AUSTIN, Texas We just lost the whole ballgame on corporate reform without
the news even making it to the front page. The sick, sad tidings were tucked away
discreetly on the business pages: "SEC Chief Hedges on Accounting Regulator."
Now there's a sexy headline.
All of you who were shafted by Enron, shucked by Worldcom, jived by Global
Crossing, everyone whose 401(k) is now a 201(k) (I think that's Paul Begala's
line), you just got screwed again. They're not going to fix it.
They've already called off the reform effort; it's over. Corporate muscle showed
up and shut it down. Forget expensing options, independent directors, going after
offshore shams, derivatives regulation. For that matter, forget even basic reforms
like separating the auditing and consulting functions of accounting firms and
rotating accounting firms every few years. Bottom line: It's all going to happen
again. We learned zip from the entire financial collapse. Our political system
is too bought-off to respond intelligently.
Even the normally impeccable Lou Dobbs had taken to referring to SEC Chairman
Harvey Pitt as "a reformer," a usage that stretches the language. Pitt, President
Bush's appointee to the chair of the Securities and Exchange Commission and a
career-long mercenary for the securities industry, is the lawyer who memorably
advised in one law journal article: If you get in trouble, shred the evidence.
He came in promising to make the SEC "a kinder, gentler place for accountants."
This unpromising champion of reform appointed to keep the corporations
happy came under such heavy political fire during the financial collapse
that he was suddenly out there flirting with Paul Volcker, Arthur Levitt and other
genuinely concerned citizens with actual ideas about how to fix this ghastly mess.
No mas. According to The New York Times: "Harvey L. Pitt, under pressure
from Republicans and former clients in the accounting industry, is backing away
from the choice he and other members of the SEC favored to lead the new federal
agency that will oversee the industry. Industry executives and at least one prominent
Republican lawmaker complained that the top choice, John H. Biggs, was too tough
on the industry."
Biggs, the citizen in question, is head of the pension investment plan TIAA-CREF
not exactly a commie. Nevertheless, he has spoken up strongly for the need
to make companies more stringently accountable for stock options, making companies
rotate their auditors every few years, and for separating the auditing and consulting
functions of accounting firms. Gee, how bold and daring of him. Quel overthrow
of capitalism is implied by these obvious, fundamental reforms.
The Sarbanes bill set up a new five-member board to oversee the accounting
industry. Biggs was the much-touted choice to head this board both Pitt
and another SEC commissioner had announced their support when, oops, the
accounting industry weighed in. "Congressional aides and current and former SEC
officials say the episode illustrates the continued political influence of the
accounting profession despite its defeat ... on the Sarbanes bill." Duh.
Lynn Turner, former chief accountant for the SEC, told the Times, "It appears
that the accounting firms, the Republicans and now chairman Pitt are trying to
circumvent the Sarbanes legislation by making certain that the board does not
include a reform-minded person: If we lose Biggs, we lose a reform-minded board."
The ever-flexible Rep. Michael Oxley, R-Ohio, chairman of the House committee
that oversees the SEC, is one of my favorite players in the corporate scandals.
First, he was against reform. Then the pressure for reform got so strong even
the White House rolled over in front of it, and Our Man Oxley became a reformer,
too, signing on to the Sarbanes bill. But now he wants a person of "moderate views,"
as opposed to this reincarnation of Lenin, the head of a major pension fund.
You will not be amazed to learn that Oxley's major contributors are securities
and investment firms, commercial banks, insurance, finance and credit companies,
and accounting firms. You got to dance with them what brung you.
The Wall Street Journal reports that in addition to pressure from Oxley, Pitt
ran up against major lobbying muscle form the accounting industry and further
bobbled the appointment by failing to consult two new SEC commissioners. So now
we are to get an industry-approved board just what we need. The Senate
Governmental Affairs Committee issued its report on Enron on Sunday, blaming the
SEC for "systemic and catastrophic failure." It is a comprehensive and utterly
damning evaluation about which, it now appears, the Pitt-led SEC is prepared to
do absolutely nothing.
Several months ago, after it was disclosed that Pitt had met with the CEOs
of some companies then under investigation by the SEC, The Wall Street Journal's
editorial board (not to be confused with The Wall Street Journal I'm convinced
those people dont even read their own paper) called for Pitt's resignation. Must
have been a blue moon, because they were right.
Copyright 2002, The Daily Camera