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THE NATION

SEC Chief Insists He Won't Quit

Business: Also, new evidence points to questionable WorldCom practices as early as 2000.

July 15, 2002|RICHARD SIMON | TIMES STAFF WRITER

WASHINGTON — Amid accusations that the White House has failed to act aggressively to clean up corporate accounting abuses, the chairman of the Securities and Exchange Commission, Harvey L. Pitt, on Sunday defended the administration's performance and said he would not resign.

For their part, Democrats called for President Bush to "restore integrity to the White House" by releasing information on his 1990 sale of stock in a Texas oil company before it announced a significant decline in earnings.

The verbal jousting came on the eve of today's Senate vote on a far-reaching accounting reform bill that seeks to address reports of financial irregularities in some of the largest U.S. firms.

Those revelations continued Sunday with the disclosure of evidence that WorldCom Inc. had engaged in fraudulent accounting practices in 2000, earlier than suspected last month when nearly $4 billion in accounting irregularities led the SEC to file fraud charges against the communication giant.

The documents, released by House Energy and Commerce Committee Chairman W.J. "Billy" Tauzin (R-La.), also showed that employees challenged the company's accounting and, in one case, raised those concerns with outside auditor Arthur Andersen.

Andersen officials have suggested that WorldCom Chief Financial Officer Scott Sullivan was to blame for the financial irregularities, and they claim important information was withheld from auditors.

"This is way beyond aggressive accounting. This is Fraud 101," Tauzin said on ABC's "This Week." His committee is investigating the accounting at several major companies, including WorldCom, Enron Corp. and Global Crossing.

Also Sunday, one of American's largest corporations, Coca-Cola, announced that it would begin treating stock option grants made to employees as an expense, an action that many financial observers--including Federal Reserve Chairman Alan Greenspan and investor Warren Buffett, Coca-Cola's largest individual shareholder--say would offer a fairer assessment of a company's financial picture.

Responding to the accounting scandals that have caused economic and political jitters from Wall Street to Washington, Pitt on Sunday took aim at his critics, denouncing their "politically crass sound bites."

He defended the SEC, saying the agency is investigating a "staggering" number of corporations. He did not specify how many cases of corporate wrongdoing are under investigation. But he said the agency would get a better gauge of problems "lurking out there" after an Aug. 14 deadline for the heads of the largest public companies to certify the accuracy of their financial statements.

"I have absolutely no intention of stepping down," the nation's top securities regulator told CBS' "Face the Nation." "I believe I enjoy the confidence of the president, and I'm certain if I don't, he'll let me know."

But Sen. John McCain (R-Ariz.) renewed his call for Pitt's resignation, contending that the SEC chairman's past work as a lawyer for the accounting industry makes him unsuitable for the job.

"We have now a crisis of confidence on the part of the American investor," McCain told NBC's "Meet the Press." "That confidence can only be restored by individuals whose records are completely untainted by any charge or allegation of conflict of interest."

Pitt called renewed scrutiny of Bush's 1990 sale of stock in a company of which Bush was a director "ancient history." Then-businessman Bush sold the Harken Energy Corp. stock shortly before the company reported a sizable loss.

Pitt said on NBC's "Meet the Press" that the matter had been thoroughly investigated and is now closed. But he said he would make the SEC file public at the president's request.

Sen. John Edwards (D-N.C.) urged Bush to do just that.

"This president ran on the idea that he was going to restore integrity to the White House, that he would be forthright with the American people," Edwards told CNN's "Late Edition." "He has an opportunity now to prove that."

Sen. Joseph I. Lieberman (D-Conn.) agreed. "I don't know that anything illegal happened, but there are a lot of things you can do that are legal but very wrong," he told ABC's "This Week." "It is critically important that the president of the United States, in following through on the strong language that he spoke on Wall Street earlier in the week, open up the files and let the American people see what was there."

Commerce Secretary Donald L. Evans defended Bush, dismissing continuing talk about the stock sale as "nothing but political garbage that the American people are sick and tired of."

Referring to one high-profile case, Pitt vowed that the SEC would "follow the trail wherever it leads" in its probe of accounting practices at Halliburton Co., a Texas-based oil services business that Vice President Dick Cheney once led.

"No one gets a pass," he said.

House Minority Leader Richard A. Gephardt (D-Mo.), however, suggested that Pitt remove himself from any involvement in the Halliburton probe.

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