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Third Strike for SEC's Pitt

October 29, 2002

Three strikes and you're out. We're not talking about the World Series that ended last weekend. We are talking about Harvey L. Pitt, the embattled chairman of the Securities and Exchange Commission.

Pitt earned a called third strike for his wrongheaded campaign to install former FBI and CIA Director William H. Webster as head of the newly formed Public Company Accounting Oversight Board, which is charged with cleaning up the accounting industry. Initial reports had Pitt poised to hit a home run by nominating John H. Biggs, the head of one of the nation's largest pension funds. But the powerful accounting industry threw high inside heat for Webster, a Washington insider, and Pitt bailed.

The first strike against the nation's top securities cop was his tarnishing of his agency's credibility by taking private meetings with the chiefs of the KPMG accounting firm and Xerox, two companies facing SEC investigations. His second came when he failed to publicly lobby for federal money his agency desperately needed to hire additional staff, modernize computer systems and fund the new accounting board mandated last summer when Congress passed and President Bush signed the Sarbanes-Oxley Act.

Friday's bitterly contested 3-2 commission vote in favor of Webster was divided along party lines, with Democrats favoring Biggs. Webster's a fine person, but the long-time Washington insider is hardly the best candidate to restore the credibility of the nation's financial markets. "I like Bill Webster," Sen. Paul S. Sarbanes (D-Md.) told The Times on Thursday. "But he's certainly not an expert in this field."

Expertise, though, is what the board will need to ride herd on the powerful accounting industry that continues to lobby hard for business as usual. The oversight board is charged with the important work of shaping new standards for public accountants and disciplining accountants who violate securities laws. The board -- and investors whose faith in the financial markets has been shaken -- would have benefited from Biggs' hands-on experience.

Webster is not the SEC's main problem, however. We've said before that Pitt has to go, and we're more convinced of that now.

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