White House Steers Clear of SEC Chief Controversy

Times Staff Writers

White House officials carefully distanced themselves Friday from embattled Securities and Exchange Commission Chairman Harvey L. Pitt, saying the administration was awaiting the outcome of inquiries into whether he withheld potentially damaging information about his choice for a top oversight job.

Away from the White House, senior Republicans focused on the potential political fallout of the flap, grumbling that Pitt had put President Bush in an awkward position just before Tuesday’s election.

They complained that he had made it all the more difficult for Bush and Republican candidates to argue that the administration is responding effectively to the issues of corporate accountability and investor confidence.

Pitt, a target of attacks for several months, came under new fire for failing to disclose that William H. Webster -- whom Pitt chose to lead a new accounting oversight board -- had chaired the audit committee of a company accused of accounting irregularities.


Webster is a retired federal judge who served as director of the FBI and the CIA.

He was reported to have told Pitt about his role with the company, U.S. Technologies Inc. But Pitt did not pass on the information to the White House or other SEC members, who voted 3 to 2 last week to give him the job on the oversight panel.

Pitt’s spokeswoman, Christi Harlan, said Friday that after Webster had informed Pitt about his service on the audit committee, “the [SEC] staff looked into it, found nothing of concern, so there was nothing to pass on.”

She said Pitt would have no comment and was not available for interviews. He did not return a call to his office.

White House officials acknowledged that they were in the dark about Webster’s corporate past and that they learned of the allegations from news reports.

One GOP veteran who held senior White House positions in previous administrations, speaking on the condition of anonymity, said that Pitt had a “tin ear” for politics and that in its handling of the matter, the White House was not doing much better.

“Bush should get rid of him right after the election,” he said. “This goes to investor confidence. It goes to corporate accountability. [Pitt] may be a very fine lawyer, but that doesn’t qualify you for the SEC chairmanship.”

Two investigations into Webster’s selection have been launched: one by the SEC’s inspector general and another, at the request of Sen. Paul S. Sarbanes (D-Md.), by the General Accounting Office.


Scott McClellan, a deputy White House press secretary, said Friday: “The SEC and Chairman Pitt have indicated that they are looking into the process involved there .... In terms of the specifics related to this matter, we don’t know the facts.”

Bush made no mention of Pitt as he sought to drum up enthusiasm for Republican congressional candidates Friday during stops in New Hampshire, Pennsylvania and Kentucky.

The low-key White House response to questions about Pitt -- and Bush’s lack of public support for him -- fueled questions about whether the chairman would be able to hold onto his position after the election.

Bush, seeking to minimize any damage the episode might cause, revisited the issue of corporate responsibility, a theme he had not raised in recent weeks.


“Our message, loud and clear, to the corporate wrongdoers is: There isn’t any easy money in America. There’s only jail time when we catch you fudging the books,” Bush told a Republican get-out-the-vote rally in Portsmouth.

Bush acknowledged that corporate scandals during the last year have generated a “lack of confidence in the system.”

“We’re going to have [to] reveal the whole truth in the corporate accounting practices,” Bush pledged to Republican voters at his first stop, in Harrisburg, Pa.

Pitt has been a political lightning rod for months. Democrats have repeatedly called for his resignation, contending that he is too cozy with the accounting industry to crack down on corporate wrongdoers.


His latest stumble allowed them to repeat their criticism at a sensitive moment, just days before an election that will decide control of the House and Senate.

Congressional Republicans and campaign strategists, normally quick to parry the Democrats’ attacks, have largely responded to the latest reports with silence.

Their reticence reflected a twofold political calculation.

First, some Republicans were not inclined to jump to Pitt’s defense if the White House was distancing itself from him.


Second, with four days until election day, the Republicans were reluctant to get drawn into a debate that would distract attention from their campaign themes.

“This does not necessarily fit into the message mix,” said one aide to the Republican leaders in the Senate.

Some party officials dismissed the potential effect of the SEC controversy.

“It will be an issue in zero House races in the final days,” said Steve Schmidt, a spokesman for the National Republican Congressional Committee.


His counterpart at the National Republican Senatorial Committee, Dan Allen, added: “I don’t think it’s an issue that’s going to resonate at all at the local level. People are focused on kitchen-table issues.”

Still, some Republican senators have publicly begun to raise questions about Pitt.

One key Republican, Sen. Mike Enzi of Wyoming, complained of a “lack of transparency” in the Webster appointment.

Sen. Phil Gramm of Texas, a Pitt defender who is the ranking Republican on the Banking, Housing and Urban Affairs Committee, conceded in an interview Thursday that the SEC chairman “has not turned out to be very good at responding to political attacks.” But, Gramm insisted, “that wasn’t why he was appointed.”


Gramm added: “I keep hoping that when the elections are over, all this will end.”


Reynolds reported from Portsmouth, Anderson from Washington. Times staff writer James Gerstenzang contributed to this report.