This is a partial transcript from Your World with Neil Cavuto, June 27, 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: A little too often. A little too much. A little too late? Name the day. Name the scandal. Name the company. WorldCom. Enron, and on and on. What can we do about this saga?
Let's ask the man who should know, the chairman of the Securities and Exchange Commission, Harvey Pitt. Mr. Chairman, good to see you.
HARVEY PITT, CHAIRMAN, SECURITIES & EXCHANGE COMMISSION: Good to see you, Neil.
CAVUTO: Wow. It gets worse and worse. How bad is this?
PITT: Well, it is bad. And there's a legitimate crisis of confidence that we inherited and we are cleaning it up.
CAVUTO: Are you cleaning it up? There's some criticism on Democrats, sir, that you're not.
PITT: I know. It's a great sound bite, but it is an election year and that's what they prefer to do. When this problem is no longer newsworthy, they will go on to some other issue. But I've got to solve the problem.
CAVUTO: All right. Now, you've already tried to solve the WorldCom problem by dragging some of these guys in by the keister to talk to you, right?
PITT: We did. And we set a record for expedition. Within 12 hours of the news hitting the public, we were in court claiming that WorldCom committed fraud. This is what we mean by real time enforcement.
CAVUTO: All right. So let's say you do have proof of fraud. Most Americans look at this and say we want to see them in jail.
PITT: So do we, and that's why one of the first things I did was have our enforcement team meet with the U.S. attorneys and the Department of Justice. Hard time for hard crime. That's what we're going for.
CAVUTO: The criticism, as you know, Mr. Chairman, has been that you've been slow to respond to these developments, that is the Enrons and the Global Crossings and the Dynegys and the Arthur Andersens have come out. Harvey Pitt is responding. He's not being proactive.
PITT: It's a great sound bite. Again, it is an election year. It is political.
CAVUTO: But they do keep happening?
PITT: I know and I inherited this. You know, I've been on the job 10 months. But I promise you that I am not going to leave to my successor the same kind of mess.
CAVUTO: Are you blaming Arthur Levitt for this thing?
PITT: I blame no one. All I can is that these problems did not arise overnight, and they certainly didn't arise on my watch.
CAVUTO: All right. But you're saying you kind of inherited this mess.
PITT: I did.
CAVUTO: The guy before you was Arthur Levitt. So, obviously, he screwed up something.
PITT: I don't blame any individual whatsoever. But what I won't do is make this into a political issue. What I want to do is solve the problem. And from the moment I've gotten there, we have taken dynamic, aggressive action and we will solve this problem.
CAVUTO: OK. Now, how can we be so sure there won't be other WorldCom issues coming up, that another company won't come out and say, you know what, these expenditures that we marked as expenses or vice versa, our bad. You know, we're not going to see more of this.
PITT: I wish I could give you a guarantee. What I can guarantee is that we are going to make it so unpleasant, so painful, so impossible for people...
CAVUTO: What do you mean painful? What would you do?
PITT: Painful? Well, I'll tell you what we are already are doing and then what we want to see done in addition. We are taking CEOs and other corporate senior officers and we're stripping them of their titles, preventing them from running companies. We're stripping them of their salaries. We're stripping them of their bonuses, and we're stripping them of their stock options.
CAVUTO: But you couldn't and didn't do it after Enron folded or Global Crossing folded. Now, you're doing that post-WorldCom, and many of your, even critics say that's great. But the animals got out of the barn in the prior cases and left with the cash.
PITT: No. I think what we're doing now is we're continuing our investigation, and we are going to make certain that anybody who walked away with a penny that they don't deserve has to pay it back.
CAVUTO: Do you think there should be a ceiling on CEO pay and option grants?
PITT: I think that the more important issue is that CEOs earn what they get, and that they don't keep it if they haven't earned it. That's the American system. As to where the rates get set, my view is if you get a lot of money, you better work hard to deserve it.
CAVUTO: OK. So, in the future, if we have, you know, Ken Lays and Bernie Ebbers and others who profited handsomely, we don't know if they were guilty of any wrongdoing yet, how would you expect them to pay back for that, besides, let's say, going to jail, on the worst-case scenario?
PITT: Well, the first thing we're doing, which is unprecedented as part of our real-time enforcement, is the minute we get wind of these things, where we can, we're into court seeking freeze orders, preventing them from dissipating the money. We want people to feel real pain if they take money away from shareholders they are not entitled to.
CAVUTO: Do you think it is also necessary, Mr. Chairman, to say of companies that you have to have a standard accounting for how you do things. What marvels me, and I'm no accountant, is why and how there are so many different standards for so many different industries. Isn't that one of the simplest reforms of all, just establish basic accounting principles that everyone would adhere to?
PITT: Well, I think we can do more with our accounting principles. I don't think we can ever get to the level you suggest. But what we can do...
CAVUTO: Why not?
PITT: Because different companies and different industries function in different ways. Sometimes, it is exceedingly difficult to apply a standardized one size fits all. But what we can do is make sure that people are honest. We can make sure that when you're given a number, you can take that number to the bank. That's not been happening with some of these companies. And we're going to put a stop to it.
CAVUTO: Mr. Chairman, there has been, as you know, some concern about you coming into this job, because obviously you're a very successful lawyer in your prior life. You represented many accounting firms, including Arthur Andersen. And a lot of people did not and even do not now think that you'll be as vigilant in going after this sort of thing. What do you want to tell them?
PITT: I want to tell them that look at our record. We are moving. We are taking action. And in the first 10 months I've been on the job, we have done more dramatic things. We've improved our enforcement programs so dramatically over any other period in the SEC's history. I think that the American people are smart enough not to be fooled by political sound bites.
CAVUTO: Yes. But, you know, all that being said, Mr. Chairman, what they see again and again is this lemming-like fashion of losers that come forward and announce horrible sins. And just when they think it's done, you get a WorldCom. There's talk now that the next shoe to drop might be Qwest and on and on. And now even some concerns about cable companies and their math. The people, investors in this country are saying the hell with it. What would it take for them to have faith restored?
PITT: Well, I think it takes a lot of things. But one of the immediate things we're doing is we have targeted the 1,000 largest companies, and we have demanded that they supply us with a certification from their CEOs and CFOs that the numbers that they have put out are numbers the public can rely on. If that turns out to be a false certification, they go to jail for that.
CAVUTO: Yes, because a lot of CEOs don't pay attention to the details, right? I mean, most of them are big concept guys, big picture guys. So if they are signing something, does that make them liable?
PITT: We want them to stop and think. When they...
CAVUTO: But don't they sign an annual report?
PITT: They sign an annual report, but no one has ever proposed, as the president did on March 7, that CEOs be directly responsible. I'm not interested in hearing a CEO say, gee, I was too busy or I relied on so and so. You get the bucks, you better make sure that you have earned it.
CAVUTO: Do you regret taking this job with all the headaches now?
PITT: No. I tell you, this is the most exciting job. And I believe that we can solve the problems. And, therefore, I couldn't be happier than to be here.
CAVUTO: OK. Thank you, Harvey Pitt, the man who runs the Securities and Exchange Commission.
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