Harvey L. Pitt is forgotten but not gone. The former Securities & Exchange Commission chairman, who resigned in disgrace months ago, remains in office while his replacement, William H. Donaldson, awaits Congressional confirmation. Bad idea. Pitt represented accounting industry interests in private practice in Washington. He was a reluctant reformer at best. He resigned after fumbling the key appointment to a new accounting oversight board that was supposed to generate investor confidence. Despite this terrible record, there he is, overseeing the SEC staff in writing rules that are supposed to keep accounting conflicts of interest in check. So we shouldn't be surprised that these rules are as weak as they are. And we shouldn't be surprised that the staff caved in to heavy lobbying from the discredited accounting industry.
As a lame duck, Pitt had one last chance to restore investor trust. Yet even after Enron, WorldCom, and Tyco, he sided with the accounting industry. In the end, the SEC softened proposed rules on banning firms that did audits from also offering tax services, especially on tax shelters, to the same client. It eased rules requiring rotation of auditors. And it backed off from insisting accounting firms break out specific fees that companies pay for their services, which would have provided more transparency. At a time of economic uncertainty, rising geopolitical risks, and public jitters, this was an appalling showing that reflects poorly on the Bush Administration. Harvey Pitt should leave now.