Tags: Another | Resignation | Securities | Board

Another Resignation at US Securities Board

Sunday, 10 November 2002 12:00 AM

The Washington Post reported Saturday that Herdman submitted a letter of resignation on Friday to outgoing SEC head Harvey Pitt, who himself quit on Election Night.

The newspaper said Herdman was "the second top official in the agency to depart because of his role in the selection of former FBI and CIA director William H. Webster" to head up the agency's Public Company Accounting Oversight Board.

"Pitt issued a statement praising his longtime associate, but some sources at the agency said Pitt blames Herdman for his (Pitt's) not getting all the facts surrounding Webster's tenure as head of the audit committee of U.S. Technologies, Inc."

The accounting practices of U.S. Technologies, based in Washington, have been under investigation. Pitt was aware of Webster's involvement with the company but didn't share that information with the four other SEC commissioners before they voted on Webster's nomination in late October. The controversy over Webster's appointment ultimately led to Pitt's resignation.

Sources told the Post Pitt and Herdman "worked closely on the SEC's strategy for the new accounting board." And, it said, Pitt had asked Herdman to determine whether Webster's involvement with U.S. Technologies "should be an issue in the selection process." According to these sources, Herdman told Pitt that the connection wouldn't pose a problem, but neither of them raised the issue with the other four commissioners.

Meanwhile, Pitt, speaking to a securities industry gathering in Florida, has said that he was undermined in his efforts at the SEC by a "climate of attacks and partisanship." Pitt, spoke Friday at the annual meeting of the Securities Industry Association, a financial services trade organization, in Boca Raton, Fla.

In his remarks, carried in Saturday's Miami Herald, the outgoing SEC head didn't mention Webster.

But he defended his tenure at the agency. Among his achievements at the commission, he said, were reforms forcing U.S. executives to swear to the truth of their companies' financial statements and reopening the markets six days after the Sept. 11 attacks on New York and Washington.

He also said that "too many Americans ... piled into the stock market at the worst possible time, lured by false expectations of sustained double-digit increases" in their portfolios.

He said such investors "feel fundamentally betrayed" by the investment industry, which he said needed to demonstrate "far greater concern for the well-being of its customers than about profits and take-home pay."

Also speaking Friday -- although at a separate Florida conference -- was a previous SEC chief, Arthur Levitt. He told a conference of Business for Social Responsibility members in Miami that "the absence of true leaders" in business was behind the plunge in investor confidence, the Herald reported.

BSR is a group that promotes ethical investment.

"I can't think of a time when the markets and systems were viewed with such disdain by the public," he said.

His comments, and those of his successor, Pitt, appear to be borne out by the SIA's own annual survey of investment sentiment, released on Nov. 7. The poll found that investors' opinions of the industry were the lowest since the polls began in 1995.

The SIA survey found that 55 percent of those questioned had a "very favorable" or "somewhat favorable" view of the securities industry, vs. 62 percent in 2001 and 63 percent in 2000. Those holding "very favorable" views accounted for only 9 percent of the latest survey, vs. 22 percent in 2001.

Asked about specific investment issues that worried them, 65 percent chose accounting fraud, 49 percent fear of losses, and 45 percent the state of the economy.

The SIA said the poll was conducted by Harris Interactive, which interviewed about 1,500 people aged 18 or older, from Aug. 22 to Sept. 22, "when the bear market had stretched into its 30th month." Random-digit dialing was used to ensure unlisted numbers were included in the sample population.

Those interviewed had household incomes of $50,000 or above and financial assets -- excluding a residence -- of $100,000 or more, and had primary or joint responsibility for household investment decisions. The margin of error was plus/minus 2.5 percent.

Copyright 2002 by United Press International.

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The Washington Post reported Saturday that Herdman submitted a letter of resignation on Friday to outgoing SEC head Harvey Pitt, who himself quit on Election Night. The newspaper said Herdman was the second top official in the agency to depart because of his role in...
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Sunday, 10 November 2002 12:00 AM
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