified individual who would bring great integrity to the position."
Mr. Webster also sought the advice of Alan Greenspan, chairman of the Federal Reserve and a close friend and tennis partner, an official said. It is not known what advice he received. Before Mr. Webster's name surfaced, Mr. Greenspan and Treasury Secretary Paul H. O'Neill had endorsed Mr. Biggs for the job, a senior government official said.
Officials said the decision to reject Mr. Biggs in favor of Mr. Webster was sharply criticized by the agency's two Democrats, Roel C. Campos and Mr. Goldschmid. They have told colleagues that Mr. Pitt promised them last month to support the candidacy of Mr. Biggs and then backed off that promise after objections were raised by the profession and Mr. Oxley.
Securities experts and Democratic lawmakers said today that partisanship at an agency that is supposed to be independent and has historically not been polarized by politics threatened to undermine the credibility of both the commission and the new accounting board.
"If the commission divides along party lines it would be the death knell for the public acceptance of this body," said Arthur L. Levitt, the former chairman of the commission, in an interview. Mr. Levitt, along with such figures as Paul A. Volcker, the former Fed chairman, and Senator Paul S. Sarbanes, the principal author of the law creating the oversight board, had also strongly endorsed Mr. Biggs.
The deep political divide at the commission arises just as it struggles to regain the confidence of Wall Street. Mr. Pitt has been repeatedly upstaged by more aggressive state prosecutors like New York's attorney general, Eliot Spitzer. Mr. Pitt has also been criticized by some lawmakers as unduly sympathetic to the accounting profession and slow to respond to the emerging corporate crisis facing the markets.
The oversight board has been viewed by lawmakers and experts as essential to restoring confidence in the markets by taking steps to end accounting abuses and reduce the record number of restatements of financial earnings over the last few years.
Known officially as the Public Company Accounting Oversight Board, the new agency has been given a broad mandate to set ethics and conflict-of-interest standards, discipline accountants and conduct annual reviews of the nation's largest accounting firms.
The S.E.C.'s enforcement division was dealing with another problem in a meeting yesterday at the commission's offices in Washington.
Stephen M. Cutler, the commission's director of enforcement, and Mr. Spitzer met with lawyers from 10 big securities firms and proposed changes in stock research on Wall Street. Mr. Spitzer laid out a plan to have the firms pay annual fees to finance research that would be conducted by about 20 independent companies but distributed to investors by the big banks.
The regulators, who are also considering how to punish the firms for allowing their banking interests to influence their investment advice, gave the firms until Wednesday to respond to the proposal. |
