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SEC Chairman Resigns Under Pressure

Nov 6, 2002 | AP Harvey Pitt, who provoked outcries over his ethics in a string of political missteps, resigned under pressure as the government's top securities regulator. The Bush White House, embarrassed by Pitt's troubles, was relieved to have him go.

Pitt's turbulent 14-month tenure as chairman of the Securities and Exchange Commission came at a time when the administration needed to shore up investors rattled by a wave of accounting scandals.

The Democrats lost one of their favorite targets Tuesday, Election Day. Pitt told President Bush in a letter that "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 the midterm elections. Pitt's stumbles had been seen as weakening the SEC at a time when the market was reeling from corporate debacles, including Enron Corp., WorldCom Inc. and Global Crossing Ltd., and the economy was fragile.

Senate Majority Leader Tom Daschle, D-S.D., who had previously demanded Pitt's resignation, suggested the White House may have wanted to "minimize the news" of Pitt's departure by making it known on Election Night.

Pitt's latest fumble came when he 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 of Webster's selection and renewed the almost daily drumbeat of calls from Democrats and other Pitt critics for his resignation.

Pitt withheld information about Webster having headed the board of directors' auditing committee at U.S. Technologies, a company facing investor lawsuits alleging fraud. Webster told The New York Times that Pitt assured him that SEC staffers had looked into the issue and determined it would not pose a problem.

Webster's future as head of the new oversight board was unclear; he said this week that he would step aside if he decided he couldn't be effective in that job.

Presidential spokesman Ari Fleischer said Bush had not asked for 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. Pitt called the White House personnel office Tuesday afternoon and said he intended to resign.

There were no objections, and Pitt submitted his resignation shortly afterward, saying he thought the controversy was hurting his ability to lead the SEC.

Sen. Richard Shelby, R-Ala., whose criticism of Pitt over the weekend eroded his previously solid Republican support, said Tuesday: "The process of what happened and how it happened was very troubling, and I think it tainted the whole situation."

To replace Pitt, the White House must find someone who is "able, experienced and above reproach," Shelby, who will become the senior Republican on the Senate Banking Committee, said in a telephone interview.

A senior White House official said Bush won't have a replacement immediately, adding that Senate confirmation of a nominee was expected to be difficult in the intense political climate.

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.

Former New York Mayor Rudolph Giuliani has been mentioned for the SEC post, but he said on CNN's "Larry King Live" program Tuesday night, "I don't have an interest in another job right now."

Pitt, an attorney who first worked at the SEC in the late 1960s, 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 commission is investigating major accounting fraud at big corporations. Pitt represented the Big Five accounting firms while in private practice.

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 teachers' pension fund administrator, believed he would advocate tough regulation of the accounting industry.

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