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Bush Said to Be Close to Ousting SEC Chairman

No decision on Harvey Pitt is expected until after election day. He could still stay on panel.

November 04, 2002|James Gerstenzang and Walter Hamilton | Times Staff Writers

ST. PAUL, Minn. — President Bush is near a decision to oust Harvey L. Pitt as chairman of the Securities and Exchange Commission, a senior White House official said Sunday.

The decision on Pitt's future, however, isn't likely to be made final, let alone public, until after Tuesday's elections and possibly not until a bit later in the year. Bush could remove Pitt as SEC chairman but cannot drive him off the independent commission if Pitt refuses to go.

"Everyone has come to the conclusion his days are numbered, but it doesn't have to happen in the next 30 days," said a Republican lobbyist close to the White House who asked not to be named.

Pitt, who has been embroiled in controversy since he began his term as SEC chief a year ago, sparked a new firestorm last week after it was revealed that he did not disclose potentially damaging information about William H. Webster, his choice to head the nation's new accounting industry oversight panel.

Pitt, from whom the White House had been distancing itself in recent days even as it continued to express official support for him, has annoyed key congressional Democrats and some Republicans with his handling of Webster's appointment. SEC commissioners approved Webster for the accounting-panel post in a partisan 3-2 vote on Oct. 25.

A Pitt spokeswoman last week acknowledged that Pitt knew Webster had led the audit committee of the board of U.S. Technologies Inc., a small Washington-based company that last year fired its outside accountants and has been sued by shareholders for alleged fraud.

But Pitt did not tell others on the panel before the vote. Nor did he tell White House Chief of Staff Andrew H. Card Jr., who was encouraging Webster to take the job. That has put Card in an embarrassing position.

While Bush traveled from Florida to the upper Midwest to campaign for Republican candidates in the midterm election, aides continued to walk gingerly around the Pitt affair.

Even as some raised the specter of his ouster, another Bush aide, speaking on condition of anonymity, said to reporters that Pitt "retains the confidence of the president."

But that official added that the White House was "looking forward" to a report by the SEC's inspector general on Pitt's handling of the Webster case.

Webster, a retired federal judge and former director of the FBI and the CIA, has not come under fire because he informed Pitt of his work for U.S. Technologies. A Pitt spokeswoman said last week that Pitt had the SEC staff investigate Webster's tenure at U.S. Technologies, and that the staff found "nothing of concern" to bring to other commissioners.

Bush, who was on his fourth consecutive day of campaigning for Republicans on Sunday, has made no public mention of Pitt since the Webster incident.

Many longtime SEC observers said they would not be surprised if Pitt's latest controversy costs him his job.

"The job of being SEC chairman requires more than simply being a very smart lawyer," said John Coffee, a Columbia University law professor. "You must be a statesman."

Though Pitt has many of the intellectual tools needed for the job, his personality flaws have tripped him up, Coffee said.

In his first year as chairman, Pitt has frequently come off as arrogant and combative, and has made a number of gaffes that have called into question his willingness to be tough in regulating the accounting and securities industries. The need for closer regulation has become a major political issue in the wake of the many corporate accounting scandals this year.

Pitt in recent days has pointed to the agency's stepped-up enforcement efforts as proof that he is effective. But on one of the biggest issues facing the SEC -- a crackdown on Wall Street analysts for allegedly giving tainted stock advice during the bull market -- Pitt has been repeatedly upstaged by New York Atty. Gen. Eliot Spitzer, who launched his own probe of Wall Street's conduct.

As Spitzer pressed ahead with demand for tough reforms by major brokerages, Pitt appeared to talk tough only when forced into a political corner, critics said.

"He's done any number of really stupid things," said Alan Bromberg, a securities-law expert at Southern Methodist University.

Christi Harlan, a Pitt spokeswoman at the SEC, said Sunday that Pitt had not been informed that he might be asked to leave. "We've heard nothing but support from the White House this weekend," she said.

Pitt's stumbles have surprised friends and supporters, said Laura Unger, a former SEC commissioner.

"It's really kind of baffling," she said. Like others, Unger, a Republican, was stunned by Pitt's failure to share with the other commissioners the information Webster gave him.

Already, several people are being mentioned as possible Pitt successors. One is James Doty, a former SEC general counsel who now is a private attorney.

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Times staff writer Ronald Brownstein contributed to this report.

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