WASHINGTON -- By July 8, Securities and Exchange Commission Chairman Harvey Pitt had been the corporate corruption scandal's designated punching bag long enough to be on guard. Nevertheless, he was stunned when he read Sen. John McCain's op-ed column in that Monday morning's New York Times calling for his resignation.
The maverick Republican senator never had made a policy suggestion to Pitt. Indeed, the two men never have met. McCain was both riding and building the assault on Pitt by Democrats and the news media. In order to portray the SEC chairman coddling corporate swindlers, what he has done and what he has said have been grossly misrepresented.
This is the kangaroo trial of Harvey Pitt, once extolled a model securities lawyer. In the mold of past political trials, the case against him is short on evidence and long on insinuation. The real target is George W. Bush, who faces this dilemma: sack Pitt and admit keeping a fox in the henhouse, or retain him and feed the furor of his critics. Bush told Pitt last week that he is sticking with him.
McCain's July 8 essay calling for tighter government regulation of corporations demanded Pitt's head but devoted few of its 743 words to that end. With Pitt appearing "slow and tepid in addressing accounting abuses," wrote the senator, "he has not distanced himself enough from former clients." The sole basis for those claims: Pitt has not participated in 29 SEC votes, mostly involving former law clients.
McCain's staff picked up the information about the 29 recusals from a June 17 report by Bloomberg News. Neither the news service nor the senator noted that the SEC's workload exceeded 930 cases and that Pitt's two predecessors stayed out of many more cases -- triple digits for each -- their first year. After Pitt's one year of keeping hands off ex-clients ends next month, he told me, "I'll look at it case-by-case."
Following McCain's lead, critics have claimed Pitt's recusals cripple the SEC by depriving the five-member SEC of a majority. Actually, thanks to the Democratic-controlled freeze on Bush nominations, four SEC nominees (one sent to the Senate last December) now await confirmation.
On the other most frequently voiced criticism of Pitt, McCain has followed rather than led the crowd. Pitt's "first speech" as SEC chairman, McCain said on ABC's "Good Morning America" July 11, "was that accountants would have a kinder and gentler SEC." Senate Majority Leader Tom Daschle, on CNBC's "Hardball" July 9, called for Pitt's dismissal and quoted him as saying: "We want a kinder and gentler SEC. We want to reduce the regulatory burden. We want to reduce the level of enforcement." In truth, Pitt never said what Daschle, McCain and many others claimed.
The newly confirmed Pitt last Oct. 22 mistakenly attempted a light touch in assessing the "risk" of addressing the accounting industry's governing council meeting in Miami Beach. The SEC, he said, "has not, of late, always been a kinder and gentler place for accountants and the audit profession, in turn, has not always had nice things to say about us." Instead of the pledges alleged by Daschle, Pitt only wanted a climate where rules could be made clear to accountants.
On the Fox News Network July 10, House Democratic Leader Richard Gephardt indicated Pitt was among "lobbyists for the accounting industry." That frequently applied label is also wrong. Pitt has never been a registered lobbyist and has never lobbied. As a lawyer, he often represented firms in formal proceedings before the SEC -- which is not lobbying.
When Pitt was about to be confirmed unanimously by the Senate a year ago, liberal Democratic Sen. Charles Schumer declared: "He is without question the most talented and respected securities lawyer in the United States." Sen. Paul Sarbanes, the Banking Committee's Democratic chairman, praised Pitt's "extraordinary knowledge of federal securities laws" -- attributing that asset partly to the clients he represented.
Harvey Pitt, the SEC's youngest general counsel ever at age 29, returned 26 years later with new recruits to breathe life and intensify oversight at a moribund commission. The political attack, he told me, "has had a devastating effect on this agency." That's the way Washington works.