Corporate scandal issue will rise again
By MARIANNE MEANS
SYNDICATED COLUMNIST
Thursday, November 7, 2002
WASHINGTON -- The corporate corruption scandal, a very big deal, fizzled as an important issue in the Tuesday election thanks to clever maneuvering by the White House and political timidity from the Democratic congressional contenders.
The issue hasn't disappeared. It just went temporarily underground, shoved aside by simpler problems that were easier for candidates to link directly to their opponents.
The economy and corporate cheating could have damaged President Bush's image because of his close philosophical and financial identification with big-business interests. But the Democrats were cowardly, wary of attacking a president whose popularity is intimidatingly high and nervous about offending their own corporate contributors.
Now that the election is over, however, the issue will promptly resurface. In addition to the continuing roster of collapsing companies and vastly overpaid CEOs, the blatant bungling of Securities and Exchange Commission Chairman Harvey Pitt assured that.
Pitt announced his resignation Tuesday night, a step clearly timed to avoid further embarrassing the Bush administration. If he had quit before the election, it would have amounted to an acknowledgement by Pitt and his White House sponsors that he was not the man for the job. He would have become fodder for Democrats on the campaign trail.
As it was, the White House steadfastly stood by him, as least in public. But with the election past, Bush must now work to cut his losses and take aggressive steps to bolster investor confidence, something the hapless Pitt was incapable of doing.
The SEC, an independent federal agency, is supposed to maintain public trust and confidence in Wall Street by seeing that big businesses do not file faked, overly rosy financial reports. But Pitt badly botched a major test of his leadership, the naming of the newly formed Public Company Accounting Oversight Board, created by Congress this summer to oversee the accounting industry.
This tawdry episode played out in the final days of the campaign when most voters were distracted and not paying attention. That allowed the White House to stall and contain the problem so it could fire Pitt after the election and name a replacement who is more responsible.
Pitt's political tin ear was remarkable. After his appointment in August 2001 he demanded that the job be elevated to Cabinet status, a nutty idea greeted on Capitol Hill with horror. Pitt also met privately with the CEOs of two companies under SEC investigation, reflecting both bad judgment and a conflict of interest.
Recently Pitt backed away from naming as head of the accounting oversight board a respected candidate, reform-minded John Biggs, a former pension fund administrator. He bowed to anti-Biggs lobbying by the accounting industry and reportedly by the White House as well. Biggs had even quit his regular job because he thought Pitt had offered him the oversight post.
Then Pitt substituted former CIA and FBI Director William Webster, who warned him privately that there might be a problem with his appointment. Webster had headed the audit committee for U.S. Technologies, a nearly bankrupt Internet company being investigated for possible fraud. The company is currently engaged in a nasty name-calling blame-game with its former accounting firm.
Webster has a reputation for personal integrity, but he does not appear to understand the arcane accounting tricks he would be expected to monitor at the oversight board.
Pitt didn't bother to pass on the information about Webster's U.S. Technologies connection to the White House or the other SEC board members. Instead, after Webster publicly confirmed what he had told Pitt, the SEC chairman asked the SEC inspector general, a close buddy whom he hired and can fire, to look into it. Fortunately, the General Accounting Office and a Senate committee are also investigating the matter.
Pitt, who as a private accounting industry lawyer opposed tough restrictions on accounting practices, has lost the credibility needed to reassure investors and stockholders that he is serious about reform.
The president has been eager to downplay corporate wrongdoing, focusing on a few "bad apples" rather than addressing systemic problems in the way businesses are allowed to operate. But he knows he cannot be seen as too lenient on wrongdoers. There is the 2004 election to consider.
Bush's economic record is unimpressive. His big tax cuts last year helped to dampen the economy by reducing federal revenues and contributing to huge deficits. His only new initiative is to demand that his tax cuts for the rich promptly be made permanent. His so-called economic summit in August, designed to demonstrate that he is in touch with the needs of real people, was so artificially contrived as to be embarrassing. The one suggestion the session produced, new tax cuts for investors, was even sillier and was immediately dropped.
If the economy keeps slumping and business scandals keep coming, next time voters may decide after all to focus on serious reform in our corporate culture, including further expansion of federal oversight.
The president, staying one step ahead of the political posse, is reportedly already planning to shake up his whole economic team. Pitt was the first to go and other economic advisers may leave as well. The ideological fixation on tax cuts as the sole remedy for an ailing economy, however, is likely to stay. Bush himself is the leading believer.
The president is skilled at proposing weak, generalized versions of popular ideas, such as cleaning up fraudulent accounting, while undercutting specific steps that might really get the job done. Watch for his next clever but meaningless move.
______________________________________
Marianne Means is a Washington, D.C., columnist with Hearst Newspapers. Copyright 2002 Hearst Newspapers. She can be reached at 202-298-6920 or means@hearstdc.com
seattlepi.nwsource.com |
