- The Washington Times - Wednesday, November 6, 2002

Securities and Exchange Commission Chairman Harvey Pitt resigned last night after a bipartisan chorus of critics decried his handling of the appointment of William Webster to head a new accounting board created by Congress.

In a letter of resignation to President Bush, Mr. Pitt acknowledged that his failure to inform the White House and members of the SEC about a probe of questionable accounting practices at U.S. Technologies when Mr. Webster was serving in a key post as chairman of the company's audit committee raised questions about his credibility to serve as the nation's chief corporate watchdog.

Mr. Pitt said "the turmoil surrounding my chairmanship" had made it difficult to do the job. "Rather than be a burden to you or the agency, I feel it is in everyone's best interest if I step aside now, to allow the agency to continue the important efforts we have started."

The White House quickly accepted his resignation.

Disclosure of the government investigation of U.S. Technologies a week after Mr. Pitt pushed Mr. Webster's appointment through the commission on a 3-2 vote also cast a shadow over Mr. Webster, the former director of the FBI and CIA whose credentials in government had been considered impeccable.

Mr. Webster told the New York Times and USA Today on Monday that he would resign his new post if the controversy surrounding the federal probe rose to the point where he could no longer carry out his job.

The SEC and the accounting board are charged with crafting rules and enforcement strategies designed to keep investors informed about the practices and risks embraced by corporations and the securities they issue primarily through the principle of full disclosure. Mr. Pitt's failure to disclose an important aspect of Mr. Webster's background so that other commission members could knowledgeably vote on his appointment thus cut to the heart of what many consider his and the SEC's mission.

Mr. Webster informed Mr. Pitt about the U.S. Technologies probe privately before the commission's vote. Mr. Pitt asked the agency's chief accountant if it would be a problem for Mr. Webster, and the accountant concluded it would not.

Leading Republicans as well as Democrats were appalled, however, that Mr. Pitt did not provide commission members with full disclosure. Democratic leaders called for Mr. Pitt's resignation, and the chorus grew to include top Republicans as well.

William Siedman, for example, the former director of the Federal Deposit Insurance Corp. under former President George Bush, said he could not see how Mr. Pitt could credibly continue as SEC chairman in light of the Webster revelation. Leading business groups, including the U.S. Chamber of Commerce, also joined in calling for Mr. Pitt's resignation yesterday.

"Harvey Pitt resigned tonight. All Americans won tonight," said Terry McAuliffe, chairman of the Democratic National Committee.

While Mr. Pitt's departure was considered an almost certainty after yesterday's elections, rumors also have mushroomed that other top economic advisers to the president might be forced out in the coming months.

It was not immediately clear whether Mr. Bush sought Mr. Pitt's resignation, but the White House made no secret that Mr. Bush was angered by Mr. Pitt's failure to warn the White House and Chief of Staff Andrew H. Card Jr. about Mr. Webster's role with the auditing committee.

Officials did not reveal who will replace Mr. Pitt.

This story is based in part on wire service reports.

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