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Chairman of SEC resigns under pressure

Wednesday, November 6, 2002

WASHINGTON -- Securities and Exchange Commission chairman Harvey Pitt resigned under pressure Tuesday night after a series of political missteps that embarrassed the Bush White House just when it needed to shore up investors unnerved by accounting scandals.

In a letter to President Bush, Pitt said "the turmoil surrounding my chairmanship" had made it difficult to stay in the job. "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."

The White House quickly accepted his resignation.

Three administration officials, speaking on condition of anonymity, said the White House welcomed the resignation of a regulator who had created a host of political problems for Bush in the run-up to Tuesday's midterm elections. Pitt's troubles had been seen as weakening the SEC at a time when the market was reeling from corporate debacles, including Enron, WorldCom and Global Crossing, and the economy was fragile.

Withheld information

The latest fumble came when Pitt failed to share with fellow commissioners information about William Webster, the newly named chairman of an accounting industry oversight board, before the agency voted last week to put the former CIA and FBI director in charge of the panel.

The revelation led SEC commissioners, including Pitt, to request an internal investigation Thursday of Webster's selection -- and renewed the almost daily drumbeat of calls from Democrats and other Pitt critics for his resignation.

A senior White House official said Bush aides heard over the weekend that Pitt was inclined to resign. Neither the president nor his aides requested the resignation, but Pitt called the White House personnel office Tuesday afternoon and said he intended to resign.

There were no objections, and Pitt submitted his resignation late Tuesday afternoon. In it, Pitt said he thought the controversy was hurting his ability to lead the SEC.

The official said Bush won't have a replacement immediately. They had not begun to search for candidates as of Tuesday night and expected Senate confirmation to be difficult in the intense political climate, the official said.

Ex-chairman declined offer

Former SEC chairman Richard Breeden was said to have been informally approached about the job, but declined. Breeden is now a court-appointed monitor for the bankrupt WorldCom.

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 this latest instance, Pitt withheld information about Webster's lead role on the auditing committee for U.S. Technologies, a company facing investor lawsuits alleging fraud. Webster told The New York Times that Pitt assured him that SEC staff had looked into the issue and it would not pose a problem.

Last month, Democrats asked Bush to remove Pitt, whom they accused of bowing to the accounting industry by opposing the appointment of John H. Biggs to head the oversight board. Supporters of Biggs, a pension fund administrator, believed he would advocate tough regulation of the accounting industry.

It was not immediately clear whether Bush sought Pitt's resignation, but the White House made no secret that Bush was angered by Pitt's failure to warn the White House and chief of staff Andrew Card about Webster's role with the auditing committee.


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