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    A Times Editorial

    Reluctant regulator

    © St. Petersburg Times
    published October 13, 2002

    The list of current and former high ranking financial regulators who are pushing for John Biggs to be appointed chairman of the new accounting oversight board just keeps getting longer.

    Biggs, who just retired as chief of TIAA-CREF, a pension system, is widely respected as a tough regulator who would push for strict accounting standards. His candidacy to head the new board is being supported by, among others, Paul Volcker, the former Federal Reserve chairman, Arthur Levitt, the former chairman of the Securities and Exchange Commission, and Sen. Paul Sarbanes, D-M.D., chairman of the Senate Banking Committee. But one name is conspicuously absent from the booster column, and it is the one that counts the most: SEC Chairman Harvey Pitt.

    The lessons painfully learned by the accounting scandals involving such corporate giants as Enron and WorldCom have not sunk in for Pitt. Since his appointment, Pitt has been eyed suspiciously as a shill for big business. But many thought the depth of the corporate greed uncovered this summer and the resulting impact on investor confidence would have convinced Pitt to hang up his laissez-faire attitude and get serious about his regulatory responsibilities. Apparently not.

    Because Biggs favors the regular rotation of auditors, expensing stock options and strict separation of auditing and consultant functions, the accounting community is deeply opposed to his appointment. The nation's largest accounting firms have made huge sums by being paid to offer advice to business clients while ostensibly policing their books. And they have clearly made their views known to Pitt. Where once the SEC chairman was indicating Biggs had the job, Pitt has now moved off that idea.

    When Congress passed a law this summer to reform the corrupt business practices that had been laid bare in its committee investigations, it gave the plan teeth by creating an independent five-member oversight board to enact accounting ethics rules and discipline transgressors. Pitt's change of mind on the Biggs appointment suggests the accounting industry has a veto over the board makeup.

    Pitt's job is no longer lobbying for the interests of the Fortune 500 and the Big Ten accounting firms. He is the chief regulator now and is charged with overseeing publicly traded companies in order to protect investors and the integrity of financial markets. The stock market's precipitous fall has been fueled in part by the startling breadth of cheating by corporate actors with the help of their accountants. Pitt has a responsibility to check that fall by putting someone in charge of the accounting oversight board who will be tenacious and thorough. If he won't do that, then Pitt should step aside for someone who will.

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