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Tuesday, July 22, 2014

Securities chief troubles White House

Sunday, November 3, 2002

WASHINGTON -- President Bush and top aides are losing patience with Harvey Pitt but have not decided whether to seek his ouster as Securities and Exchange Commission chairman, a senior White House official said Saturday.

Support for Pitt among Republicans, who had been steadfastly backing him amid Democrats' calls for his resignation, eroded as Sen. Richard Shelby, R-Ala., criticized Pitt's handling of the selection of former FBI director William Webster to head a new accounting oversight board.

Pitt is facing an investigation by the SEC's inspector general into whether he concealed from his fellow commissioners information about Webster's watchdog role at a company facing fraud accusations before they named him to head the new board.

"I find chairman Pitt's decision not to share this information troubling," Shelby said Saturday. "It is vitally important right now that we restore confidence in the capital markets and to do that we must have disclosure, transparency and honesty in our oversight of the market."

Shelby will become the senior Republican on the Senate Banking Committee in January after Sen. Phil Gramm, R-Texas, retires from the Senate. If the GOP regains control of the Senate after Tuesday's elections, Shelby would become the committee chairman.

Shelby said he supported calls by Democratic lawmakers last week for hearings by the committee on Webster's selection.

"I believe hearings to examine this matter are entirely appropriate," said Shelby. He added: "At the end of the day I believe Judge Webster is still a good choice for this position."

Webster headed the audit committee at U.S. Technologies, which is being sued by investors who say they were defrauded of millions of dollars. The company also reportedly is under federal investigation. Last year, during Webster's tenure, the audit committee dismissed the company's outside accounting firm.

The White House official, speaking on condition of anonymity, said Bush and his chief of staff, Andrew Card, are angry that Pitt put Card in the situation of urging Webster to accept the new post without Card's knowing about Webster's affiliation with U.S. Technologies' audit committee. That anger also is part of long-simmering frustration with Pitt's political judgment, the official said.

Despite increasing concerns, Bush still believes Pitt has done a good job cracking down on corporate wrongdoers and that no decision has been made on whether the White House would seek his resignation -- and none will come before Tuesday's elections, said the White House official,

"We want to see how the investigation plays out and then we'll cross that bridge," the official said.

Leaving by resignation

The official said Bush does not have the power to remove Pitt but that the White House expects that he would resign at some future date if the president's advisers asked him to leave.

White House spokesman Ari Fleischer told reporters traveling with the president to a political stop in Tennessee on Saturday that Bush "continues to have confidence in Harvey Pitt."

Asked if Bush and Pitt have spoken recently, Fleischer replied: "They have not. ... The president does not talk to everybody in his government every day."

Fleischer said the internal investigation should move ahead because "that's the appropriate place for everything to be looked at" in the Webster matter.

Fleischer said he had not spoken Saturday to Card, but that Card thinks the inspector general is the right person to handle the situation.

A second Republican member of the Senate Banking Committee, Sen. Mike Enzi, R-Wyo., said there are "serious concerns over how the selection process for the board members was handled."

"I think it is premature to say what should happen one way or the other before we know all of the facts," added Enzi, a former accountant.

In the House, Financial Services Committee Chairman Michael Oxley, R-Ohio, said in a statement that it was appropriate for the Webster appointment issue to be examined internally at the SEC.

Oxley, who had backed Webster for the job before his appointment, said he has seen "no evidence to contradict" the original conclusion by Pitt and SEC staff that Webster's role at U.S. Technologies did not disqualify him from the new job.

Pitt, who first worked at the SEC in the late 1960s and built his career as an attorney in appearance-conscious Washington, has been criticized for meeting with the heads of companies under SEC investigation and for his close ties to the accounting industry -- at a time when the SEC is investigating major accounting fraud at big corporations. Pitt represented the Big Five accounting firms while in private practice.

In July, Pitt asked that the SEC be elevated to Cabinet-level status with a corresponding pay raise for the chairman. Senate Majority Leader Tom Daschle, D-S.D., responded that the request, which never was acted upon, demonstrated that Pitt was "not qualified to serve in that position."


Associated Press reporters Ron Fournier and Scott Lindlaw contributed to this report.


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