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Bush may oust Pitt following probe

President George Bush is poised to oust Securities and Exchange Commission Chairman Harvey Pitt after a probe of William Webster's selection to run a new accounting board is done, a senior administration official said.

Bush will demand Pitt resign after Tuesday's election should an inquiry by the SEC inspector general conclude Pitt misled his fellow commissioners before they voted 3-2 to select Webster, the official said. Pitt didn't inform the four other commissioners that Webster had headed the audit committee of a company accused of fraud, SEC officials said.

Criticism of Pitt by investors and lawmakers is rising.

Senator Richard Shelby of Arkansas, who next year will become the highest-ranking Republican on the committee that oversees the SEC, supports a probe of Webster's selection. Bush, who appointed Pitt last year, may be forced to remove him to head off complaints the administration is lenient in dealing with corporate fraud, political analysts said.

``The president is in a very tight spot when members of his own party are going against him,'' said Mark Rozell, a professor of politics at Catholic University in Washington. ``The more embroiled in this matter that the White House appears to be, the more it starts to hurt his own agenda on appearing tough on corporate reform.'' The administration official said neither Bush nor any advisers learned of Webster's role as the head of the audit committee of US Technologies Inc. before the SEC's vote. Webster has said he informed Pitt of his work before the SEC confirmed him. The new accounting panel Webster was picked to run was created to help restore investor confidence after the collapse of Enron Corp. and WorldCom Inc.

Pitt, who in his private law practice represented accounting firms, said in a 2001 speech to accountants that the SEC would be ``kinder and gentler'' than under his predecessor, Arthur Levitt.

Pitt angered lawmakers by meeting with the chairman of KPMG LLP, a former client under investigated by the SEC.

Pitt upset the White House by seeking a personal pay raise and Cabinet rank for his agency at the same time he failed to seek additional funding lawmakers had authorized.

Last month, Democrats in Congress began calling for his resignation after Pitt withdrew his support for John Biggs, former chairman of the TIAA-CREF teachers pension fund and a critic of the accounting industry, as a candidate to head the oversight board.

The controversy surrounding the appointment is embarrassing for the administration, the official said, because White House Chief of Staff Andrew Card urged Webster, a former FBI director, to take the position as head of the Public Company Accounting Oversight Board.

Pitt will continue to do his job until he hears from Bush, SEC spokeswoman Christi Harlan said. ``These are unnamed sources and the chairman serves at the pleasure of the president,'' Harlan said. ``The chairman is going to continue to do his job.'' Harlan said on Thursday that the SEC's staff was informed of Webster's work at US Technologies and ``identified nothing of concern after reviewing the situation.''

The administration official didn't discuss a potential successor for Pitt, a 57-year-old lawyer who in 1975 was the youngest general counsel at the SEC. Pitt came to the job after spending 24 years as a Washington-based lawyer for the New York firm of Fried Frank Harris Shriver & Jacobson, where he represented securities firms such as Morgan Stanley as well as accountants.

White House spokesman Ari Fleischer told reporters on Air Force One yesterday that ``the president continues to have confidence in Harvey Pitt.'' ``The inspector general and the SEC are looking into all these matters, and that's the appropriate place for them to be looked at,'' Fleischer said.
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