Bush's SEC nominee promises to enforce anti-fraud legislation

WASHINGTON -- President Bush's nominee to head the Securities and Exchange Commission pledged aggressive enforcement of corporate anti-fraud rules and said Wednesday that picking a new chairman for an accounting industry oversight board is his top priority.

At his Senate confirmation hearing, Wall Street investment banker William H. Donaldson defended his record as a former chairman of the New York Stock Exchange, but softened his opposition to a rule that prohibits companies from disclosing information to financial insiders ahead of the public.

Donaldson, a Bush family friend, pledged to work to rebuild investor confidence shaken by last year's business scandals, and to allow the SEC to fully investigate and prosecute corporate lawbreakers without regard to politics.

Amid the accounting failures, Bush's own transactions as a one-time director of Harken Energy Corp. drew renewed scrutiny and the SEC has been investigating Vice President Dick Cheney's tenure as chief executive of oil-service company Halliburton Co.

As for the accounting board chief, Donaldson told the Senate Banking, Housing and Urban Affairs Committee that selection was "the number one priority that I have ... We're behind the eight ball."

The current SEC chairman, Harvey Pitt, announced in November that he was resigning in a flap over his selection of former FBI director William Webster to head the board. Webster also resigned.

Confirmation expected

Donaldson, 71, received a friendly reception from senators and is expected to be confirmed soon by the full Senate.

Sen. Richard Shelby, R-Ala., the committee chairman, told Donaldson: "You will be undertaking a tremendous public trust. ... Your leadership will be key to rebuilding the faith of investors in our markets."

Donaldson, a founder of Wall Street brokerage Donaldson, Lufkin & Jenrette and chairman of insurer Aetna Inc. in 2000-01, did not promise instant results.

"Just as the war on terrorism cannot be won overnight, neither can investor confidence be completely restored so quickly," Donaldson said. "Corporate America, Wall Street and their professional stewards -- lawyers, accountants, corporate and financial managers and financial regulators -- still have much work to do."

Senators were clearly impatient to replace Pitt, whose continued lame-duck tenure has become a political irritant as a beleaguered SEC makes new rules for companies, and pursues corporate fraud and accounting cases.

"It's now the first week in February and he's still on the job," said Sen. Paul Sarbanes of Maryland, the committee's senior Democrat. "We need to get moving."

If confirmed, Donaldson said, "I will demand accountability from all responsible parties. I will aggressively enforce civil penalties and work cooperatively with state and federal law enforcement agencies ... to bring those who break the law to justice."

In 2001, Donaldson denounced as "terrible" a year-old SEC rule prohibiting companies from revealing financial results and other information to stock analysts and other Wall Street insiders ahead of the public -- a long-standing practice. Like other critics, Donaldson contended it could make executives afraid to say anything.

Asked about the issue at the hearing, Donaldson acknowledged his earlier stance but said he believed the rule was now "working better."

Also covered at the hearing was Donaldson's leadership of the stock exchange in the early 1990s, when floor brokers made millions of dollars in illegal trades.

"There's been a lot of misunderstanding," Donaldson testified, referring to allegations that he and other senior exchange officials quietly approved of letting floor brokers trade and share in profits with private customers. "Enforcement and protection of investors was always my top priority."

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