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EDITIONS
Thursday, 18 July, 2002, 16:33 GMT 17:33 UK
Regulator of Corporate America
SEC chief Harvey Pitt
Regulator of Corporate America

The Stock has seen abysmal lows recently which have wiped vast amounts of money from the value of people's savings.

Those who claim to understand these things say that potential investors were reassured by the comments of Alan Greenspan - sometimes called the most powerful man in the world, and chairman of the Federal reserve - that the American economy's improving.

But they remain deeply uneasy about what might crawl out of the woodwork in the boardrooms of corporate America. There is a real crisis of confidence.

What's happening to American stocks and shares may seem remote form this country. But not only are moods infectious, vast amounts of British pension fund money are invested across the Atlantic.

The man with the job of cleaning up corporate America is Harvey Pitt, whom George Bush appointed to run the Securities and Exchange Commission.

Jeremy Paxman asked him whether there are other scandals waiting to come out.


JEREMY PAXMAN:
What's happening to US stocks and shares seems remote from the UK. But not only are moods infectious, British pension fund money is invested across the Atlantic. The man with the job of cleaning up corporate America is Harvey Pitt, whom George Bush appointed to run the Securities and Exchange Commission. When I spoke to him earlier, I asked him whether there are other scandals waiting to come out.

HARVEY PITT:
(Securities and Exchange Commission):
I don't know that there are other scandals waiting to come out but one of the things we did was to order the 1,000 largest companies to have their CEOs and CFOs certify their filings so that the public would have assurances that the numbers they see are numbers they can rely upon. With that effort some CEOs or CFOs may refuse to certify because they are not certain of their numbers, then we will know where other problems may exist.

JEREMY PAXMAN:
So there could be other scandals to emerge?

HARVEY PITT:
There always can be. With all the steps that we are taking, with all the steps that the US Congress is taking, we are in a position to basically start to shut down the kind of shenanigans we have seen up to now.

JEREMY PAXMAN:
Doesn't that frank admission make you rather embarrassed by your comment last October that, "our financial reporting system is acknowledged to be the best in the world and has set the standards by which all others are judged"?

HARVEY PITT:
No, it was right then and it is still right. The standards can be improved. No-one can account for CEOs and CFOs who don't abide by requirements. That is always a possibility in any system. I am not embarrassed by what I said but I am also determined not to let us rest on our laurels.

JEREMY PAXMAN:
Your critics say you're the wrong person to become a gamekeeper, given that you represented all the five big accountancy firms. Do you accept in hindsight that you were wrong when you opposed your predecessor as the head of SEC, Arthur Levitt, when he tried to separate accountancy from consultancy?

HARVEY PITT:
The premise of your question isn't accurate. I never objected to what Arthur Levitt's premise was. I represented the two major accounting firms in the US that tried and succeeded to work with Arthur Levitt, to help get through a sensible set of independence proposals. What you are repeating are the political sound bites that people who want to take advantage of these scandals are trying to perpetuate on the air waves and in the Media.

JEREMY PAXMAN:
But you have also had to miss out on 29 commission votes because of possible conflict of interests?

HARVEY PITT:
I agreed as part of my ethics agreement that for the first year, even if there were no conflict, I would sit out certain matters. It is like judges do in this country in the first year when they go on the bench. They have to refrain from sitting on certain matters. The number of my recusals is smaller than some of my predecessors but this is an irrelevancy because I have been involved in all of the major policy decisions at the SEC and I am providing leadership and guidance so the investing public can rely on what they hear and what they are told.

JEREMY PAXMAN:
Let's look at the clear-cut question of policy. Do you accept there is a potential conflict of interest when the same firm is asked both to audit and consult and shouldn't that practice be stopped?

HARVEY PITT:
Well, you have asked two different questions. The first part is, do I accept there is a conflict? Absolutely. We have proposed a number of measures that would avoid that conflict from arising. Do I believe there should be an absolute separation? I do unless the independent audit committee of a public company decides that it is in the interest of investors and of the company to have a particular firm provide certain services. So we have always believed there can be conflicts that arise and if they do exist or if they could exist, they must be eliminated, otherwise you cannot serve two masters.

JEREMY PAXMAN:
The problem here is credibility. There are so many senior figures in companies and charged with auditing those companies, who are now thoroughly discredited.

HARVEY PITT:
Well, there is a serious problem here of credibility. You are right that these scandals have reflected poorly on those who should be watching out for the interests of the investing public. The one problem I think you wind up with is there are some people around who want to take political advantage of these crises. I always say there are two kinds of people - those who solve problems and those who try to take advantage of them. At the SEC, our job is to solve them and that is what we're doing and we are going to restore the credibility of the investing public in our markets.

JEREMY PAXMAN:
Well, so far you obviously haven't achieved that. Do you believe the markets can go much lower on the anxiety that people feel?

HARVEY PITT:
I believe if we keep getting the political sound bites that some few have been trying to perpetuate on the investing public, there's no telling how low the markets could go. But I believe our economy is strong, that we have many fundamentally sound companies, that we are undertaking significant and far-reaching reform, and that the stock prices in the market will eventually reflect all of the good things happening. The longer the sound bites continue, the harder it is going to be to get those prices up to the levels they should be at.

JEREMY PAXMAN:
Mr Pitt, thank you.

HARVEY PITT:
It's my pleasure.

 WATCH/LISTEN
 ON THIS STORY
Harvey Pitt, US financial market regulator
On whether confidence can return to the market

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
Launch marketwatch
View market data
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