Nov 11, 2002
The Chairman of the SEC (Security and Exchange Commission), Harvey Pitt, resigned last week. His chief accountant, Robert Herdman, resigned three days later. And William Webster, former head of the CIA and the FBI, who was just appointed to the oversight board of the SEC which would clean up Corporate America, said, "If I conclude that my ability to serve impedes on the ability of the board to function, I will step aside."Why is there such turmoil at the SEC? This is the agency which was designed to make sure corporations follow the rules. It is the place where corporate misdeeds are supposed to be handled and prosecuted. Following the recent Enron and WorldCom scandals, on July 30, Bush signed a new bill to further clean up those corporations which sure seemed dirty to the public. Bush claimed, "Corporate misdeeds will be found and will be punished. ... No more easy money for corporate criminals. Just hard time."But the White House couldn't clean up the corporations. After all, these were the friends of the Bushes, those who had donated thousands of dollars in political contributions and even given corporate officers to the administration. And Congress couldn't clean up the corporations, since that's where most of their contributions come from. So the job would fall to the SEC.
The chairman appointed to the SEC by Bush was Harvey Pitt, a lawyer who had spent the last 25 years defending those accused of financial fraud. He and his firm had at one time or another represented all of the Big Five accounting firms, including Arthur Andersen, the former accountants for Enron. No wonder his critics charged that as head of the SEC, his committee lacked any teeth. In fact, the SEC's Public Oversight Board had no power to subpoena records from firms it accused of wrong-doing; in February the board members resigned in protest.
Webster was brought in by Pitt to head a new oversight committee set up after the July 30 bill was passed. But Pitt neglected to mention to anyone that Webster had headed an auditing committee overseeing United Technologies, a corporation currently under investigation for fraud.
To accomplish their job of making sure the books of the corporations are clean and law-abiding, the SEC proposed to hire 200 new auditors. Less than three months later, the administration cut the SEC's budget request by 200 million dollars. The White House thinks SEC auditors can find corporate misdeeds in their spare time.
All these maneuvers suit the corporations very well. After Webster and Pitt are gone, will the fox find somebody new to guard the henhouse?