Harvey Pitt, under pressure from Republicans and his former clients in the accounting profession, is backing away from the choice he and other members of the Securities and Exchange Commission favored to lead the new federal agency that will oversee the industry.
Industry executives and at least one prominent Republican lawmaker complained that John H. Biggs, the top choice, was too tough on the industry. Following those complaints, Pitt, the chairman of the commission, informed Biggs this week in a telephone conversation that he was no longer certain he could support his candidacy to head the new accounting oversight board, according to several people who were briefed about the discussion. Only three weeks ago, Pitt privately assured Biggs that he would support him for the job.
Biggs, a top executive at a large pension system, has been a leading voice for more stringent oversight of the accounting profession. His testimony this year helped to lay the groundwork for some of the provisions in the legislation signed into law two months ago that set up the new five-member accounting oversight board.
He has been endorsed by figures like Paul A. Volcker, a former Federal Reserve chairman who was the commission's first choice for the post, and Arthur Levitt, Pitt's predecessor. Biggs, the chairman and chief executive of the pension fund TIAA-CREF, testified this year before Congress that companies need to more stringently account for stock options granted to executives. He supports making companies rotate their auditors every few years. And he has been critical of accounting firms that perform consulting and auditing activities for the same clients.
The call from Pitt this week was a remarkable turnabout. At a lunch at TIAA-CREF offices in New York on Sept. 11, Pitt and Harvey J. Goldschmid, another commissioner, told Biggs that they would support him for the job if he wanted it, senior agency officials and congressional aides briefed about the meeting said. At that time, Biggs indicated he was leaning toward taking it.
Biggs then began consulting with the commissioners about who should be selected as the other four members of the new board. A few days after the lunch, Pitt publicly predicted that the new oversight board would be announced by the end of September, a month ahead of its deadline.
What tangled webs we weave
But now, commission officials say, the selection process has been thrown into turmoil, as the accounting profession, which lost the battle in Congress two months ago over how it should be regulated, has turned to Pitt, one of its former top lawyers before he joined the government, to try to win the war.
In response to an e-mail message outlining what aides and officials had said about the selection process, Pitt issued a one-sentence statement on Thursday through his spokeswoman, Christi Harlan. "The version of events you have described is untrue," his response said. Pitt declined a request to elaborate.
The SEC chairman now finds himself in an awkward political position, caught between some Republicans and the accounting profession, who do not want Biggs, and some of his colleagues and lawmakers, who do.
Congressional aides and current and former commission officials say the episode illustrates the continued political clout of the accounting profession despite its defeat on Capitol Hill on the legislation, sponsored by Senator Paul Sarbanes, establishing the oversight board.
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