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The Honolulu Advertiser

Posted on: Saturday, October 26, 2002

Oversight vote splits SEC

By Marcy Gordon
Associated Press

WASHINGTON — Divided on party lines, the Securities and Exchange Commission voted yesterday to name former FBI and CIA chief William Webster as head of a new board to oversee the scandal-plagued accounting industry.

The 3-2 vote for Webster at a public meeting came after rancorous discussion among the five commissioners. The two Democrats were angry and disappointed because they had supported another candidate widely regarded as advocating tough regulation of the accounting industry.

The dispute split the SEC just when it is being called on to resolve a massive wave of accounting scandals in big companies that rattled Americans' confidence in the stock market and corporate integrity.

Commissioner Roel Campos, one of the two Democrats, said the selection of Webster feeds the perception that the SEC has been influenced by the accounting industry. He said the new five-member oversight board is being "born with a scar" because it was "subjected to the approval of the accounting lobby."

The board "will begin in a deep hole," said Campos, who, along with Commissioner Harvey Goldschmid, wanted pension-fund head John H. Biggs for the job.

Campos also raised the possibility of a legal challenge against the new oversight board, which he said would hamstring it. He did not say who or what group might bring the legal action.

SEC Chairman Harvey Pitt, clearly feeling under attack, made an emotional defense of his choice of Webster. He accused Campos of alleging a lobbying effort against Biggs by the accounting industry while he himself has made "an intense lobbying effort in favor of Mr. Biggs."

"I am fiercely independent. I am beholden to no one," Pitt insisted, his voice breaking at times. No one from the accounting profession, the Republican Party or the Bush administration had sought to influence his judgment, he said.

Pitt earlier this week asked Webster, now in private law practice, to consider taking the job. Pitt and the other two Republican commissioners then decided to nominate Webster.

Goldschmid and Campos supported Biggs — the chairman of TIAA-CREF, a teachers' pension fund that is one of the nation's largest. Pitt had recently informally offered him the job, but opposition from the industry and Republican lawmakers was said to have caused them to withdraw the offer.

Also selected as members of the new oversight board were Daniel Goelzer, a former SEC general counsel; Kayla Gillan, a former official of the California state pension fund; Willis Gradison Jr., a former Ohio congressman; and Charles Niemeier, chief accountant in the SEC's enforcement division.

The board, to be independent of the industry, was established under new law enacted this past summer in response to the mounting wave of corporate accounting scandals.

The vote comes about a year after the scandal at now-bankrupt Enron Corp. first came to light. Enron's longtime auditor, Arthur Andersen LLP, was convicted in June of obstructing justice for shredding Enron audit documents.

Webster did not return a telephone call seeking comment. Biggs could not be reached for comment; his spokesman has previously declined comment on the issue.

The new oversight board will be armed with subpoena authority and disciplinary powers and financed by fees from publicly traded companies.

Senate confirmation is not required for its chairman and members, but the Securites and Exchange Commission must consult with the Treasury Department and the Federal Reserve Board.