SEC Searching for Pitt Successor Amid Webster Flap

The search began in earnest Wednesday for a new head of the Securities and Exchange Commission after Chairman Harvey Pitt resigned late Tuesday over a series of political missteps that had embarrassed the White House.

Speculation turned to Pitt 's potential successor and whether former FBI chief William Webster would stay on as head of a new accounting oversight board.

Last week, Pitt came under pressure to step aside for failing to tell SEC commissioners and the White House that Webster had chaired the audit committee of a company facing fraud accusations.

On Oct. 25, with the support of Pitt and two other Republican SEC commissioners, the 78-year-old Webster won a bitterly divided, 3-2 party-line SEC vote to become the first chairman of the Public Company Accounting Oversight Board.

Six days after the vote, it emerged that Webster had been the audit committee chairman of U.S. Technologies Inc, a small, Washington-based company facing accusations of fraud.

Webster reportedly has said he would consider resigning, with investigations under way into how the accounting board's members were chosen and into his role as a director of a company accused of fraud. Probes are being pursued by the SEC and Congress' General Accounting Office.

Webster could not be reached late Tuesday. His colleagues on the accounting board declined to comment on Webster's future. The board was established to crack down on auditors and bolster market confidence after a rash of business scandals that started last fall with Enron Corp.

Pitt has offered to stay on during a transition period, an SEC spokeswoman said. But President Bush could opt to name one of two other Republican SEC commissioners as an interim chairman. The two, Paul Atkins and Cynthia Glassman, have declined to comment on the matter.

Possible permanent successors to Pitt could include Atkins, who is a former top SEC lawyer, as well as other SEC veterans including corporate lawyers James Doty and Gary Lynch and former federal judge Stanley Sporkin, sources said this week.

The confirmation path for the next SEC chair should be smooth since Republicans took control of the Senate Tuesday. Pitt's resignation came amid talk that a wider post-election house-cleaning could sweep through Bush's economic team.

Pitt served 15 tumultuous months as top U.S. markets regulator, witnessing the Sept. 11 attacks that shuttered Wall Street, a rash of corporate scandals, a stubborn bear market and the massive securities law overhaul in Congress.

The accounting board episode was just the latest in a series of stumbles by Pitt. He angered the White House last summer by suggesting to Congress, without first consulting the Bush administration, that the SEC be promoted in the government and he be made the equal of Fed Chairman Alan Greenspan.

A senior White House official said Bush aides heard over the weekend that Pitt was inclined to resign. Neither the president nor his aides requested the resignation, but Pitt called the White House personnel office Tuesday afternoon and said he intended to resign.

There were no objections, thus Pitt submitted his resignation late Tuesday afternoon. In it, Pitt said he thought the controversy was hurting his ability to lead the SEC.

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.

Reuters and the Associated Press contributed to this report.