In the end, Harvey Pitt probably did the best thing he could to restore investor confidence: resign.
That’s the theme building here as the securities industry gathers for its annual meeting. As of Wednesday evening Pitt still was scheduled to speak to about 500 industry executives Friday despite his resignation as chairman of the Securities and Exchange Commission.
Pitt, a longtime friend of the accounting and investment industries, still generates gushing praise from business leaders for his intelligence and grasp of the issues facing financial markets.
But a series of missteps during his 15-month tenure, culminating in a decision not to disclose key facts about his choice to head a new public accounting oversight board, had even this welcoming audience saying it was time to go.
“Harvey Pitt is a good man, and one of the most qualified people we could have had in that role,” said Allen B. Morgan Jr., chief executive of Morgan Keegan & Co. and chairman of the Securities Industry Association.
“But there were political mistakes, one after the other. Then when the non-disclosure issue arose, people shook their heads and said this just wasn’t right. It looked so bad that it’s hard not to blame him for that.”
The association’s official statement, issued Wednesday, generally praised Pitt.
“We should not lose sight of the tremendous accomplishments that he and his staff have achieved over the past 15 months,” the statement said, going on to praise his work in getting the financial markets up and running again after last year’s terrorist attacks.
“The SEC also acted aggressively against some of the greatest examples of corporate malfeasance that this country has ever seen: WorldCom, Enron and Adelphia,” association President Marc E. Lackritz said in the statement.
White House spokesman Ari Fleischer also defended the SEC under Pitt’s tenure. President Bush wants someone who “will continue Harvey Pitt’s very successful record of taking action against corporate corruption. … The SEC, in fact, has one of the strongest enforcement records of any SEC in history.”
Industry players are turning their attention to Pitt’s successor and, most likely, an alternative to William Webster for the job of running the new oversight board.
“I don’t think you need a crusader,” said Stanley Sporkin, a former federal judge who once headed the SEC’s enforcement division. “I think what you need is somebody with a steady hand who knows the business, who’s honorable and honest, who will in effect tell the players, `This is the way it’s going to be.”‘
Several candidates have been mentioned, including former New York Mayor Rudy Giuliani, former SEC general counsel James Doty and Frank Zarb, a former chairman of the National Association of Securities Dealers who is close to Vice President Dick Cheney.
Fleischer said he didn’t know when a replacement would be named. Whoever it is will require Senate confirmation.
“The next chairman of the SEC should be someone who is able, experienced and above reproach,” said Sen. Richard Shelby (R-Ala.), one of the first senior Republicans to raise questions about Pitt’s judgment.
Pitt was all of that, industry sources said wistfully.
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After winning the top job at the SEC in August 2001, Pitt set out to modernize the agency and its regulations.
But in October 2001, he made a now infamous remark that he wanted the agency to be a “kinder, gentler” home for accountants. He met with the head of KPMG, a former client, while the accounting firm was being investigated by the SEC. Last July he asked for a pay hike and for Congress to elevate his role to a Cabinet position.
Then last month, Pitt failed to warn the White House and others about key details of Webster’s background, including the fact that he had served as a director of a company under SEC investigation.
“One of my first bosses used to tell me, `There are no secrets. Everything eventually comes out,”‘ said John Burich, a Barrington investor who heralded Pitt’s resignation Wednesday.
But as for restoring confidence in the stock market, Burich said that feat will take more than Pitt’s resignation. “The economy has to get better” before investors feel good about the market again, he said.