Global Policy Forum

By David Teather

The US securities and exchange commission moved to defuse a potentially damaging row yesterday over the appointment of former FBI chief William Webster to run the accounting oversight board. Harvey Pitt, the embattled SEC chairman, came under further fire after it emerged that he withheld information that Mr Webster served on the audit committee of a company now facing fraud charges. The accounting oversight board has been formed to shore up investor confidence in financial reports and any hint of scandal could destabalise those efforts.

There were renewed calls for Mr Pitt to step aside. He has been repeatedly berated by critics over the past year who have accused him of failing to act quickly enough to stem the tide of financial scandals. He yesterday asked SEC inspector general Walter Strachnik to launch an internal inquiry into the process of choosing Mr Webster for the job. The inquiry was launched as lawyers for the 10 biggest investment banks met with the SEC and state regulators, including the campaigning New York attorney general Elliot Spitzer, to agree a sweeping reform of Wall Street.

The proposals shaped by Mr Spitzer, who has formed an uneasy alliance with the SEC, centre on an oversight committee for research analysts to monitor conflict of interest issues in banks. The key criticism facing the banks is that they issued biased advice during the stock market boom to secure investment banking business. The banks would together pay around $1bn to fund the committee, which would also produce independent research.

The two Democrats on the five-member SEC committee who last week publicly opposed Mr Webster's appointment now have added ammunition. Mr Webster, 78, was on the audit committee of a small listed company, US Technologies, which invested in internet start-ups and is being sued by investors who claim they were defrauded of millions of dollars. The US justice department is investigating whether the chief executive, Gregory Earls, committed fraud.

Mr Webster informed Mr Pitt and Robert Herdman, the agency's chief accountant and the SEC executive in charge of the appointment process, of the potential problem and said Mr Pitt had assured him that commission staff had looked into the issue and that it would not pose a problem.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.