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Thursday, 10 October, 2002, 06:21 GMT 07:21 UK
Democrats call for Pitt's head
SEC chairman Harvey Pitt
Pitt is accused of giving auditors an easy ride
Harvey Pitt, America's top stock market regulator, should resign for being far too soft on the beleaguered accounting industry, Congress's two most senior Democrats say.

Senate Majority Leader Tom Daschle and House Minority Leader Richard Gephardt wrote to President George W Bush on Wednesday to call for him to demand Mr Pitt's resignation.

Senator Paul Sarbanes
Sarbanes: auditing regulator is "in disarray"
Under his leadership, they say, the Securities and Exchange Commission (SEC) is kneecapping the new oversight body set up to keep the accountancy profession in order.

Accounting industry lobbyists are believed to have torpedoed the top pick to lead the Public Company Accounting and Oversight Board (PCAOB), they charge, and Pitt is assisting them.

With John Biggs, the hugely respected and independent 66-year-old head of the massive TIAA-CREF pension fund, now apparently out of the running, the SEC may find it difficult to fill the post by the Congress-mandated deadline of 28 October.

The White House rejected the letter, calling it "a political charge that has no merit or substance".

On Tuesday Mr Pitt had answered other calls for his resignation by saying that he did not intend to allow "either this agency, or the (SEC) commissioners, to be coerced into selecting, or rejecting, any candidate for board membership, simply because a publicly orchestrated campaign has been undertaken".

In the fire

Mr Pitt's stewardship of the SEC has come under fire before.

His own plans to regulate the auditing and accountancy business had called for much greater industry representation, but were thrown out by Congress as public clamour for genuine reform grew.

The resulting Sarbanes-Oxley bill, named after the Democratic Senator who wrote most of it and the House Republican - and well-known friend of the accountancy trade - who reluctantly endorsed it, enforced a more independent line.


At worst, Chairman Pitt has allowed associations with... the industries he is regulating to influence his judgment and actions in ways that are improper or unethical

Senator Tom Daschle and Rep. Richard Gephardt
Maryland Democratic Senator Paul Sarbanes, the accounting reform bill's main author, praised Mr Biggs in a statement, saying that the PCAOB selection process was "in disarray".

In July, former Republican presidential hopeful Senator John McCain called for his head, following a series of embarrassments including private meetings with former clients now under SEC investigation.

And earlier this week a Senate committee said the SEC - admittedly before Mr Pitt's reign began - had consistently avoided investigating companies like Enron who had been given regulatory exemptions in a "systemic and catastrophic failure" to regulate properly.

'Unethical'

The letter made no secret of Democratic disgust with Mr Pitt.

"The latest incident involving Mr. Biggs ... represents the culmination of a pattern of behaviour by Mr. Pitt that is steadily eroding the credibility of the SEC," it said.

"At worst, Chairman Pitt has allowed associations with past clients and the industries he is regulating to influence his judgment and actions in ways that are improper or unethical."

But the Senators' views are far from universally shared.

"Anybody that looks at the record of what Chairman Pitt has done would not come to the conclusion he needs to be replaced," said David Ruder, a law professor at Northwestern University in Chicago, who served as SEC chairman from 1987 to 1989.


Analysis

IN DEPTH
The Markets: 9:29 UK
FTSE 100 5760.40 -151.7
Dow Jones 11380.99 -119.7
Nasdaq 2243.78 -28.9
FTSE delayed by 15 mins, Dow and Nasdaq by 20 mins
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See also:

12 Sep 02 | Business
19 Jul 02 | Business
18 Jul 02 | Archive
16 Jul 02 | Business
15 Jul 02 | Business
16 Jul 02 | Business
28 Jun 02 | Business
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