[A-List] US legitimation crisis: SEC

["Michael Keaney" <michael.keaney@xxxxxx>]

Scandal forces out SEC's Webster SEC

David Teather in New York
Wednesday November 13, 2002
The Guardian

The head of the accounting oversight board, set up to fight corporate crime
in the US, quit yesterday after less than three weeks in the job.

William Webster, a former director of the FBI and CIA, said that by
remaining he was damaging efforts to restore confidence in Wall Street. It
emerged shortly after he was named to the post that he was on the audit
committee of a small Washington firm, US Technologies, which is facing
allegations of fraud.

The scandal surrounding Mr Webster's appointment has already engulfed the US
financial regulator, the securities and exchange commission, and last week
led to the resignation of chairman Harvey Pitt and chief accountant Robert
Herdman.

The accounting board was the centrepiece of the sweeping Sarbanes-Oxley act,
a series of corporate reform measures passed in July after US financial
scandals that began with the failure of Enron. It was given unprecedented
powers to oversee corporate accountants in a profession that had previously
been largely self-regulating.

The debacle has threatened to undermine efforts by the US government to
clamp down on the scandals that have shaken corporate America.

In his resignation letter to the SEC, Mr Webster said: "I now believe my
continued presence on the board will only generate more distractions."

Mr Webster's nomination to the accounting board's chair faced strong
opposition from the beginning. Mr Pitt had originally backed a tougher
reformer, John Biggs, but was said to have backed away from his choice after
intense lobbying from the accounting industry. When he switched to Mr
Webster, he faced a public backlash from two of the other four commission
members.

But the scandal really erupted when it emerged that Mr Pitt and Mr Herdman
had withheld information from the rest of the SEC and the White House that
US Technologies was under investigation. The affair was the final straw
after a series of blunders by Mr Pitt.

Mr Webster wrote: "Those who know me will appreciate that I do not abandon
duty lightly. It is time to clear the air. A new SEC chairman will no doubt
wish to have a part in the selection process of a new board chairman who can
devote his or her full energy to building this important enterprise."

Mr Pitt, who remains with the SEC until a replacement is found, refused to
admit that he made any mistake. "I continue to believe that investors would
have benefited from William Webster's dedication to the best interests of
the American people," he said.

There were calls last night to replace Mr Webster as quickly as possible,
perhaps with Mr Biggs who has the backing of the two Democrats on the
commission.