honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser

Posted on: Sunday, November 3, 2002

EDITORIAL
Investors must have an SEC they can trust

No one was surprised two years ago when President Bush named an accounting industry lobbyist, Harvey Pitt, to head the Securities and Exchange Commission. Clearly Bush wanted to keep the corporate playing field fast and loose.

But most of us expected Pitt to change with the times when the Enron and WorldCom scandal hit. After some unseemly hesitation, Bush backed bipartisan reform legislation in Congress, which included a new accounting oversight board under the SEC.

With this administration it pays to watch what it does, rather than what it says. Having vowed tougher corporate oversight, it then cut back on a promised budget increase for SEC enforcement staff. And instead of picking John Biggs, a pension fund manager who was making accounting firms quake in their boots, to head the new accounting oversight board, Pitt picked William Webster, a respectable but singularly unqualified figure.

How unqualified only come to light last week. Webster, former chief of the FBI and CIA, had made no apology from the start for his complete lack of accounting expertise.

But now we learn that last summer, Webster was head of the audit committee of the board of U.S. Technologies. That committee fired the company's auditors when they raised concerns about internal financial controls. Those concerns were serious enough that the company, now nearly insolvent, and its CEO are being sued and investigated for possible fraud.

Pitt knew about Webster's record at U.S. Technologies, but — unforgivably — he withheld that information from the SEC members when he asked them to approve Webster's appointment.

Webster has not been accused of any wrongdoing, but it's impossible to suppose that Pitt believed such a figure could establish tough new auditing standards and make them stick.

At week's end, the White House continued to support both Webster and Pitt. But Webster should step down immediately based on his record as now disclosed; and, painful as it will be for him, Bush must dismiss Pitt because of his dissembling attempt to defeat the intentions of Congress and the investing public.

So far, Bush's effort to restore confidence in his administration's corporate oversight is a shambles.