This is a partial transcript from Your World with Neil Cavuto, August 28, 2002, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.
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NEIL CAVUTO, HOST: As we mentioned, two former WorldCom executives indicted today on securities fraud, as the government continues its crackdown. With us now the head of the Securities and Exchange Commission, the industry's top watchdog, Harvey Pitt.
Mr. Chairman, a pleasure to have you.
HARVEY PITT, CHAIRMAN, SEC: It's good to be back again.
CAVUTO: First off any thoughts on the WorldCom indictments today?
PITT: Well, I think this is the natural progress, as you know, within about 24 hours of the announcement about WorldCom, the SEC was already in court freezing assets and preventing the destruction of documents, now the government is turning to the individuals who inflicted this tragedy on public investors. And I am pleased to see how diligently both the Department of Justice and our enforcement division are working.
CAVUTO: Do you think, Mr. Chairman, that if one of these guys ultimately is handed down a guilty verdict, he should be behind bars a substantial amount of time?
PITT: I do, I think, as I said earlier, hard time for hard crime, people who cause the loss of hundreds of millions of dollars to innocent investors and employees deserve no sympathy, they deserve the harshest treatment that we can mete out.
CAVUTO: All right, now, securities fraud in the past has typically meted out terms like five, seven years tops. What do you think should be a more correct term?
PITT: Well, I think that the penalty has to be that they serve time in a real prison, not a club, 10 years would not be too minimal. The Congress has just raised all of the criminal terms. There are sentencing guidelines that deal with this, but I think the point is that everyone has to understand if you do this kind of thing and you are caught, you will pay a very heavy personal price.
CAVUTO: Now the SEC yesterday has made it much tougher on companies to be more responsive to individual investors, a tightening of the time it takes to release quarterly earnings reports, the time to release annual reports, the time you notify investors in the general public as to when a company insider sells shares or buys shares in a company, what is the motive here?
PITT: The motive here, I think, is to learn from the tragedies we have seen with Enron and WorldCom, and the other companies that have imploded. We started this process way back. And when I was here last in June, I talked about a lot of the initiatives we have underway. Since that time a lot has happened, not only has there been new legislation with the Sarbanes-Oxley Act, which embodied many of the reforms that we had proposed, but the commission itself is moving forward on its initiative. The rules yesterday are designed to give investors a fair break . A fair break means that when news happens, when information occurs, the shareholders need to know it. They need to know it as it is happening, not when it is already stale. We are improving and accelerating the speed with which companies have to report to investors. But we took a slightly more moderate approach than we had initially proposed to make sure that in picking up an enormous amount of speed, we don't sacrifice quality.
CAVUTO: But do you worry that in the rush to get some sort of reform going in corporate America that you make matters would worse, that companies are in such a rush to get out the kind of information that you want that they will end up committing more sins, not necessarily criminal sins but just simple error sins, and those guys could to be heading off to jail if they've done nothing wrong?
PITT: Well, I am not worried that what we are doing will make matters worse. What we are doing is going to make matters a lot better. I think investors can look at the action we took yesterday and understand that this is an agency that is devoted to them and their interests, that we will stop at nothing to improve our markets and to make sure that those people who are required to tell us what is going on in their companies fulfill all of their obligations. Some people will do some hard time if they break the rules. And we have seen this throughout our history, not just recently, that there are always people that think they can cut a corner or gain an advantage or take advantage of innocent shareholders. Those people will pay and pay even more heavily now than at any time in our past.
CAVUTO: So let me ask you something, sir, there are a number of Democrats the Hill, including Tom Daschle and even Republicans, John McCain among them, who say that the solution is getting rid of you, that you've got to step down.
PITT: Well, I think that we are in an election year, and I really can't be focused on that. The reforms that I have proposed were unanimously adopted by a full commission that consists of Democrats as well as Republicans. There are always going to be people who want to take advantage of a situation and try to find someone to blame.
CAVUTO: But do you think in that environment, Mr. Pitt, it was the right time to be advocating cabinet rank for your position and furthermore an increase in pay?
PITT: Well, I never advocated cabinet rank for my position, you may have read something about that, but that is not what happened.
CAVUTO: What did you want?
PITT: I thought that the SEC as an agency needed some recognition in that we were having trouble because of some of the political bashing and attracting first rate people to the agency.
CAVUTO: Did that include an increase in pay, sir, for yourself?
PITT: No, no, it did not.
CAVUTO: So the fact that that got so widely played, it was more or less looking like you were putting out a fire and dousing it with gasoline. Did you feel bad about the way that was covered?
PITT: I have become used to it. There are people who have their own agendas. What I think is important is what we are doing for investors. We are producing a much better system than the one I inherited. And every one of these crises has been years in the making. We are cleaning up the situation. We are fixing it. We are determined to make the markets safer, better, and fairer. And I think investors are seeing that. And that's really the only thing that counts, not what some politicians want to say to pick up an extra seat or two.
CAVUTO: Mr. Chairman, a pleasure, thank you very much.
PITT: Thank you.
CAVUTO: Harvey Pitt, the chairman of the Securities and Exchange Commission.
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