WASHINGTON – Democratic leaders on Wednesday asked President Bush to remove Securities and Exchange Commission Chairman Harvey Pitt, whom they accuse of bending to pressure from the accounting industry and withdrawing support from a candidate to head a new oversight board. The White House called the accusations politically motivated.
Senate Majority Leader Tom Daschle, D-S.D., and House Minority Leader Dick Gephardt, D-Mo., told Bush in a letter that Pitt's "repeated insensitivity suggests an arrogant indifference to the appearance of conflicts of interest.''
Pitt is "giving the accounting industry a veto over who will head the new board,'' Daschle said at a news conference on Social Security. "This is exactly the kind of abuse the new board was created to prevent.''
White House spokesman Ari Fleischer dismissed the charges.
"It's an old, tired cry,'' Fleischer said, citing what he said was the SEC's record number of enforcement actions and its confiscation of corrupt executives' illicitly earned money. "I think it's a political charge that has no merit and substance.''
Pitt, who previously represented Wall Street's big players and all Big Five auditing firms as a private securities lawyer, is back in the hot seat in a year of corporate accounting scandals that started with the collapse of Enron Corp.
He was criticized last spring for meeting privately with the heads of companies under investigation by the SEC, and the watchdog group Common Cause demanded his resignation.
In response, Pitt is disputing recent newspaper reports that SEC officials had offered and then withdrawn support for the candidate to head the new board, who is an advocate of tough accounting oversight.
Bush, who appointed Pitt in spring 2001 to head the market watchdog agency, has stood by him.
In a letter Tuesday, two senior Democrats on the House Energy and Commerce Committee urged Pitt "to resist the special pleadings of your former clients in the accounting profession'' and appoint John Biggs as head of the new oversight board.
"The accountants cannot, and should not, be permitted to pick their regulator or exercise veto power over'' the SEC's choices for the oversight board, Reps. John Dingell of Michigan and Edward Markey of Massachusetts wrote Pitt.
Gephardt and other Democrats sent a similar letter to Pitt on Friday.
Dingell and Markey also have criticized Pitt's reported meeting recently with the chairman of Goldman Sachs Group Inc., a big Wall Street firm that the SEC is investigating for alleged favoritism in distributing hot new stocks to company executives.
The new oversight board, to be independent of the accounting industry, was created by far-reaching legislation enacted this summer in response to the wave of scandals that rocked public confidence in the stock market and the integrity of corporate America.
Biggs, an advocate of aggressive oversight of the accounting industry, is the chairman of TIAA-CREF, a teachers' pension fund that is one of the nation's largest. SEC officials recently offered him the job, but opposition from the industry and Republican lawmakers caused them to withdraw the offer, according to newspaper reports.
The reported reversal on Biggs raises "serious questions as to the level of your commitment to reforming the accounting profession,'' Dingell and Markey told Pitt.
In a reply to Gephardt, Pitt called the press reports false and said they were intended to pressure the SEC to select Biggs.
The SEC "has made no offers to anyone, received no acceptances from anyone and indeed, has not yet finished interviewing potential candidates for the board,'' Pitt wrote.
SEC spokeswoman Christi Harlan declined to comment.
Pitt was criticized last spring for his private meeting with the head of accounting firm KPMG, a former Pitt client whose audits of Xerox Corp. were being investigated by the SEC. Pitt also met in December with the chief executive officer of Xerox, which agreed in April to pay a record $10 million civil fine to settle allegations of accounting fraud.
Pitt has denied any impropriety in the meetings.
Last summer, as Congress debated the corporate crackdown legislation, Pitt disclosed that he did not intend to automatically remove himself from cases involving former law clients when a one-year period requiring such a step expired.
In an indication of the issue's political sensitivity, the White House said last week it was sending spokeswoman Anne Womack to work at the SEC.
Womack will help Pitt ensure his message is accurately communicated, said Harlan, the SEC spokeswoman.
Tom Pinto, a spokesman for Biggs at TIAA-CREF in New York, declined comment Wednesday.