Pitt reinforced concerns in an address to the American Institute of Certified Public Accountants in October. The new chairman, who said the SEC had "not, of late, always been a kinder and gentler place for accountants," spoke of a "new era of respect and cooperation" and "working together with [the SEC] to find solutions, without fear of recrimination."
Pitt said he wanted to build a bridge to the accounting profession, whose relationship with the SEC had deteriorated under his predecessor.
"That first speech was worrisome," said Ann Yerger, research director of the Council of Institutional Investors, which represents 120 pension funds. "We are not looking for a `kinder and gentler' SEC. We are looking for a commission that will vigorously enforce the laws."
Then Enron filed the biggest bankruptcy reorganization ever after disclosing that the company had overstated earnings by at least US$1 billion since 1997 and had used affiliated partnerships to hide debt. The collapse wiped out US$27.6 billion in market value, 5,000 jobs and US$850 million of Enron employees' retirement investments.
The Justice Department and SEC began investigations of Enron and Andersen, the company's auditor. Andersen was subsequently indicted on an obstruction of justice charge because employees of its Houston office destroyed records related to Enron audits. A dozen congressional committees also began hearings on Enron's collapse.
"Harvey came in thinking that too much bad had happened to the accounting profession," said Roderick Hills, an SEC chairman in the 1970s. Post Enron, "it became quite clear that the agenda was going to call for far more stringent rules. He is now proposing a lot of things he never would have proposed."
Many of Pitt's proposals are still in the debate stage. Some of the ideas "are very good but they haven't happened yet," said TIAA-CREF's Bertsch. "It's still too early to make definitive judgments about how effective he will be in reforming the system in response to Enron."
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