Pitt Again Under Fire to Step Down as SEC Chairman

Harvey Pitt was known as a smart, aggressive and hardworking securities lawyer, qualities some thought would serve him well as head of the Securities and Exchange Commission. It's his lack of political sensitivity, they say, that keeps getting him into trouble.

The latest example: Pitt's failure 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 Thursday of Webster's selection — and renewed the almost daily drumbeat of calls from Democrats and other Pitt critics for his resignation.

"Not to disclose relevant information is kind of unfathomable," says David Yellen, dean of Hofstra University's law school and a Pitt critic. He said anyone who had high hopes for Pitt or had given him the benefit of the doubt may now wonder "whether he has too much of a political tin ear to do his job."

"This raises serious questions about judgment and political sensitivity because if he needs anything in his position it's unvarnished integrity," Yellen added.

Pitt, who first worked at the SEC in the late 1960s and built his career as an attorney in appearance-conscious Washington, 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 SEC is investigating major accounting fraud at big corporations. Pitt represented the Big Five accounting firms while in private practice.

In this latest instance, Pitt withheld information about Webster's lead role on the auditing committee for U.S. Technologies, a company facing investor lawsuits alleging fraud. Webster told The New York Times that Pitt assured him that SEC staff had looked into the issue and it would not pose a problem.

Last month, Democrats asked President 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 pension fund administrator, believed he would advocate tough regulation of the accounting industry.

David Ruder, an SEC chairman in the late 1980s who teaches law at Northwestern University, wondered what information Pitt actually had about Webster's corporate ties.

"If the staff came to him and said 'We've found nothing,' then I think it would be OK for him (Pitt) to say 'It's OK, this is not material,"' Ruder said. But, he added: "One can fault that decision on grounds that this is a terribly politicized situation and it would have been better for him to disclose" the information.

Despite renewed calls for Pitt's resignation, his latest self-inflicted wound doesn't appear to have jeopardized his job. "It's only fatal if the president doesn't want him there anymore," says Ira Sorkin, who worked with Pitt at the SEC, an independent federal agency, in the late 1960s.

That does not appear to be the case, with the White House strongly backing Pitt on Thursday.

"Chairman Pitt has done a good job in cracking down on corporate wrongdoing and the SEC has a very strong record under his leadership," White House spokeswoman Claire Buchan said. "We support him."

On Friday, Bush did not respond to questions shouted by reporters as he strode to Marine One on the White House South Grounds to take off on a campaign trip. But aboard Air Force One, presidential spokesman Scott McClellan said, "The president continues to support him and his efforts to crack down on corporate wrongdoing."

McClellan reiterated that the White House is satisfied with the SEC investigating itself.

"They have indicated they are looking at the process involved there, but in terms of the specifics related to this matter we don't know all the facts," the spokesman said.

Pressed as to whether the matter should be investigated by an entity other than the SEC, McClellan said, "We indicated that it's a good step to look into this process (at the SEC) and we'll see what the facts are."

Bush is known for his reluctance to force out any of his appointees, apparently working under the theory that loyalty breeds loyalty. He isn't known to have had a personal relationship with Pitt before tapping him to chair the SEC.

But critics say sticking with Pitt takes some heat off an administration that threw its support behind securities reform legislation after the public outcry over a spate of corporate accounting scandals and political pressure for change became too much for the White House to ignore.

"Pitt is such an attractive target that people fail to notice that he is loyally carrying out the agenda of his president," said Barbara Roper, director of investor protection for the Consumer Federation of America, an advocacy group. "The White House looks at Pitt and says, 'Where else would we find someone who would absorb so much criticism on our behalf."'

Democrats naturally weren't as supportive as the White House.

"From his personal meetings with companies under investigation, to his deference to accounting firms fighting tougher oversight, to his mishandling of the new oversight board, Mr. Pitt has shown that he has neither the judgment or the credibility to continue in this important position," said Sen. Carl Levin, D-Mich.