Securities and Exchange Commission Chairman Harvey Pitt has transformative powers not seen since King Midas. But instead of turning things to gold, Pitt seems to be able to make anything he touches turn radioactive. The latest and most serious instance came this week when it was learned that his appointee to run a new accounting oversight board had been the head of the audit committee at a company that is being sued for alleged fraud. The episode looks like it will cost Pitt his job, and it should.
When he was approached by Pitt about the post, former CIA and FBI director William Webster volunteered the information about his role at U.S. Technologies. “I said if this is a problem, maybe we shouldn’t go forward,” he says. Pitt not only saw no problem but saw no need to share the news with his fellow commissioners–some of whom had already raised doubts about whether Webster was the right person. Left in the dark, they voted 3-2 to approve the choice.
Once the revelation came out, Pitt’s colleagues demanded an investigation and Pitt agreed, asking for an investigation of his own conduct by the SEC’s inspector general. The General Accounting Office is looking into the matter too. And a Senate committee is planning hearings on Webster’s selection.
Why Pitt would do something so transparently indefensible is open to question. Maybe he was too dim to grasp how it would look to keep the information about Webster’s role at U.S. Technologies from his fellow commissioners. Maybe he just thought it was genuinely irrelevant. Maybe he was simply determined to get his way no matter what.
But whether Pitt is clueless or arrogant doesn’t really matter. He has clearly and irretrievably forfeited the public faith his agency needs at a time of debilitating corporate scandal. He has committed a rank deception. He must go.
His critics, who were numerous before, took this as vindication. Even those who have supported him in the past–as the Tribune has–were no longer rising to his defense. One previous defender, Georgia Institute of Technology accounting professor Charles Mulford, said he had committed “an atrocious error of judgment.” Republicans in Congress generally declined to defend him. The White House issued a perfunctory statement of support, but no one would be surprised if the president were to ask for Pitt’s resignation after Tuesday’s congressional elections.
Pitt had more than his share of doubters because of his close ties to the same accounting firms the SEC regulates, as well as his vow to make the agency a “kinder and gentler place for accountants,” issued shortly before a spate of scandals erupted. He has been better than is generally acknowledged–taking a more active enforcement role, for example.
But he has also been clumsy and cavalier in many of his decisions. And this latest misstep was by far his worst yet. Public confidence in securities markets in particular and the corporate sector in general has been badly damaged. Harvey Pitt has made it clear he’s not the person to rebuild it.
