Tags: Pitt | Quits | SEC

Pitt Quits SEC

Tuesday, 05 November 2002 12:00 AM

"The issues confronting our capital markets are enormous, and I am pleased I was able to play a role in starting to restore investor confidence," said Pitt in his resignation letter.

He referred to the slump in investor confidence sparked by the string of huge corporate financial scandals.

In the past year, the markets and public confidence have been rocked by such large-scale bankruptcies as that of Global Crossing, Enron Corp. and WorldCom Inc.

Since the end of last year, Pitt, the SEC and the Bush administration had come under fire for the handling of these corporate scandals. Criticism of Pitt had reached a zenith in recent weeks.

"Unfortunately, the turmoil surrounding my chairmanship and the agency makes it very difficult for the commissioners and the dedicated SEC staffers to perform their critical assignments," Pitt said in his letter, addressed to President Bush.

"Rather than be a burden to you or the agency, I feel it is in everyone's best interest if I step aside now, to allow the agency to continue the important efforts we have started."

Calls for Pitt's resignation had been hotly debated among politicians and pundits in the past week, if not for several months before, but the news on election night surprised many observers.

The SEC chairman has been under increasing pressure in recent weeks from congressional Democrats to step aside after he failed to disclose relevant information about the background of the recently appointed U.S. accounting monitor, William Webster.

Congressional critics calling on Pitt to resign said he had deprived fellow commissioners of material information about Webster's role as chairman of an auditing committee for a company facing fraud allegations.

Webster had served as head of the FBI and the CIA.

In a letter to Bush last week, Sens. Christopher Dodd, D-Conn., and Jon Corzine, D-N.J., said the integrity of the SEC and the new accounting oversight board had been tarnished.

They cited circumstances surrounding Webster's appointment to the board and allegations that Pitt had failed to disclose information to members of the SEC that could have affected the nomination process.

The senators said that by not disclosing information that had an impact on Webster's suitability to head the Public Company Accounting Oversight Board, Pitt had failed to fulfill his duty as head of the SEC. They added that they feared that these circumstances would further undermine confidence in the U.S. financial markets.

The New York Times reported last week that Webster formerly headed the audit committee of U.S. Technologies, which is facing shareholder lawsuits for alleged fraud over accounting problems.

In responding to the Times' story, White House spokesman Scott McClellan said, "We don't know all the facts."

He said, "This was a decision made by the SEC."

On Thursday, Pitt had asked the SEC's inspector general to investigate Webster's appointment.

In October, the Times reported that the accounting industry, working with Rep. Michael Oxley, R-Ohio, covertly pressured Pitt to drop John H. Biggs, who is retiring as the head of pension fund giant TIAA-CREF, as his first choice.

Webster was selected over the objections of the SEC's two Democrat commissioners who said he lacked the financial expertise to head the board. The two Democrat SEC members had favored Biggs based on expectations the former pension fund head would make for a tougher accounting industry regulator.

"Pitt not only deprived his fellow commissioners of vital information about one of the most important appointments they would ever make, he knowingly endorsed a candidate for chairman ... without seriously investigating this matter," said House Minority Leader Dick Gephardt, D-Mo., in a recent statement.

Gephardt accused Pitt of torpedoing a qualified candidate in favor of Webster, who has almost no experience in the auditing industry.

Copyright 2002 by United Press International.

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The issues confronting our capital markets are enormous, and I am pleased I was able to play a role in starting to restore investor confidence, said Pitt in his resignation letter. He referred to the slump in investor confidence sparked by the string of huge corporate...
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2002-00-05
Tuesday, 05 November 2002 12:00 AM
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